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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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.