Deciding between hiring a contractor or a full-time employee involves more than just base pay. In the US and UK, various additional costs — such as benefits, taxes, and overhead — can significantly impact your budget. Understanding these differences is essential for HR and finance teams to ensure cost-effective hiring and accurate financial forecasting.
Our calculator compares the true cost of each option, factoring in industry-specific benchmarks and regional compliance requirements. Whether you’re evaluating a short-term project hire or a long-term strategic workforce decision, this tool provides a clear financial comparison you can trust.
How the calculation works
The calculator compares the total cost of employing someone as a contractor versus as a full-time employee. It factors in baseline hourly or annual rate, projected hours per year, and location (US or UK). For employees, it includes FICA, Social Security, and employer-side taxes, plus benefits like health insurance, retirement contributions, and paid time off. For contractors, it considers self-employment taxes, potential 1099 filing requirements, and the lack of benefits typically provided to employees.
The calculator also adjusts for typical industry averages, such as the average cost of benefits as a percentage of salary, and includes overhead costs like office space, training, and recruitment fees where applicable. The result is a side-by-side comparison of total annual cost for each role type, helping HR and finance teams make informed decisions based on real-world financial data.
How to use this calculator
- Enter the projected hourly or annual rate for the contractor or employee.
- Select the expected hours of work per year.
- Choose the location (US or UK) for accurate tax and benefit calculations.
- Specify whether the role is a contractor or employee.
- Click 'Calculate' to view the total estimated cost for each option.
- Compare the results to inform your hiring strategy and budget planning.