👥 Contractor vs Full-Time Employee Cost Comparison
Compare the total cost of hiring a full-time employee versus an independent contractor for the same role.
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📘 Complete Guide: Contractor vs Full-Time Employee Cost Comparison
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How much does an employee actually cost beyond salary?
Add 20-35% for payroll taxes, health insurance, PTO, equipment, workspace, HR overhead, and training. A $70,000 salary actually costs $84,000-$95,000 in total employment cost.
When is hiring a contractor more expensive than an employee?
Contractors are more expensive per hour but eliminate benefits, payroll taxes, and HR overhead. Break-even occurs at approximately 1,000-1,500 hours per year (50-75% of full-time).
What IRS rules define contractor vs employee classification?
The IRS uses a behavioral, financial, and type-of-relationship test. Key factors: Do you control how the work is done? Is the worker economically dependent on you? Misclassification carries severe penalties.