Fiducia TogetherContractor versus employee cost
What an employee actually costs beyond salary, and how to compare it with a contractor.
Please note: This page explains what a term means. It is general information, not legal, financial, tax or investment advice, and it does not know anything about your business. Before you sign, file or commit to anything, check it with an accountant, a solicitor, or the official guidance we link to.
What it means
The full cost of an employee is salary plus employer's National Insurance, pension contributions, holiday, sick pay, equipment, software, space and management time.
Why it matters
A common rule of thumb is 20 to 30% on top of salary before equipment, which is why a contractor day rate that looks expensive often is not.
What it looks like in practice
Compare on total annual cost for the work actually needed. A contractor for 60 days at £400 is £24,000; an employee at £45,000 costs perhaps £57,000 fully loaded and is available all year.
What to watch out for
Choosing a contractor for cost reasons where the working arrangement is really employment — see IR35 and employment status. The saving evaporates with the liability.
Where to get proper advice
Your accountant for the fully loaded figure, which they can produce quickly and few owners ask for.
Where to read more
Last reviewed 2026-08-28 by Fiducia Together · Next review due 2027-08-28
Please note: This page explains what a term means. It is general information, not legal, financial, tax or investment advice, and it does not know anything about your business. Before you sign, file or commit to anything, check it with an accountant, a solicitor, or the official guidance we link to.