Contractor vs employee calculator
Compare take-home pay on the same gross income as a PAYE employee versus a self-employed contractor.
What this means for you
See what gross contract income would be needed to match the employee's net take-home pay.
Compare expense levels
Your deductible business expenses are one of the biggest levers a contractor controls — see how the gap shifts.
| Scenario | Expenses | Contractor net | Difference vs employee |
|---|---|---|---|
| Lower expenses | 5% | $0 | $0 |
| Current | 10% | $0 | $0 |
| Higher expenses | 20% | $0 | $0 |
Higher genuine deductible expenses reduce the contractor's taxable profit, narrowing the gap versus an employee on the same gross figure.
Assumptions & sources
Inland Revenue (IRD) 2026/27 PAYE tax brackets; ACC earner's and Working Safer levy rates for self-employed people.
1 July 2026
17 July 2026
Employee: gross minus PAYE tax, ACC earner levy, and KiwiSaver. Contractor: gross treated as revenue, expenses deducted to reach profit, then PAYE tax and self-employed ACC levies applied to that profit.
PAYE tax for both, ACC levies for both (employee earner levy vs contractor earner + Working Safer levy), KiwiSaver for the employee, and deductible expenses for the contractor.
The industry-specific ACC work levy (varies by occupation), paid leave value, and any GST registration or compliance costs a contractor may carry.
Related reading
What does your salary actually look like after tax in NZ?
A $80,000 salary doesn't mean $80,000 in the bank — here's what actually comes off your pay, and what's left.
Read article →
Contractor vs employee in NZ: which leaves you better off?
Higher day rate, fewer protections — here's how contracting vs employment actually stacks up financially in NZ.
Read article →What actually differs between the two
Employees and contractors pay income tax at the same marginal rates, so tax brackets aren't the main difference. What differs is: contractors can deduct genuine business expenses before tax; employees get an employer-matched KiwiSaver contribution on top of their salary, which contractors don't; contractors pay their own ACC levies (an earner's levy plus a Working Safer levy, and typically a work levy on top that varies by occupation); and employees get paid annual and sick leave that contractors have to self-fund by charging more.
Because of the leave and KiwiSaver gap, many contractors price their day or hourly rate around 20-30% above an equivalent employee salary, on top of covering their own expenses and ACC. If a contract rate looks similar to a salaried role's pay, it's often worth less once those gaps are accounted for.
Example: A $110,000 salaried role vs an equivalent contract
Using the common 20-30% contractor premium convention, an equivalent day-rate contract for a $110,000 PAYE role would typically be priced to gross approximately $132,000-$143,000 a year.
That's a meaningful headline jump — but once the contractor covers their own ACC levies, gets no employer KiwiSaver match, and self-funds annual and sick leave by working fewer paid weeks a year, the gap in real take-home terms narrows considerably.
Which is exactly why comparing headline pay alone is misleading — the 20-30% premium exists specifically to offset those gaps, not to represent a genuine pay rise.
Running your own actual numbers above — not the rule of thumb — is the only way to know whether a specific contract rate is genuinely better, worse, or roughly equivalent to a salaried offer.
Frequently asked questions
No, both pay income tax at the same marginal rates. The real differences are business expense deductions, no employer KiwiSaver match, self-paid ACC levies, and no paid leave for contractors.
Generally yes — often 20-30% more, to cover self-funded ACC levies, no employer KiwiSaver match, and no paid annual or sick leave, which an equivalent employee gets automatically.
