Contractor vs Employee Cost Calculator
Salary is not the cost of an employee.
Work out Contractor vs Employee Cost. Salary is not the cost of an employee. Every rate is an input, not an assertion.
Cheaper option
Employee
68,000 employed against 96,800 contracted
Salary is not the cost of an employee. Employer social security, pension, benefits, equipment and the overhead of the space they occupy typically add 25 to 40% on top — which is why a contractor day rate can look expensive and still be cheaper. The break-even day rate is the figure to negotiate against. It is what a contractor would have to charge to cost exactly what the employee does, and it is usually higher than people expect. Cost is not the whole decision. Employees accumulate institutional knowledge, contractors carry no notice obligation, and employment status is a legal question in most jurisdictions rather than a matter of preference — misclassification carries real penalties.
How the Contractor vs Employee Cost Calculator works
The full cost of an employee against a contractor, with the break-even day rate. Employer social security, pension, benefits, equipment and overhead typically add 25 to 40% on top of salary.
Also known as: true cost of an employee · is a contractor cheaper than an employee · employer on costs percentage · break even day rate
Not financial advice. This calculator is for planning and illustration, not financial advice. Real products carry fees, taxes, and terms it does not model. Confirm figures with your lender or a qualified adviser before committing.
Frequently asked questions
What does an employee really cost?
Typically 25 to 40% above salary once employer social security, pension, benefits, equipment and overhead per head are counted. That gap is why contractor day rates can look expensive and still be cheaper.
What is the break-even day rate?
What a contractor would have to charge to cost exactly what an employee does. It is usually higher than people expect, and it is the number to negotiate against.
Is a contractor always more expensive?
No. For short engagements, specialist skills or uncertain workload they are frequently cheaper once the full employment cost and the risk of a bad permanent hire are counted.
What does the comparison miss?
Institutional knowledge, availability, notice obligations and cultural continuity. Cost is one input to the decision rather than the decision itself.
Is employment status a matter of choice?
No. It is a legal question in most jurisdictions, determined by how the work is actually done rather than by what the contract says. Misclassification carries real penalties.
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