Subcontractor vs Employee Cost Comparison Calculator
Compare the true total annual cost of engaging a subcontractor versus hiring a full-time employee, factoring in payroll taxes, benefits, overhead, and productivity time.
Subcontractor Inputs
Employee Inputs
Formulas Used
Subcontractor Total Cost
Base Contract Cost = Hourly Rate × Hours/Week × Weeks/Year Agency Fee Amount = Base Contract Cost × (Agency Fee % / 100) Subcontractor Total = Base Contract Cost + Agency Fee Amount + Equipment Cost
Employee Total Cost
Social Security Tax = min(Salary, $168,600) × 6.2%
Medicare Tax = Salary × 1.45%
FUTA Tax (net) = min(Salary, $7,000) × 0.6%
SUTA Tax = min(Salary, $7,000) × 2.7%
Total Payroll Tax = SS + Medicare + FUTA + SUTA
Retirement Match = Salary × (Match % / 100)
Daily Rate = Salary / 260
PTO & Holiday Cost = (PTO Days + Holidays) × Daily Rate
Overhead Amount = Salary × (Overhead % / 100)
Employee Total Cost = Salary
+ Total Payroll Tax
+ Health Insurance
+ Retirement Match
+ PTO & Holiday Cost
+ Training Cost
+ Overhead Amount
+ Other Benefits
Effective Hourly Cost
Subcontractor Effective Hourly = Subcontractor Total / (Hours/Week × Weeks/Year) Employee Effective Hourly = Employee Total / ((260 − PTO Days − Holidays) × 8)
Cost Multiplier
Employee Cost Multiplier = Employee Total Cost / Base Salary (Typical range: 1.25× – 1.40× for fully loaded employee cost)
Assumptions & References
- Social Security wage base: $168,600 for 2024 (IRS Publication 15).
- Employer SS rate: 6.2%; Medicare rate: 1.45% (IRS Rev. Proc. 2023-34).
- FUTA net rate: 0.6% on first $7,000 after the standard 5.4% state credit (IRS Form 940).
- SUTA rate: 2.7% on first $7,000 — national average new-employer rate (U.S. DOL).
- Working days per year: 260 (52 weeks × 5 days), standard U.S. assumption.
- Employee workday: 8 hours for productive-hours calculation.
- Overhead covers desk space, utilities, HR administration, IT, and management time.
- Subcontractor is assumed to pay their own self-employment taxes, benefits, and equipment unless specified.
- This calculator does not constitute legal or tax advice. Consult a CPA or employment attorney for jurisdiction-specific guidance.
- References: IRS Publication 15 (Circular E), U.S. DOL SUTA tables, SHRM Employee Benefits Survey 2023.