Free tool
Contractor vs employee cost calculator
The annual cost of employing someone against the annual cost of a contractor, on your own numbers. It compares cost, and it decides nothing about classification.
Pay figures are sensitive. The link carries them in the address itself, so think before you paste it anywhere shared. Nothing is stored on our side either way.
Where the cost comes from
| Line | Per year |
|---|---|
| The breakdown appears here once your figures are in. | |
How the two totals are worked out
Every step, in the open, so you can rebuild the comparison on one spreadsheet tab and disagree with it if you want to. A calculator you cannot check is an ad.
The employee side
The employee total is the gross annual salary multiplied by one plus the on-cost percentage you entered. If you type twenty percent, the total is the salary plus a fifth of it. That percentage is yours: this tool publishes no employer contribution rate for any country, because those differ by jurisdiction, industry, employer size and salary, and they change. If your on-costs are a mix of a percentage and fixed amounts, the employee cost estimator takes each line separately.
The contractor side
The contractor total is the rate per unit multiplied by the number of billable units you expect to pay for across a year, whether you invoice by the day or the hour. The tool assumes no working calendar and no default number of days, because contractor engagements vary too much for one to be right, so the units are entirely your figure. It also adds no agency fee, currency margin or expenses; if you carry those, the contractor cost calculator handles them.
The difference, and what it does not settle
The difference is one total minus the other, and the tool names which side is cheaper and by how much. That is the whole of what it decides. It does not tell you which way to engage someone, because cost is not the test: whether a person can lawfully be a contractor turns on how the working relationship actually operates, differs by country, and is a question for a qualified professional, not a cheaper-of-two sum.
What this tool does not know
Any employer contribution rate, ceiling, threshold or exemption in any country, and whether a given person can lawfully be engaged as a contractor at all. It does not compute net pay, it is not payroll, and it is not tax, legal or accounting advice. Above all it is not a classification test: a lower total is not a reason to treat an employee as a contractor, and treating one as the other to save cost is the mistake this page exists to warn against.
Before you act on a comparison, read contractor versus employee, which sets out how classification is actually judged. For how contractor engagements, agreements and pay runs are managed alongside employees, see the Contractor Management module. Capstan does not compute statutory payroll: it compiles your inputs and hands a documented export to your payroll partner.
Questions with complete answers
Does the cheaper option decide how I should engage someone?
No, and this is the one thing worth being blunt about. Whether someone can be a contractor is a legal question about how the working relationship actually operates: who controls the work, who carries the risk, whether the person works for others, and more, all of which differ by country. It is not answered by which arrangement costs less. Comparing the two totals and picking the lower one is precisely how misclassification happens, and it tends to surface in an audit or a dispute, when it is most expensive to fix. Use this for the cost, then read the classification guide and take the specific case to a qualified professional.
Why do I have to enter the employer on-cost percentage myself?
Because we will not publish employer contribution rates as fact. They differ by country, and inside some countries by region, by industry, by employer size and by salary band, and they change. A tool that shipped with a number in that field would be confidently wrong for most readers while looking authoritative. Ask your accountant or check the official source for where you are hiring, enter the percentage they give you, and the tool shows exactly what it did with it. If you leave it at zero, the employee total is bare salary, which in most countries understates the real cost.
What should the on-cost percentage include?
Whatever your accountant tells you the employer carries on top of gross salary where you are hiring, expressed as a percentage of that salary. In many countries that is employer social or pension contributions plus the value of benefits you provide, and sometimes a levy or insurance particular to your industry. It is your figure, built for your case, not a rate we assert. If some of your on-costs are fixed amounts rather than a percentage of salary, fold them into the percentage or use the employee cost estimator, which takes each line separately.
How do I count contractor units?
Pick the basis you actually invoice on, a day or an hour, and enter the rate for one unit and the number of units you expect to pay for across a year. If a contractor bills 200 days at a day rate, that is 200 units. If they bill hours, use hours. The tool multiplies the two and does not assume a working calendar, because contractor engagements vary too much for any default to be right, so the number of billable units is yours to set.
Is this tax or legal advice, or payroll?
None of them. It is a budgeting aid that compares two totals you build from your own figures. It states no rate, no threshold and no filing date, it does not compute anyone's net pay, and it is not a payroll calculation. Capstan does not compute statutory payroll either: it compiles your payroll inputs and hands a documented export to your payroll partner, who does the statutory maths.
Employees and contractors, in one place, without deciding which to be on cost alone.