Free Contractor vs Employee Cost Calculator
Compare the true cost of hiring a contractor versus a full-time employee.
Quick answer
An employee costs salary plus employer PF, ESI, bonus, gratuity, leave and benefits. A contractor costs the invoice amount plus 18% GST if they are GST-registered (claimable as input credit for most businesses). You deduct TDS from contractor payments under Section 194C (1% or 2%) or 194J (10% for professional fees). Compare the full monthly cost, not just salary against fee.
Last reviewed November 2026.
How to use the Contractor vs Employee Cost Calculator
Fill in these fields and the contractor vs employee cost calculator works out the rest instantly, in your browser:
- Employee Annual Salary (₹)
- Contractor Monthly Rate (₹)
Worked example
With Employee Annual Salary: 800000; Contractor Monthly Rate: 100000:
| Employee: Base Salary | ₹8,00,000 |
| Employee: Employer PF + ESI + Bonus + Gratuity + Insurance | ₹1,50,702 |
| Total Employee Cost (Annual) | ₹9,50,702 |
| Contractor Annual Cost | ₹12,00,000 |
| Difference | ₹2,49,298 |
| Cheaper Option | Employee |
Contractor costs do not include employer statutory benefits. Employee costs include approx PF, ESI, bonus, gratuity.
Frequently asked questions
What TDS applies to contractor payments?
Section 194C: 1% for individuals or HUFs and 2% for others, for work contracts. Section 194J: 10% for professional or technical services (2% for technical services and certain other payments).
Can a long-term contractor be treated as an employee?
If the person works fixed hours under your control like an employee, authorities and courts may treat them as one, making PF, ESI and gratuity payable. Keep genuine contracts for genuine independent work.
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