1099 vs. W-2 Cost Calculator
Enter your W-2 hourly rate and 1099 contractor rate to see the true annual cost of each — including payroll taxes, workers' comp, and benefits that most contractors forget to factor in.
How This Calculator Works
Enter the W-2 hourly rate, hours per week, weeks per year, workers' comp rate, and benefits percentage. Then enter the 1099 contractor's hourly rate. The calculator compares them head to head.
You'll see the fully loaded W-2 cost — including Social Security, Medicare, FUTA, SUTA, workers' comp, and benefits — compared against the flat 1099 cost. The tool shows your annual savings and which classification is cheaper.
A $25/hour W-2 employee doesn't cost $25/hour. This tool reveals the true cost of each option so you can make smarter hiring and worker classification decisions.
Enter Worker Details
W-2 Employee
What you pay the W-2 employee per hour
1099 Contractor
What you'd pay a 1099 contractor for the same work
Your comparison will appear here
Enter W-2 and 1099 rates to compare the true cost of each worker classification.
The True Cost of a Worker
A $25/hr W-2 employee doesn't cost $25/hr. By the time you add employer taxes, insurance, and benefits, you're paying $30–$35/hr. Know the real number before you hire.
See Hidden Employer Costs
W-2 employees cost way more than their hourly wage. This calculator adds Social Security, Medicare, FUTA, SUTA, workers' comp, and benefits to show the real number.
Make an Informed Decision
1099 contractors have a higher hourly rate but no employer taxes. W-2 employees have a lower rate but hidden costs. See which one actually costs you less.
Know the Risks
Misclassifying a W-2 employee as a 1099 contractor can result in back taxes, penalties, and lawsuits. Make sure you're classifying workers correctly.
W-2 vs. 1099: What Contractors Need to Know
W-2 Employees
You control when, where, and how they work. You withhold taxes from their paycheck and pay employer-side taxes (Social Security, Medicare, FUTA, SUTA). You're also responsible for workers' comp insurance and any benefits you offer.
1099 Contractors
They control how the work gets done. You pay them a flat rate with no tax withholding and no employer-side taxes. They handle their own taxes, insurance, and benefits. But they typically charge a higher rate to cover these costs.
Misclassification warning
You can't just call someone a 1099 contractor to avoid paying taxes. The IRS uses a behavioral, financial, and relationship test to determine classification. If you control when and how they work, they're likely a W-2 employee regardless of what your paperwork says. Penalties for misclassification include back taxes, penalties, and potential lawsuits.
What Employers Pay on W-2 Workers
| Tax / Cost | Rate |
|---|---|
| Social Security | 6.2% of wages |
| Medicare | 1.45% of wages |
| FUTA (Federal Unemployment) | 0.6% of first $7,000 |
| SUTA (State Unemployment) | 2.7% of first $7,000 (varies by state) |
| Workers' Comp Insurance | 5–15% (varies by trade and state) |
| Benefits (health, PTO, etc.) | 0–15% (varies by what you offer) |
How to Pay Your Crew 20% More and Double Your Profit
The math most contractors never run — and the mistakes that cost them $93K+ a year. This free PDF breaks down the math in ten minutes. Plus, you'll understand the payroll traps that can wipe you out.
Ready to Stop Wasting Time on Payroll?
Track piece work, run payroll in minutes, and know exactly what every job costs. Free to start — no credit card required.