Question 1

Is it cheaper to hire a contractor or a full-time employee?

Accepted Answer

It depends on the hourly rate and how much work you need. Contractors typically cost 1.5–2× their hourly rate vs the equivalent employee hourly cost. But employees have fixed overhead (benefits, equipment, HR) that contractors don't. For less than 30 hours/week of work, contractors are usually cheaper.

Question 2

What benefits cost does an employer add on top of salary?

Accepted Answer

US employer costs on top of salary: health insurance ($5,000–$12,000/year), 401k match (3–6% of salary), payroll taxes (7.65% FICA), PTO (10–20 days), dental/vision ($500–$2,000/year). Total benefits typically add 25–40% to base salary.

Question 3

What overhead should I factor into employee cost?

Accepted Answer

Hidden overhead includes: equipment ($2,000–$5,000 setup), software licenses ($500–$2,000/year), office space allocation ($3,000–$15,000/year), HR time for hiring/management, training costs, and IT support. Add 15–25% to fully loaded salary cost.

Question 4

When should I hire a full-time employee instead of a contractor?

Accepted Answer

Hire full-time when: (1) You need 40+ hours/week consistently, (2) The role requires deep company knowledge, (3) You need legal control over work product and IP, (4) The contractor costs more than 50% above equivalent FTE cost, (5) You're building a core team function.

Question 5

What is a 1099 contractor vs W-2 employee?

Accepted Answer

A 1099 contractor is self-employed — they pay their own taxes and benefits, you don't withhold. A W-2 employee has taxes withheld and receives benefits. Misclassifying an employee as a contractor is illegal and results in back taxes, penalties, and benefits owed. When in doubt, use a proper classification test.

Contractor vs Employee Cost Calculator — Which Costs More?

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