Contractor vs Employee Cost
Apples-to-apples cost comparison of W-2 employee vs 1099 contractor for the same work.
FAQ
Why is contractor often more expensive than salary?
A 1099 contractor pays self-employment tax (15.3%), buys their own health insurance, and gets no benefits. They need to charge enough to cover all of that — usually 30-60% above an equivalent W-2 salary for similar take-home.
When does W-2 actually make sense?
Long-term, full-time work where you want control over the schedule, methods, and exclusivity. Plus benefits compound — health, retirement, training — that contractors find expensive to replicate.
When does contractor make sense?
Project-based work, specialized skills you need occasionally, scaling up/down with demand, testing a role before committing. NOT for ongoing full-time work disguised as contract.
What about the IRS 20-factor test?
Worker classification has clear legal tests. Use our Classification Checker quiz. Misclassification penalties include back taxes, benefits, and fines — easily 6 figures per worker.
Disclaimer. Cost comparison only. Misclassification carries significant legal and tax penalties. Take the Classification Checker and consult an employment attorney before deciding.