Compare W-2 employee value with three independent-contractor scenarios across compensation, benefits, collected revenue, expenses, unpaid time, nonbillable work, payroll taxes, and multi-year outcomes.
No income-tax estimateNo worker classificationNo data saved
This calculator provides estimates based on the compensation, billing, utilization, expense, time and payroll-tax assumptions you enter. Contractor revenue is not equivalent to employee salary, and actual results may depend on contract availability, collections, business expenses, insurance, benefit eligibility and applicable tax rules. The calculator does not determine whether a worker is legally an employee or independent contractor and does not calculate income tax, take-home pay or tax deductions. Results do not constitute legal, tax, financial or employment advice.
Guide
How to compare employment and independent contracting
Employee compensation vs contractor revenue
Employee value combines expected cash with employer retirement and benefits. Contractor invoices are business revenue; collections and operating costs must be applied before the figures become economically comparable.
Why salary-to-hourly multipliers are incomplete
A flat multiplier cannot capture contract availability, utilization, nonbillable work, collections, insurance, business overhead, self-funded leave, benefit replacement, transition costs, or total time.
Billable utilization and nonbillable work
Utilization divides billable delivery hours by total business hours. Sales, proposals, administration, invoicing, bookkeeping, training, client communication, maintenance, and rework all affect realized hourly value.
Contract gaps and unpaid time
Planned vacation, holidays, contingency time, and other non-contract weeks reduce available capacity. Scenario gap weeks then reduce effective active weeks without subtracting the same time twice.
Employer benefits vs self-funded coverage
Employee health, HSA, insurance, development, and equipment benefits use employer-paid values. Contractor health, dental, disability, and business insurance are modeled as cash expenses.
Business expenses and collected revenue
Collected revenue reflects invoice collection assumptions. Payment processing, coverage, professional services, tools, facilities, marketing, and other expenses reduce net business income before payroll tax.
Employee FICA vs self-employment tax
The isolated payroll-tax layer estimates Social Security and Medicare only. The 2026 preset uses versioned rates, a self-employment taxable-earnings factor, and the Social Security wage base.
Why retirement contributions are treated differently
Employee employer contributions add compensation. Contractor personal contributions remain self-funded allocations; the calculator does not turn them into employer benefits or assume tax savings or statutory limits.
How break-even contractor rates are calculated
Bounded binary searches change one billing or salary input while holding utilization, collection, expenses, benefits, time, payroll-tax, and applicable Year 1 transition assumptions constant.
What adjusted economic value means
For employees, adjusted value reflects compensation less payroll-tax estimates and entered work costs. For contractors, it reflects net business income less the payroll-tax estimate and applicable transition costs. It is not take-home pay.
Why worker classification cannot be chosen by a calculator
Worker status depends on the actual relationship under applicable law, not solely on a contract label, payment method, or tax form. This tool does not apply a legal classification test.
What this calculator does not include
It excludes federal, state, and local income tax, deductions, credits, QBI, tax returns, take-home pay, unemployment tax, Additional Medicare Tax, and legal classification.
Transparent math
Methodology
Employee model
Salary compounds annually. Expected and target bonus remain separate. Paid leave reduces worked hours but is already included in salary, and shared sequential retirement-match and benefits calculations supply employer value.
Contractor revenue
Hourly and daily modes multiply rate, scenario billable units, and effective active weeks. Project and retainer rows annualize their frequency, quantity, active years, delivery hours, and collection assumptions.
Weeks and time
Available weeks subtract planned unpaid time once. Configured active weeks are capped by availability, and unplanned gaps reduce that result. Weekly nonbillable time uses effective active weeks; monthly time uses 12 months.
Collections and expenses
Scenario collection is applied to collectible invoice revenue. Processing is based on collections; an optional bad-debt reserve is based on billed revenue and prompts an overlap warning when both loss assumptions are used.
Payroll-tax estimate
Employee cash wages use employee Social Security and Medicare assumptions. Positive contractor net business income uses the self-employment earnings factor before contractor Social Security and Medicare assumptions are applied.
Projection and solvers
Salary, rates, and expenses compound without premature rounding. Cumulative differences use the selected metric. Solvers use finite guards, documented bounds, 80 iterations, and a 0.01 tolerance.
Common questions
Employee vs contractor FAQ
How do I compare employee salary with contractor income?
Compare employee cash, employer-paid benefits, retirement support, paid leave, work costs, and time with contractor collected revenue, business expenses, unpaid time, nonbillable work, coverage costs, and payroll-tax estimates.
What contractor rate is equivalent to a salary?
The equivalent rate is the bounded estimate that makes the Expected contractor scenario equal the employee arrangement on your selected metric while holding utilization, collections, expenses, time, benefits, and payroll-tax assumptions constant.
Why are billable hours different from total working hours?
Contractors often spend time on sales, proposals, invoicing, bookkeeping, training, client communication, equipment, and rework that cannot be billed. Total business hours include both billable and nonbillable time.
How do unpaid vacation and contract gaps affect contractor income?
Planned unpaid weeks reduce annual revenue capacity, and unplanned gap weeks further reduce effective active weeks. The unavailable-revenue figure is a planning estimate, not guaranteed lost income.
Which business expenses should I include?
Include realistic cash costs for coverage, insurance, accounting, legal support, software, equipment, communications, workspace, marketing, training, banking, travel, and other recurring operations. The calculator does not determine deductibility.
How should employee benefits be valued?
Enter only the employer-paid value of health coverage, HSA funding, life and disability insurance, professional development, equipment, and other benefits. Employee-paid premiums are not employer compensation.
How are retirement contributions compared?
Employer employee-plan contributions add compensation value. A contractor's planned personal contribution remains the contractor's own allocation, so it is shown separately and is neither added as an employer benefit nor automatically deducted from economic value.
What is the difference between FICA and self-employment tax?
The payroll-tax estimate applies employee Social Security and Medicare rates to cash wages and contractor Social Security and Medicare rates to the entered self-employment earnings base factor, subject to the Social Security wage base.
Does the calculator estimate income taxes?
No. It does not calculate federal, state, or local income tax, deductions, credits, QBI, a tax return, or take-home pay.
What does value after payroll-tax estimate mean?
It is modeled economic value after the isolated Social Security and Medicare estimate but before income tax. It is not net pay or take-home pay.
Does a 1099 form automatically mean a worker is an independent contractor?
No. Tax forms and contract labels do not by themselves determine worker status. Applicable legal tests examine the actual relationship and circumstances.
Can this calculator determine worker classification?
No. It compares economic assumptions only and cannot decide whether a person is legally an employee or independent contractor.
