Do companies get a tax break for using consultant over regular employee?
You don’t pay payroll taxes when you hire a consultant. The cost of an employee’s salary, most benefits, and the payroll taxes that you do pay are legitimate business expenses just as is the consultant’s fee. Bear in mind that a consultant will often cost, MUCH more than an employee will even after payroll taxes and benefits are taken into account. My day job is in IT and as an employee I earn about $250 a day. I do do some consulting gigs from time to time and bill out at $125 per HOUR or $1,000 per day for those. A company making the decision between hiring a consultant vs an employee will base it upon the cost of accomplishing the goal. If they have a single task to be accomplished over a short period of time a consultant would make sense. However if they are going to have a long-term need for the service, an employee would generally be MUCH cheaper than a consultant. For professional services the cost of an employee is roughly 150% of the employee’s salary when payroll taxes, benef
