Compare the two Your scenario
How it works
Built on our data. Uses the same break-even math as our rate calculator, and links to the local median for your trade on every city page, so you can sanity-check a 1099 rate against what employees in that metro actually earn.
On the employee side we add up wages and the value of employer-paid health insurance and retirement match. The employer also pays its half of Social Security and Medicare, which a contractor pays themselves.
On the contractor side we start from billable revenue, subtract business costs, the extra self-employment tax (the employer half, 7.65% of 92.35% of net earnings) and the health insurance you'd buy. What's left is compared with the employee package.
The tool also shows the contractor rate where the two come out even, so you can see how far above or below it an offer is.
Worked example
A $38/hour employee job (2,080 paid hours, $7,000 of health insurance paid by the employer, 3% retirement match) against a $55/hour 1099 job billing 1,600 hours with $12,000 in business costs:
- Employee: $79,040 wages + $2,371 match = $81,411, with insurance covered.
- Contractor: $88,000 revenue − $12,000 costs − $5,369 extra self-employment tax − $7,000 insurance = $63,631.
The 1099 rate looks 45% higher, yet the W-2 job comes out $17,780 ahead. The contractor would need $66.96/hr at 1,600 billable hours to break even. For context, PayByTrade's data puts the typical U.S. electrician at $62,440 a year as an employee.
Tips & gotchas
- Billable hours are the big one. Contractors rarely bill 2,080 hours; 1,400–1,700 is common once quoting, driving and slow weeks are counted.
- Paid holidays and vacation are already inside the employee's 2,080 paid hours.
- This compares money only. Contractors also take on liability, collections and finding the next job.
- Income tax is left out because it applies to both sides; this isn't tax advice.
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FAQ
Is a contractor always better off at a higher rate?
No. Business costs, unpaid hours, self-employment tax and buying your own insurance can eat much of the difference. Use the break-even rate to check.
Why only half of self-employment tax?
Employees already pay their half (7.65%) out of their wages. The extra cost of going 1099 is the employer half, which you now pay yourself.
Where do the starting numbers come from?
They're examples. Replace them with your real offers. For local typical pay, see your trade's city page.