1099 contractor vs W-2 employee cost calculator
Compare what a worker really costs your business. For an employee, add the employer share of Social Security and Medicare, federal and state unemployment tax, workers' comp and benefits. Then compare it with a contractor's rate.
Help: how to use it and FAQ
How to use it
- You enter the data
- Smallo works it out
- You get the result
- Enter the employee's yearly wage, payroll tax rates and benefits.
- Enter the contractor's hourly rate and the hours you need per year.
- Compare both yearly costs and the hourly rate where they are equal.
Frequently asked questions
What payroll taxes does an employer pay?
For 2026: Social Security 6.2% on wages up to $184,500, Medicare 1.45% on all wages, federal unemployment (FUTA) usually 0.6% on the first $7,000, and state unemployment (SUTA), whose rate and wage base depend on your state.
Can I choose to hire someone as a 1099 contractor to save money?
No. The IRS and your state decide based on how the work is done, not on cost: who controls the schedule and methods, who provides the tools and whether the person runs their own business. Misclassifying an employee can bring back taxes and penalties.
Why does a contractor charge more per hour?
Contractors pay both halves of Social Security and Medicare, their own insurance and equipment, and have unpaid time between jobs. A higher hourly rate can still cost you less than an employee.