1099 Locum vs W-2 Attending: What Hourly Premium Do I Actually Need?
The rate looks huge until you price what the W-2 was quietly paying for. Here is the break-even math, done honestly in both directions.
A guide by Taxstra Tax & Accounting · CPA-led tax strategy for business owners
Written by Bryan Martin, CPA, Managing Partner and Founder of Taxstra. Last updated August 18, 2026.
The short answer
As a working framework: your 1099 rate needs to run roughly 30% above the W-2 equivalent just to replace benefits, and 50% to 100% above once you also price the employer half of payroll taxes you now pay yourself, health coverage, the vanished retirement match, malpractice with tail, CME, and the weeks nobody pays you between assignments. The right number for you falls out of a one-page model, not a forum thread, and it shifts dramatically depending on whether locums is your whole income or a side gig on top of a W-2.
What the W-2 was actually paying you
A $300,000 salary is not $300,000 of compensation. Stack what rides along: employer-paid health premiums, a 401(k) or 403(b) match, disability and life coverage, CME money, licensing and DEA reimbursements, malpractice with tail covered, and four to six weeks of paid time off. The employer also pays its 7.65% share of payroll taxes behind the curtain. Move to 1099 and every line transfers to your side of the table; the only question is whether the rate transferred enough dollars with it.
| Cost the 1099 absorbs | Realistic annual range | Notes |
|---|---|---|
| Employer half of payroll tax (now SE tax) | $12,000 to $18,000 | Half is deductible; above the SS wage base the marginal bite is mostly Medicare |
| Health, dental, vision for a family | $18,000 to $30,000 | The line that shocks people; self-employed premiums are deductible |
| Lost employer retirement match | $10,000 to $20,000 | Partly offset by solo 401(k) space a W-2 never offers |
| Malpractice including tail exposure | $6,000 to $25,000+ | Specialty-dependent; agency-covered in many placements, yours in direct deals |
| CME, licenses, DEA, credentialing | $3,000 to $8,000 | Deductible against 1099 income |
| Unpaid weeks (gaps, vacation, credentialing lag) | the biggest swing | 48 paid weeks vs 38 changes everything |
The break-even, worked both directions
W-2 attending at $300K + benefits vs full-time 1099
- W-2 package: $300K salary + ~$45K benefits stack + employer payroll tax
- call it ~$368K of true cost
- W-2 hours: 46 weeks x 40 hrs
- $300K salary = about $163/hr paid
- 1099 replacement target: ~$368K of self-funded equivalent
- Realistic 1099 calendar: 44 weeks x 40 hrs = 1,760 hrs
- Break-even rate: ~$368K / 1,760
- about $209/hr
- Same math at 38 worked weeks (1,520 hrs)
- about $242/hr
Against a $163/hr W-2 equivalent, break-even lands around $209 to $242, a 28% to 48% premium, before you price the option value of flexibility or the risk of slow seasons. Rates above that are genuine raises; rates below it are pay cuts wearing a big number. Illustrative figures; your benefits stack and utilization drive the real answer.
Notice what moves the answer: not the tax rate, the calendar. The all-in premium folklore (50% to 100%) is really a utilization statement: full-calendar locums with cheap health coverage live at the bottom of the range; specialists with long credentialing tails and family coverage live at the top. And the model flips entirely for side-gig locums: with a W-2 already carrying benefits and filling the Social Security wage base, incremental 1099 hours clear the hurdle at a much smaller premium, which is why the W-2 plus side gig structure is so quietly lucrative.
The tax side is not all cost, either. The 1099 gains deductions the W-2 lost years ago (CME, licenses, travel under the tax-home rules, home office where legitimate), the self-employed health insurance deduction, potentially the QBI deduction depending on income level, and solo 401(k) employer contributions that can far exceed any hospital match. A well-run 1099 at the right rate frequently nets more after tax than the W-2 it replaced, but "well-run" is doing real work in that sentence: estimates on the calendar per the quarterly guide, and stipends structured correctly per the stipend guide.
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Frequently Asked Questions
How much more should a 1099 locum rate be than a W-2 salary?
The common rules of thumb are roughly 30% more to replace the benefits alone, and 50% to 100% more all-in once you price self-employment tax, health coverage, the lost retirement match, malpractice, unpaid gaps between assignments, and zero PTO. Where you land in that range depends mostly on your benefits at the W-2 job and how full you can keep your calendar.
How much extra tax does a 1099 actually pay?
The headline is the employer half of payroll tax: as an employee your employer pays 7.65% of your wages toward Social Security and Medicare; as a 1099 you pay both halves as self-employment tax, though you deduct the employer-equivalent half and, above the Social Security wage base, the marginal cost drops to the Medicare slice. Against that, 1099s gain deductions and retirement space a W-2 cannot touch, so the net tax gap is usually smaller than people fear at high incomes.
What benefits am I replacing when I leave W-2 employment?
Price each one: health, dental, and vision premiums; employer 401(k) or 403(b) match; disability and life coverage; CME allowance and licensing reimbursements; malpractice including tail; and paid time off. For a physician household, the full stack commonly runs $30,000 to $60,000 a year before you count the value of paid vacation.
Do unpaid gaps really change the math that much?
They are frequently the biggest single variable. A $200/hour rate at 48 worked weeks and the same rate at 38 worked weeks are different careers financially. Model your realistic utilization, credentialing delays, license waits, seasonal demand, chosen vacation, before comparing anything to a salary that pays 52 weeks regardless.
Does the locum premium change if I keep a W-2 job and locum on the side?
Yes, in your favor. The W-2 job carries the health insurance and often fills the Social Security wage base, so incremental 1099 dollars face only the Medicare-side SE tax and no benefits burden. Side-gig locums can accept a smaller premium than full-time locums and still come out ahead per hour.
Should stipends be counted inside the rate comparison?
Yes, at their after-tax value: agency-paid housing on a valid tax home arrives tax-free and can be worth more than a larger taxable rate bump, while cash stipends are just rate by another name. Two offers with identical all-in numbers can differ by thousands after tax purely on how the travel benefits are structured, which is why the comparison spreadsheet needs a stipend column, not just an hourly one.
How do malpractice tail obligations change the picture?
Tail is the lumpiest hidden cost in the model: a claims-made policy without employer-paid tail can present a bill of one and a half to two times the annual premium when coverage ends, effectively a deferred charge against every hour you worked under it. Price the tail clause of any offer into the hourly rate before comparing, especially in high-premium specialties where it can move the break-even by double digits per hour.
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This page is educational, not individualized tax advice. Locum tenens tax outcomes depend on your contracts, your states, and your numbers. Savings vary by client and results are not typical of every situation. Consult a qualified tax professional before acting on anything here.