Employee or contractor, what each costs
Enter a pay rate and hours to compare a year's cost of a W-2 employee, including the employer's payroll taxes, with a 1099 contractor.
Draft, figures being verified: Juliette or Fred checks this calculator against the IRS and Virginia rates before it goes live.
Cost for the year
Fill in the form and choose Compare to see the costs.
Whether someone is an employee or a contractor depends on how the work is controlled, not on which costs less. Treating an employee as a contractor can lead to back taxes and penalties.
For estimation only, not tax or legal advice. See our terms of use.
For estimation only, not tax or legal advice. See our terms of use.
How this works out the costs
- Employer Social Security tax stops at the yearly wage limit. Medicare has no limit.
- Federal unemployment tax assumes you get the full credit for paying Virginia unemployment tax on time.
- Virginia unemployment tax applies up to the Virginia wage limit, at the rate you enter.
- Workers' compensation insurance, payroll processing and equipment aren't included. Add them to benefits if you want them in the comparison.
Rates last checked against IRS and Virginia sources on 7 October 2026.
Sources for the rates this calculator uses
- Publication 15 (2026), (Circular E), Employer's Tax Guide (6 figures), checked 7 October 2026
- Code of Virginia § 60.2-229. Wages (1 figure), checked 7 October 2026
- Code of Virginia § 60.2-526. General provisions (1 figure), checked 7 October 2026
Hiring your first employee?
We set up payroll, register you with the Virginia Employment Commission and Virginia Tax, and run the first pay run with you.