Contractor vs Employee: What Really Pays More?
Understanding the math behind self-employment taxes, unbillable time, and hidden corporate benefits.
The Freelance Premium
Many professionals mistakenly compare a $50/hour W-2 salary directly to a $50/hour 1099 contract rate. This is the fastest way to take a massive pay cut without realizing it.
As a 1099 independent contractor, you must charge a Freelance Premium. Why? Because you are now a business. Your employer no longer pays half your payroll taxes, no longer subsidizes your health insurance, and no longer pays you when you take a sick day.
The 30% Rule
As a rule of thumb, a contractor must charge at least 30% to 50% more per hour than a salaried employee to achieve the same take-home lifestyle.
- Self-Employment Tax: In the US, this is 15.3% (you pay both the employee and employer portions of FICA).
- Unpaid Time Off (PTO): Employees get 3-5 weeks of paid vacation and sick leave. Contractors get $0 when they don't work.
- Health Insurance: Corporate plans are heavily subsidized. A family plan on the open market can cost $1,500+ per month out of pocket.
Calculate Your Exact Rate
Don't guess. Use our interactive calculators to plug in your exact numbers and see the mathematical truth: