Contractor Pay vs Employee Pay Calculator

About this tool

Comparing contractor income to W-2 employment is harder than it looks. Contractors pay self-employment taxes, skip employer-provided benefits, and carry their own overhead—yet often quote higher hourly rates. This calculator strips away the confusion by modeling the real take-home difference, accounting for tax liability, benefits gaps, and business expenses. You'll see whether that higher contractor rate actually beats employee pay.

Freelancers deciding between a full-time offer and independent work need this comparison. Contract workers wondering if they're pricing themselves correctly use it to benchmark. HR professionals and hiring managers use it to understand what contractor rates truly cost. Anyone negotiating compensation—whether sliding from W-2 to 1099 or vice versa—lands here to quantify the trade-off.

Most people guess. They compare a contractor's hourly quote to a salary and assume the contractor comes out ahead. This tool bakes in self-employment tax (~15.3%), the cost of no employer-paid coverage gap (health, retirement match, paid time off), and typical business deductions. The AI model runs multiple scenarios and flags hidden costs that casual math misses.

Example: A $75/hour contractor might feel like a raise from a $120k salary. But after self-employment tax, zero employer 401(k) match, no paid leave, and health coverage costs, the contractor's true annual earnings drop below the salary—even with deductions. The paid output surfaces this reversal with a detailed comparison, tax breakdown by filing status, and scenario variants (with/without benefits, different deduction levels).