How to use this 1099 vs. W-2 calculator
Enter the employee’s annual base pay, then the employer add-ons: payroll taxes (about 7.65% FICA plus unemployment), workers’ comp as a percent of pay, and annual benefits and overhead. The tool shows the fully-loaded W-2 cost and its multiplier. Add what a 1099 contractor would cost for the same work and it tells you which is cheaper.
What goes into the true cost of an employee
| Cost | Typical amount | 1099 contractor? |
|---|---|---|
| Base wage / salary | the sticker number | Paid as a flat rate |
| Employer FICA | 7.65% of pay | No — they pay their own |
| Unemployment (FUTA/SUTA) | varies by state | No |
| Workers’ comp | ~1–5% of pay (trade-dependent) | Usually no |
| Benefits (health, retirement) | $0–$15,000+/yr | No |
| Overhead (tools, space, PTO) | varies | No |
A worked example
A $60,000 employee with 9% payroll-plus-unemployment tax and 2% workers’ comp carries about $6,600 in employer taxes, plus say $6,000 of benefits and $3,000 of overhead — a fully-loaded $75,600, or 1.26× the base wage. If a contractor would do the same work for $70,000 on a 1099, the contractor is about $5,600 a year cheaper — before you weigh control, availability, and classification rules.
Cost is only half the decision
A 1099 often looks cheaper on paper, but classification is a legal test, not a cost choice — control, independence, and how the work is done all matter, and misclassifying an employee is expensive. Use this to compare the money, then confirm the classification against IRS and state rules. When you price the work itself, the free estimate templates and the break-even calculator help you build a number that pays.