Contractor vs Full-time Cost Calculator

Compare the total cost of contractors vs full-time employees including day rates, NI, benefits, equipment, and management overhead.

Last updated: March 2026

A contractor vs full time calculator compares total costs including taxes, benefits, equipment, and overhead. Contractors typically charge a 20 to 60% premium over equivalent salaries but save on benefits and taxes. Use this free tool to determine the most cost effective hiring approach.

Contractor Daily Rate ($)

Annual Salary ($)

Employer Tax and NI %

Annual Benefits Cost ($)

Working Days Per Year

Annual Contractor Cost

$115,000

Annual Employee Cost

$79,750

Difference

$35,250

Contractor Premium

44.2%% more

📊

How You Compare

Your contractor premium over full-time is better than 54% of tech industry.

Industry typical: 20-60%

Source: Robert Half Salary Guide 2025

💡 What This Means

📊 The 44% contractor premium is within the typical 20-60% range. Factor in: no benefits, no training costs, and easy scaling up/down.
📊 Contractor: $115,000/year. Employee: $79,750/year. The break-even usually favors full-time after 12-18 months of continuous work.
💡 Consider IR35 implications (UK) or employment law classification. Misclassifying employees as contractors can result in significant fines and back-taxes.

Create a free account to save calculations, track trends, and download PDF reports.

Create Free Account Sign In

What is Contractor vs Full-Time Cost?

The contractor vs full-time comparison evaluates the total cost of hiring a contractor/freelancer against employing a full-time equivalent for the same work. Contractors have higher hourly rates but no benefits, tax contributions, or overhead costs. The right choice depends on workload predictability, project duration, and required expertise. Calculate full employment costs with the Employee Cost Calculator and set freelance rates with the Freelancer Rate Calculator.

The Formula

Contractor Annual Cost = Hourly Rate × Hours per Week × Working Weeks
Full-Time Annual Cost = Base Salary + Benefits + Employer Tax + Equipment + Overhead

Worked Example

A developer needed for ongoing work: contractor at $75/hour, 40 hours/week, 48 weeks vs full-time at $85,000 salary + 30% benefits/overhead.

Contractor annual = $75 × 40 × 48 = $144,000
Full-time annual = $85,000 × 1.30 = $110,500
Difference = $144,000 − $110,500 = $33,500 more for contractor
Break-even hours = $110,500 ÷ ($75 × 48) = 30.7 hours/week

📌 At 40 hours/week, full-time is $33,500/year cheaper. The contractor becomes more cost-effective below 31 hours/week — the break-even point for this rate comparison.

Why This Matters

Flexibility value

Contractors can be scaled up or down without the cost and complexity of hiring/firing. If your workload fluctuates 30%+ between quarters, the contractor premium is insurance against over-hiring during slow periods.

Hidden employment costs

A $85,000 salary costs the employer $110,000-125,000 after benefits (health insurance, pension, paid leave), employer taxes, equipment, office space, and HR administration. The "30% rule" is a useful approximation.

Common Mistakes

❌ Comparing hourly rate to salary equivalent

A contractor at $75/hour sounds expensive vs a $85K salary ($41/hour). But the employee actually costs $53/hour fully loaded, and the contractor covers their own benefits, taxes, and downtime. The real gap is $75 vs $53, not $75 vs $41.

❌ Ignoring ramp-up time differences

Experienced contractors hit productivity in 1-2 weeks. New full-time employees take 3-6 months to fully ramp up. If you need results quickly, the contractor's higher rate is offset by faster time-to-value.