Guide · 2026
1099 vs W2 — the employer's cost
Most 1099-vs-W2 explainers are written for the worker. This one is for the employer: what a W2 hire costs you that a 1099 contractor doesn't.
The core difference
For a W2 employee, you (the employer) pay half of FICA (Social Security + Medicare), federal and state unemployment tax, workers' compensation, and any state-specific employer levies — on top of the wage. For a 1099 contractor, you pay only the invoice; the contractor covers their own self-employment tax and insurance.
So the "W2 premium" is essentially the burden stack. On an $80,000 role in California, that's $6,691 in employer costs (+8.4%) — money you would not owe on an equivalent $80,000 contractor invoice. (A contractor's rate is usually higher to cover their own taxes, but that cost sits with them, not on your payroll-tax return.)
Employer pays on a W2 — but not a 1099
- Social Security (employer)$4,960
- Medicare (employer)$1,160
- FUTA (incl. credit reduction)$126
- State unemployment (SUI/CA)$238
- Employment Training Tax (ETT)$7
- Workers' compensation (est.)$200
- W2 premium (employer cost)$6,691
Compute it for your state & salary
The added lines below are exactly what you save in employer cost by paying a 1099 invoice instead — though misclassification carries real legal risk, so weigh control and permanency, not just cost.
Calculate the cost
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How the $6,296 on top of salary breaks down
- Social Security74%
- Medicare17%
- FUTA2%
- State SUI4%
- ETT0%
- Workers' comp3%
| Base salary | — | $75,000 |
| Social Security (employer) | 6.20% up to $184,500 | $4,650 |
| Medicare (employer) | 1.45% (no cap) | $1,088 |
| FUTA (incl. credit reduction) | 1.80% on first $7,000 | $126 |
| State unemployment (SUI/CA) | 3.40% up to $7,000 | $238 |
| Employment Training Tax (ETT) | 0.10% up to $7,000 | $7 |
| Workers' compensation (est.)est. | ~0.25% (office/clerical est.) | $188 |
| Total cost | $81,296 |
Estimate for budgeting, not tax advice. SUI uses the new-employer rate; workers' comp is an adjustable office-class estimate. See methodology.
⚠️ Classification is a legal test (control, permanency, integration), not a cost choice — the IRS and states penalize misclassification. This tool estimates cost only; consult an advisor on status. See our methodology and sources.