Contractor vs Employee Calculator
Compare after-tax take-home pay as a contractor versus an employee in Australia for 2024–25. Includes super, Medicare levy, and PAYG tax.
Note: This comparison does not include contractor business expenses (insurance, equipment, accountant fees) which would reduce the contractor's taxable income, nor does it account for employee entitlements such as paid leave, sick leave, and job security.
Contractor vs Employee — Understanding the Difference
The decision between contracting and employment is about much more than the headline rate. After-tax take-home pay is important, but so are super, leave entitlements, job security, and non-financial factors like flexibility and career development.
What Contractors Gain
- Higher gross rate: Contractors typically earn 20–40% more in gross income to offset missing entitlements
- Tax deductions: Legitimate business expenses (insurance, equipment, home office) reduce taxable income
- Flexibility: Greater control over when, where, and how you work
- Variety: Opportunity to work across multiple clients and industries
What Employees Gain
- Paid leave: 4 weeks annual leave, 10 days sick leave, plus public holidays
- Employer super: 11.5% super paid on top of salary by the employer
- Job security: Unfair dismissal protections, redundancy pay
- Simpler tax: PAYG withholding means no quarterly BAS or complex tax returns
- Workers' compensation: Covered by the employer for workplace injuries
The Super Difference
Employee super is paid by the employer on top of the salary — it doesn't come out of your take-home pay. Contractors must fund their own super from their rate. When comparing, always check whether your contractor rate is super-inclusive or super-exclusive.
Personal Services Income (PSI) Rules
If 80% or more of your contractor income comes from a single client, the ATO's PSI rules may apply. This can limit your ability to claim certain deductions and may require you to attribute income directly to yourself rather than through a company or trust.