Payroll & Staff Cost calculator
Contractor vs Employee Cost Calculator
Compare an employee cost estimate against an annual contractor fee so you can see which option looks lower cost on the numbers entered.
Why use it
- Useful when you are comparing two delivery models before hiring or restructuring a role.
- This is only a cost comparison tool. It does not account for legal classification, productivity, control, leave, or commercial risk differences.
- The result should be treated as a planning estimate, not payroll, tax, legal, or HR advice.
Calculator tool
Use the contractor vs employee cost calculator
Compare an employee cost estimate against an annual contractor fee so you can see which option looks lower cost on the numbers entered.
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Important note
BizTools.au is designed to make business numbers easier to check, but calculator outputs still need judgment and real-world context.
- Calculator results are general estimates only and depend on the figures entered.
- Examples and summaries are provided for general information, not legal, tax, accounting, payroll, or financial advice.
- Before relying on a result for a real decision, check your assumptions and get qualified advice where needed.
How it works
Understand the formula before you use the result
The calculator uses a simple working formula so you can sense-check the result quickly and explain it clearly inside your business.
Contractor vs employee comparison formula
Super = annual employee salary × super rate
Payroll tax = annual employee salary × payroll tax rate
Workers comp = annual employee salary × workers comp rate
Estimated total employee cost = salary + super + payroll tax + workers comp + other annual employee costs
Difference = annual contractor fee - estimated total employee cost
A positive difference means the employee model is lower cost on the entered assumptions. A negative difference means the contractor arrangement is lower cost.
Worked example
See the numbers in a realistic scenario
Use the example below as a sense check when you compare the calculator result to a real quote, sale, or pricing decision.
Worked example
Worked example: comparing a service delivery role
A business compares an $85,000 employee salary with 12% super, 4.85% payroll tax, 1.5% workers compensation, $3,000 of other annual employee costs, and a contractor option costing $110,000 a year.
- Annual employee salary: $85,000
- Super rate: 12%
- Payroll tax rate: 4.85%
- Workers comp rate: 1.5%
- Other annual employee costs: $3,000
- Annual contractor fee: $110,000
Calculation steps
- Super = $85,000 × 12% = $10,200
- Payroll tax = $85,000 × 4.85% = $4,122.50
- Workers comp = $85,000 × 1.5% = $1,275
- Estimated total employee cost = $85,000 + $10,200 + $4,122.50 + $1,275 + $3,000 = $103,597.50
- Difference = $110,000 - $103,597.50 = $6,402.50
On those assumptions, the employee option looks lower cost by about $6,402.50 per year.
FAQ
Common questions about the contractor vs employee cost calculator
These are the practical questions operators usually run into when they apply the result to a real business decision.
Does lower cost automatically mean it is the better option?
No. Cost is only one part of the decision. Productivity, flexibility, supervision, leave, compliance, knowledge retention, and commercial risk can all matter just as much.
Should I include all employee-related on-costs here?
Yes, as far as practical. Equipment, training, software, recruitment, uniforms, and other role-specific costs can materially change the comparison.
Can this calculator tell me whether someone should legally be a contractor?
No. It does not deal with legal classification. It is only a simple cost comparison tool.
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