W-2 vs 1099 True Employee Cost Calculator
Find the real cost of a W-2 employee vs a 1099 subcontractor. Includes payroll tax, workers comp, benefits, PTO, training, and recruiting. See your loaded hourly rate and which path actually costs less.
W-2 Employee
Carpentry 8-12%, roofing 20%+
Employer share, 0 if not offered
1099 Subcontractor
What you pay them per hour worked
No employer-paid:
- Payroll taxes (FICA, FUTA, SUTA)
- Workers compensation
- Health insurance or benefits
- PTO, holidays, sick time
- Unemployment insurance
IRS Warning:
If you control when, where, and how the work happens, the worker is an employee, not a sub. Misclassification penalties can run $1,000+ per worker plus back taxes.
Loaded Cost Comparison
W-2 Employee
| Base Wages | $52,000 |
| Payroll Taxes | $4,277 |
| Workers Comp | $5,200 |
| Health Insurance | $4,800 |
| 401(k) Match | $1,560 |
| Other Benefits | $600 |
| Training | $1,000 |
| Recruiting | $500 |
| Total Annual | $69,937 |
Loaded Hourly (per worked hour)
$36.12/hr
1.44x base wage · +$11.12/hr burden
1099 Subcontractor
| Hours / Year | 2,080 |
| Sub Rate | $45/hr |
| Annual Invoice Total | $93,600 |
| No Payroll Tax | $0 |
| No Workers Comp | $0 |
| No Benefits | $0 |
| No PTO/Holidays | $0 |
| Total Annual | $93,600 |
Loaded Hourly
$45.00/hr
no burden — you pay only what they invoice
Apples-to-Apples: Same 1,936 Worked Hours
W-2 Total
$69,937
1099 Equivalent
$87,120
W-2 saves
$17,184/yr
W-2 wins on cost. At a $45/hr sub rate, the W-2 employee actually costs less for the same volume of work. You also get more control, consistency, and brand investment from a W-2 hire.
How to Use This Calculator
On the left, enter your W-2 employee details: base wage, hours, PTO, workers comp rate, and benefits. On the right, enter what you'd pay a 1099 sub for the same role. The calculator computes the true loaded cost of each path and tells you which one wins. Remember: the IRS decides classification based on control of the work, not what you call them.
Formula Used
Loaded W-2 Cost = Wages + Payroll Tax (~7.65%) + Workers Comp + Benefits + Training + Recruiting. Loaded Hourly = Total Annual Cost / Hours Actually Worked (excluding PTO/holiday). Burden Multiplier = Loaded Hourly / Base Wage.
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Disclaimer
This calculator is for estimation purposes only. Results may vary based on local conditions, materials, and building codes. Always consult a licensed professional before making decisions based on these calculations. MyContractorTools is not responsible for any errors or omissions.