Employer FICA Contribution
FICA (Federal Insurance Contributions Act) taxes fund Social Security and Medicare. The total rate is 15.3% (12.4% Social Security + 2.9% Medicare), split equally between employer and employee at 7.65% each. As an employee, you never see your employer's half — it's paid on top of your salary. As a contractor, you pay the full 15.3% yourself as self-employment tax.
Example
On a $120,000 salary, your employer pays $9,180 in FICA taxes on your behalf (7.65% × $120,000). You also pay $9,180 from your paycheck. A contractor earning the same amount pays the full $18,360.
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Business Valuation for Digital Businesses
A small digital business is typically worth its Seller's Discretionary Earnings (SDE) multiplied by an industry-specific multiple. In 2026, multiples range from 1.5x for consulting firms to 6.0x for SaaS businesses, depending on business type, growth, recurring revenue, and owner dependency.
Contractor vs Employee Compensation
Contractors typically need to charge 40-70% more per hour than the equivalent employee hourly rate to achieve comparable take-home pay, because they cover self-employment tax (15.3%), health insurance, retirement, PTO, and business expenses themselves.
Employee Salary Equivalent
An employee salary that matches your contractor income is typically 25-40% lower than your contractor gross, because the employer covers half of FICA taxes, provides benefits, and gives paid time off that you currently fund yourself.