Employee vs. Contractor Calculator

When it comes to hiring individuals for your company, which is more cost effective: full-time employees or independent contractors? The answer is independent contractors, due to the fact that even if their hourly rate is higher, you are not responsible for providing them with benefits. An employee vs. contractor calculator can help you see just how cost effective hiring independent contractors over salaried employees can be. 

Calculating the Cost of Employees vs. Independent Contractors

Independent contractors typically charge higher hourly rates than what the hourly rate of a salaried employee would be. So at first, it may seem like hiring a salaried employee is the better option. But that isn't the case. 

For example: You need to hire a technical writer for an upcoming client project. You estimate that hiring a full-time technical writer would cost you a salary of $83,200/yr., or $40/hr. You also know that hiring an independent contractor will cost you $60/hr., or $124,800/yr. For the independent contractor, that's an increase of $41,600. 

However, you are failing to calculate the other costs that come along with hiring a salaried employee: employee benefits such as insurance, payroll taxes, and annual bonus. Plus, there are a ton of indirect costs, such as accounting fees, computer hardware, supplies, furniture, and legal fees you'll have to account for as well. 

Using real costs that are roughly based on DCAA Cost Accounting Standards, the following chart illustrates the monetary benefit of hiring an independent contractor over a salaried employee: 

  Employee Independent Contractor
Hourly Rate  $40  $60
Annual Salary  $83,200 $124,800
Real Hourly Cost* $80 $72 
Real Annual Cost* $165,568  $149,760
If you'd like to calculate the cost of hiring an employee vs. and independent contractor using your own numbers, you can head over to this article by Toptal and plug your values into their interactive calculator. 

Managing Independent Contractors Made Easy

You know that hiring independent contractors is more cost effective for your business, but what about managing your contractor workforce? When you have a lot of ICs, managing their work and pay can become complicated. TalentWave simplifies the process of managing independent workers with our iConnect® platform. Take advantage of our total iConnect solution or choose the components that you need:

  • ICverify – for IC Compliance
  • ICpay – for IC Engagement/Agent of Record (AOR)
  • Professional Payroll – for Employer of Record (EOR)
  • Talent Community – for talent re-engagement

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