Free tool
Hiring Cost Calculator
Compare freelancer vs employee total cost over months and years.
Inputs
Freelancer monthly
$6,000.00
$72,000.00 / yr
Employee monthly (loaded)
$6,996.33
$83,956.00 / yr
Decision
At current usage, the freelancer option is cheaper monthly. Break-even is around 94 freelancer hours per month — beyond that, hiring an employee tends to be more cost-effective.
Cost is one factor. Continuity, IP control, training cost, and ramp-up time also matter — especially for senior or strategic roles.
What this tool does
The Hiring Cost Calculator compares the true monthly and annual cost of a freelancer at a given hourly rate against an employee at a given gross salary — including employer on-costs, equipment, software, vacation, and downtime.
It also calculates the break-even number of freelancer hours at which hiring an employee tends to become cheaper.
Who it is for
Owners deciding between extending a freelancer engagement or hiring permanently.
Founders modelling their first or second hire and trying to budget honestly.
Operators who suspect their 'cheap' contractor is more expensive than it looks.
How it works
- Enter the freelancer's hourly rate and how many hours per month you typically use.
- Enter the employee's gross monthly salary and your jurisdiction's typical employer on-cost percentage (often 18–30%).
- Add equipment one-off and software monthly costs. Set vacation days and a realistic downtime percentage.
- Compare the loaded monthly costs and the break-even hours figure.
What your results mean
Freelancer monthly is the rate × hours — clean and predictable.
Employee loaded monthly includes salary, on-costs, software, equipment amortised over twelve months, and a downtime adjustment for vacation, sick days, and ramp-up.
Break-even hours is the freelancer hours per month at which hiring an employee starts to look cheaper. Above this, an employee usually wins on cost alone.
Common mistakes to avoid
- Comparing freelancer rate against employee gross salary alone — missing 20–30% in employer on-costs.
- Ignoring equipment and software, which are real costs even though they feel one-off.
- Setting downtime at zero. A real human takes vacation, gets sick, and needs ramp-up time on a new domain.
Frequently asked questions
- What counts as employer on-costs?
- Social security, pension, payroll tax, mandatory insurances, and statutory benefits. The exact percentage depends on country and seniority — 18% to 30% is a common range in Europe and North America.
- Why does an employee win above the break-even hours?
- Above a certain monthly volume, the freelancer's hourly rate scales linearly while the employee's loaded cost is roughly fixed. Past that point, you are paying a premium for flexibility you may not need.
- Does this include training cost?
- Not directly. The downtime percentage absorbs ramp-up to some extent, but if a role requires significant initial training, add that as part of the equipment one-off field for a clean comparison.
- Should I always pick the cheaper option?
- No. Cost is one factor. Continuity, IP control, knowledge retention, and strategic alignment can outweigh a 10–15% cost difference, especially for senior roles.
How to use this tool
Enter your real numbers where you have them, and use the defaults as a starting point everywhere else. The tighter your inputs, the more useful the result.
When professional advice helps
Use the result to frame the question, not to settle it. For binding decisions, confirm specifics with a qualified professional in your jurisdiction. See how this tool works for what it does and doesn't model.
Related guides
Compare freelancer vs employee cost without hiding on-costs.