There is no chart that says "year one to year ten, payroll versus self-employed", and anyone showing you one built it from averages that do not include your costs. What there is, is a set of mechanics that decide the comparison every time: the 25 to 40 percent an employer pays on top of your wage, the 15.3 percent you pay instead of 7.65, the benefits that stop the day you leave, and the fact that on the payroll the risk is the company while on your own the risk is your pipeline and your body. Here is what each path looks like at years one, three, five and ten, built from those mechanics and from what this site already publishes.
The one fact that reframes the comparison
An employer does not pay you your wage. They pay your wage plus their half of Social Security and Medicare (7.65 percent), federal and state unemployment tax, workers' comp priced per $100 of payroll by how dangerous your trade is, and often health insurance and a retirement match. In construction that stack runs 25 to 40 percent on top of the base wage, and 30 to 50 percent once you count the paid hours nobody bills. A $25-an-hour laborer costs the business low-to-mid $30s an hour. What does a worker actually cost me per hour once they're on the books? shows every line.
Turn that around and it is the number you have to earn yourself the day you leave. The pricing guide's worked example takes a $33-an-hour employee wage to a $94-an-hour billing rate before that person is back where they started: the employer's share, the 187 billable days out of 261, the overhead, then profit. So when a W-2 journeyman on $33 and a self-employed one billing $94 compare paychecks, they may be looking at the same money in two different shapes. Compare like with like or the comparison lies.
Year one
On the payroll. You are a journeyman on qualified money, or should be; have that conversation in week one. Your employer pays half your payroll tax, your comp and your unemployment insurance, and probably offers a health plan (if your share of the cheapest employee-only option is above about 9.96 percent of household income, that plan is unaffordable under the ACA rules and you may qualify for Marketplace subsidies instead). If you work more than 40 hours in a week you are owed time and a half, and a day rate or a salary does not remove that (Do I have to pay my crew overtime?). You are also, in every state except Montana, at-will: you can be let go at any time for any legal reason, no notice (Can I fire a worker without a reason, and what about unemployment?).
On your own. No track record, so fewer billable days than you planned. Gear to buy. Both halves of payroll tax, paid four times a year with no prior-year safe harbor to lean on. No paid time off. No workers' comp on yourself unless you elect it, and in most states you are exempt by default, so if you are the one hurt there are no comp benefits. Year one is the year most people do not out-earn the payroll, and the ones who priced off their old wage instead of their costs do not find out until April. The money reality is the arithmetic.
Most newly qualified tradespeople stay on a payroll for a year or two, and that is not a failure of nerve. It is a year of doing the work as a fully qualified tradesperson while someone else carries the risk, on money that is finally right.
Year three
On the payroll. Raises with experience, the certifications that lift a rate (EV and solar for electricians, backflow and medical gas for plumbers, NATE for HVAC), maybe a lead-hand role. For scale, this site quotes the national electrician median at roughly $62,000 as of 2026, which is a middle bracket with a noticeably lower effective tax rate once the standard deduction is counted. What you do not have is a ceiling you control; the firm sets it.
On your own. This is when the free assets pay: reviews compound, referrals arrive pre-trusted, and you know which jobs made money because you costed them afterward. It is the year to raise prices, because you have a track record to raise them from. If profit is steadily past about $70,000 to $80,000, the S-corp election starts to save more in payroll tax than it costs to run (Should I switch my construction business to an S-corp?). And after 12 to 18 months of on-time supplier accounts a community bank will consider a line of credit, which smooths the gap between paying for a job and collecting on it (Business banking and building business credit).
Year five
On the payroll. In the licensed trades, the master exam sits two to four years past journeyman, so year five is where a master card and a foreman or superintendent role become realistic. If you came up through a union JATC there is a pension building alongside; open-shop it is a 401(k). Apprentice, journeyman, master: how long does it take to the top? is the ladder.
On your own. The decision most people meet here is the first hire. It is the biggest and riskiest jump in a trade business, because your job changes from doing the work to running the people who do it. The moment someone is on payroll you carry a fixed labor cost every week whether or not customers have paid you, you owe workers' comp from the first employee in every state except Texas, you complete a Form I-9 within three business days, report the hire to your state within 20 days, and run real payroll. The employee costs 25 to 40 percent more than the wage, and your pricing has to change to cover it or the growth loses money. The signal to hire is not one busy month; it is steady work you are turning away with a cash buffer deep enough to make payroll through a slow patch. Taking on your first employee, How do I hire my first employee the legal way? and Growing from solo to a crew are the three guides, and the First Employee: Setup Checklist is the day-one list. Staying deliberately solo with a full calendar is a legitimate year five too.
Year ten
On the payroll. An experienced hand, a superintendent, a project manager, or the person the firm cannot run without. Good money, a pension or a 401(k) with ten years in it, and the exposure that comes with it: construction is cyclical, and when a firm or a sector wobbles, layoffs follow. Unemployment insurance exists for exactly that, and you paid into it every year.
On your own. A crew with a foreman running the day so you are not on every site, or a lean solo outfit with a waiting list, or a business with a name that is not yours that can one day be sold (Naming your business, DBAs, and branding basics explains why the name matters at year ten). The ceiling is yours. So is the variance, every year, forever.
Security: a layoff versus a phone that stops ringing
The trade-off is not "safe versus risky". It is two different risks.
- On the payroll you have formal protections: unemployment if you are laid off, workers' comp if you are hurt, overtime, a final paycheck on a legal deadline, and a short list of reasons nobody can fire you for. What you are exposed to is the firm's decisions and the sector's cycle.
- On your own nobody can lay you off, and your income can go to zero in a week if the GC that feeds you stops calling, your main customer goes under, or you are injured. There is no unemployment insurance for you, no comp unless you elected it, and no sick pay. The defenses are structural: several clients rather than one, a reserve of about three months of overhead built before you need it, a line of credit arranged while the business is healthy, and disability insurance for the body that is your only asset. Managing cash flow in a feast-or-famine trade is the playbook.
On the payroll, the risk is the company. On your own, the risk is your pipeline and your body. Pick the one you would rather manage.
The benefits, priced
The line most people forget when they compare a wage to a billing rate.
- Health insurance. An employer plan is paid partly out of your wage and partly by the employer. On your own you buy on the ACA Marketplace, and the premiums are deductible straight off your income as long as you were not eligible for a subsidized employer plan. Either way it is real money every month. How US health insurance works when there's no NHS.
- Retirement. A match is free money and it stops the day you leave. Self-employed, the tools are better than most people think: a SEP-IRA up to 25 percent of net earnings capped at $72,000 in 2026, or a Solo 401(k) with a $24,500 deferral plus an employer share up to the same $72,000. An electrician netting $80,000 could shelter around $38,300 in a Solo 401(k). Nobody puts a dollar in but you. Retirement when nobody's building you a pension.
- Social Security. Both paths earn credits, one per $1,890 of covered earnings in 2026, four a year, forty needed to qualify for a benefit at all. Self-employed, you earn them only on income you report. Cash work reported nowhere builds nothing.
- Paid time off. Worth exactly what a week of your billing is worth, and on your own that week is unpaid. What will I actually take home after US taxes? shows the withholding side; How much should I set aside for taxes shows the self-employed side.
The hybrid: legal, common, and one trap
You can be a W-2 employee and self-employed at the same time, and plenty of tradespeople are: four days on a payroll and side jobs at the weekend, or a payroll job while a customer base builds. It is one of the smartest ways to start, because it builds a pipeline, a cash cushion and a reputation before you depend on the income. Do it properly: check your employment contract for a clause against side work, do not solicit your employer's customers, keep separate records, and know that self-employment tax kicks in once net side earnings hit $400 for the year, so set aside from the first job. What does it really take to start out on your own? covers starting on the side.
The trap is the other kind of hybrid: your employer keeps you on their schedule, with their tools, doing their core work, and moves you to a 1099 "so you can be your own boss". Nothing about the work changed, so nothing about your status changed. You are an employee whatever the form says, and what the switch actually does is strip your overtime, your workers' comp, your unemployment eligibility and hand you the employer's half of the payroll tax. You can ask the IRS to decide your status on Form SS-8 and use Form 8919 to pay only the employee half. 1099 vs W-2: which are you really? is the test, and 1099 or W-2? Worker Status Checker walks it in minutes. From the other side of the desk, Employees or subcontractors: which should your business use? is the same question once you are the one hiring.
Where to go next in this section
- Stay on the payroll or go out on your own? (15.2), the honest comparison this guide stretches over ten years.
- The money reality: what you will actually take home (15.6), where the self-employed column's costs live.
- Going out on your own straight out of your apprenticeship (15.3), for the year-one column if you skip the payroll years.
- The five-year plan nobody gives you (15.20), and the Five-Year Trade Career Plan template that goes with it.
- Your first quote: how not to undersell yourself on day one (15.9), the $33-to-$94 stack applied.
- What Should I Actually Charge? to put your own wage through the multiple, and the Tax Set-Aside Calculator for the tax side.
Common questions
Do self-employed tradespeople earn more than employees?
Some do, and the ceiling is higher, but it is not automatic and it is not visible from the billing rate. An employer pays 25 to 40 percent on top of your wage in payroll tax, comp, unemployment and benefits, and this site's worked example shows a $33-an-hour employee has to bill about $94 an hour to be in the same place once unbillable days and overhead are counted. Price from your costs and the self-employed path can pay more with more variance. Price off your old wage and it pays less.
What benefits do I lose when I leave a W-2 job?
Your employer's half of Social Security and Medicare (you now pay the full 15.3 percent instead of 7.65), workers' comp if you are hurt, unemployment insurance if the work stops, overtime, paid time off, any employer health plan and any retirement match. None of that is a reason to stay; it is a list of things to price into your rate and replace yourself: health cover on the Marketplace, disability insurance, a SEP-IRA or Solo 401(k), and a cash reserve instead of unemployment.
Can I be a W-2 employee and self-employed at the same time?
Yes, and it is one of the best ways to start, as long as the side work is genuinely your own customers and not your employer pretending you are self-employed. Check your contract for a clause against side work, do not solicit your employer's customers, keep separate records, report all of it, and set aside for tax from the first job, because self-employment tax applies once your net side earnings reach $400 for the year.
My boss wants to move me to a 1099. Is that legal?
Only if the work actually changes. If you still work their schedule, with their tools, on their core trade, and mainly for them, you are an employee whatever the form says, and the switch just shifts their payroll tax, comp and unemployment costs onto you while taking away your overtime. The facts decide, not the paperwork or anything you signed. You can ask the IRS to rule on your status with Form SS-8 and file Form 8919 to pay only the employee half of Social Security and Medicare.
When is the safest time to go out on my own?
When you have work you can count on, a reserve of a few months of expenses, and the paperwork done, in that order. That usually means a year or two on a payroll as a journeyman, lining up jobs quietly while still drawing a paycheck, then leaving with a job or two already committed. Quitting first and hoping the phone rings is how new trade businesses burn through savings before revenue arrives. The paperwork takes a week; the pipeline and the cash take longer, so start those first.
The honest bit
- There is no year-by-year earnings dataset in this guide, on purpose. The single wage figure quoted (the roughly $62,000 national electrician median) is the one already published on this site, and it is a median, not a path.
- The payroll figures (7.65 percent employer FICA, 15.3 percent self-employment tax, the $184,500 wage base, the $400 self-employment threshold, the 2026 retirement limits and the $1,890 Social Security credit) are 2026 federal figures. Verify at irs.gov and ssa.gov.
- At-will employment, final-paycheck deadlines, workers' comp rules and unemployment all vary by state. Check Working in Your State.
- This is general guidance, not tax, legal or career advice.
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