Decision workflow · 5 steps
Should I Hire an Employee or Contractor? — A Decision Framework
Your first hire is the most consequential financial decision after starting the business itself. Most solopreneurs underestimate the true cost by 30-50%. This workflow makes the hidden costs visible before you commit.
Calculate the true loaded cost
A $60,000 salary costs $78,000-$90,000 once you add employer taxes, benefits, and overhead. Know the real number before you budget.
Benchmark: US loaded cost multiplier is typically 1.25-1.50x base salary.
Compare W-2 vs 1099
For part-time or project-based work, a contractor may be more cost-effective. For ongoing core work, an employee usually wins after 6-12 months.
Audit meeting overhead
Before hiring for capacity, check whether meetings are eating your existing capacity. A weekly one-hour meeting with 4 people at $75/hr costs $15,600/year.
Decide on workspace policy
Office rent, commute time, home-office stipends — the workspace decision has real cost implications. Model both options before you commit.
Check break-even with new costs
Adding headcount raises your fixed costs. Re-run break-even with the loaded employee cost to see how many more sales you need to cover the hire.
Frequently asked questions
When should I hire my first employee? +
What is the biggest hidden cost? +
Should I hire remote? +
Part of
First Hire Decision →Know the true cost before you commit to headcount.