Business & SaaS

Employee vs Contractor Cost

Compare the total cost of a full-time employee versus an independent contractor.

Hiring an employee costs significantly more than their base salary once you add CPP, EI, vacation pay, benefits, and overhead. This calculator makes the true comparison visible to help small businesses make the right hiring decision.

Enter your numbers

Employee Annual Salary ($)

Monthly Benefits Cost ($)

Health, dental, and other benefits.

Contractor Hourly Rate ($/hr)

Contractor Hours per Year

Results update as you change the inputs. Calculations run in your browser.

True Employee Cost

$71399

contractor Cost: $112500
difference: Contractor costs $41101 more
overhead: $11399 over base salary

See the formula

Formula and method

Employee Cost = Salary + CPP (5.95%) + EI (1.049%) + Vacation (4%) + Benefits

2024 employer CPP contribution rate of 5.95% to max $3,799.80. Employer EI multiplier of 1.4× employee premium (1.049% effective). 4% vacation pay minimum. Benefits vary by package.

Worked examples

Junior developer

Employee Annual Salary ($):: 65000
Monthly Benefits Cost ($):: 300
Contractor Hourly Rate ($/hr):: 85
Contractor Hours per Year:: 1800

True Employee Cost: $75682

Part-time specialist

Employee Annual Salary ($):: 50000
Monthly Benefits Cost ($):: 200
Contractor Hourly Rate ($/hr):: 65
Contractor Hours per Year:: 800

True Employee Cost: $57900

Assumptions and limits

2024 CPP and EI employer rates
Minimum 4% vacation pay
Ontario-based estimates

This tool provides an educational estimate. Rules, rates and personal circumstances can change the answer. Review the assumptions before relying on a result. Report a correction.

Common mistakes to avoid

Using salary as total cost — real total employee cost is typically 120-140% of base salary.
Not including the employer portion of CPP and EI in comparisons.
Ignoring non-monetary benefits of employment (loyalty, institutional knowledge, availability).

Frequently asked questions

Is it always cheaper to hire contractors?

Not always. Contractors command higher hourly rates to compensate for their own benefits, taxes, and overhead. The crossover point depends on hours worked and benefits package. Long-term full-time work often favors employment.

What is a T4 vs T4A?

T4 is issued to employees. T4A is issued to contractors for self-employment income. Misclassifying an employee as a contractor is a serious CRA compliance risk with significant penalties.