Guide · 2026
1099 vs W-2 — the employer's cost
Most 1099-vs-W-2 explainers are written for the worker. This one is for the employer: how modeled W-2 payroll additions compare with a contractor invoice.
Compare employer spend
Enter the two annual amounts to compare the employer-side budget. The result does not determine whether the worker may legally be treated as an independent contractor.
W-2 employer cost
$86,712
$80,000 salary + $6,712 employer additions
Contractor employer spend
$95,000
Entered invoice only; contractor taxes, insurance, and take-home pay are not calculated.
The entered contractor invoice is $8,288 higher than the estimated W-2 employer cost.
Contractor invoice at employer-spend parity in this model: $86,712.
Show W-2 employer additions
- Social Security (employer)$4,960
- Medicare (employer)$1,160
- FUTA (incl. projected credit reduction)$147
- State unemployment (SUI/CA)$238
- Employment Training Tax (ETT)$7
- Workers' compensation (est.)$200
A valid contractor arrangement may still involve employer-side insurance, administration, or reporting costs outside the invoice. See the methodology and exclusions.
The core difference
For a W-2 employee, you (the employer) pay the employer share of Social Security and Medicare, federal and state unemployment tax, workers' compensation, and any state-specific employer levies — on top of the wage. In a valid independent-contractor arrangement, the contractor or their business generally handles its applicable taxes and coverage. The hiring business may still have reporting, administration, or insurance obligations depending on the facts and state law.
The modeled W-2 additions are the employer burden stack. On an $80,000 role in California, that's $6,712 in employer costs (+8.4%) above wages under the displayed assumptions. This is a budget comparison with an entered contractor invoice, not a conclusion that every addition disappears or that the two arrangements are legally interchangeable.
Modeled W-2 employer additions
- Social Security (employer)$4,960
- Medicare (employer)$1,160
- FUTA (incl. projected credit reduction)$147
- State unemployment (SUI/CA)$238
- Employment Training Tax (ETT)$7
- Workers' compensation (est.)$200
- Total modeled additions$6,712
The comparison uses an office-class workers'-comp estimate and the state's new-employer SUI default. Your actual carrier quote and experience rate may change the W-2 result.
See how the burden stack is built in our labor burden rate guide, the cost in your state from the cost-by-state index, our methodology, and sources.