For leaders making staffing decisions
New employee or consultant?
When a team is stretched thin, adding headcount is a reasonable impulse. Approval can be hard to get, especially for someone experienced enough to contribute immediately. Depending on the work, a consultant may be the smarter choice.
I've faced this decision as a hiring manager and as a consultant making the case for my rate. This calculator compares the full cost of a W-2 employee and a 1099 consultant. Each field includes a ballpark, its source, and guidance if you're unsure.
Every employment or consulting agreement is part of a relationship. In my experience, relationships are healthier and more enjoyable when there's transparency and clear communication. Laying out the costs, options, trade-offs, and expectations helps both sides make agreements that meet their needs.
- Set by law Leave as is
- Ballpark A typical figure; replace it if you know yours
- Your number Only you know this
Before you run the numbers
Will the work be performed in California?
In California, anyone you pay is presumed to be an employee, and your organization has to prove otherwise. Check these before you compare costs.
This is a planning guide, not legal advice. Sources: the California Labor Commissioner on employee and contractor tests, and the state's business-to-business exemption chart.
| Hire | Consultant | |
|---|---|---|
| Hours of work | ||
| Cost per hour of work |
| The hire's cost | |
|---|---|
| Salary and bonus | |
| Payroll taxes | |
| Benefits | |
| One-time costs | |
| Total |
How it works
- The hire's cost is pay, taxes and benefits for the months of the project, plus one-time costs. Unemployment taxes stop once pay reaches the yearly wage limit.
- An employee is paid for every workday but works fewer hours because of time off, so their cost per hour of work is higher than salary suggests.
- A consultant bills only hours worked. Their rate covers their own taxes, insurance, retirement and unbilled time.
- Ramp-up hours count for the consultant only. A hire's first weeks of learning are already inside their salary.
Not counted
- Manager time, office space, payroll administration and training budgets. These add to the hire's cost.
- A new position usually continues after the project ends. A contract ends on its end date.
- An ongoing staff role can't become a contract by changing its label. Worker classification rules apply (in California, the ABC test). Check with an employment attorney.
Sources for the ballparks
- Example salary: U.S. Bureau of Labor Statistics (BLS), Occupational Outlook Handbook, advertising, promotions, and marketing managers, May 2025
- Vacation and sick days: BLS, March 2026
- Health coverage: KFF (formerly the Kaiser Family Foundation), Employer Health Benefits Survey 2026
- Retirement match: Vanguard, How America Saves 2026
- Federal unemployment tax: IRS Form 940 instructions, IRS exemption for 501(c)(3)s, California Employment Development Department (EDD), 2026 payroll taxes
- California unemployment and training tax: EDD, 2026 rates
- Social Security wage limit: Journal of Accountancy, citing the Social Security Administration
- Consultant billable hours: SPI Research, 2026 Professional Services Maturity Benchmark