How do I compare a locums rate to my W2 salary with benefits?

Physician finance

Compare per day worked, not per year: price every W2 benefit in dollars, then divide by days worked. A locums rate usually needs to beat the W2 daily figure by 15 to 35 percent to break even.

Compare per day worked, not per year. Add up your W2 salary plus the dollar value of every benefit: employer retirement money, the employer share of health insurance, the employer half of payroll tax, disability coverage, and CME. Divide by the days you work in a year. Then divide what locums pays by the days you would realistically book. For many physicians, a 1099 locums rate needs to beat the W2 daily figure by roughly 15 percent to 35 percent to break even.

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Why compare per day instead of per year?

Because a W2 salary pays you for days you do not work, and locums does not. Vacation, holidays, CME days, and sick days are baked into a salary. With locums, a week off is a week with no income. Gaps between assignments, credentialing delays, and a canceled contract are all unpaid too.

So the first step is counting real working days. A W2 job with four weeks of vacation, one week of CME, and a handful of holidays usually lands around 230 working days. A locums physician who wants the same time off and loses a few weeks to gaps might book 200. That 30 day gap is the first hidden cost.

A $300,000 W2 salary over 230 working days is about $1,304 per day. A locums rate of $1,500 a day over 200 booked days is $300,000. Same headline number, very different reality once benefits enter the picture.

What is a W2 job's benefit package worth in dollars?

More than most offer letters make obvious. Price each piece separately.

1. Employer retirement contributions. Take the match or nonelective contribution in dollars. A 4 percent match on a $300,000 salary is $12,000. Some hospital systems contribute 8 to 10 percent with no match required, which can be $24,000 to $30,000.
2. Health insurance. Only the employer's share counts. The KFF 2024 Employer Health Benefits Survey put the average family premium at $25,572, with workers paying $6,296, which leaves about $19,300 paid by the employer. Your plan will differ, so ask HR for the real number. If you are single, use the single premium figures instead.
3. The employer half of payroll tax. On a W2, your employer pays 6.2 percent Social Security tax up to the annual wage base plus 1.45 percent Medicare on all wages. As a 1099 contractor, you pay both halves as self employment tax. On $300,000 of W2 wages, the employer's share is roughly $15,000 to $20,000 depending on the wage base that year. That entire amount comes out of your pocket as a 1099.
4. Disability and life insurance the employer pays for. Price what it would cost you to buy the same coverage individually. Employer provided disability is often worth $3,000 to $6,000 a year for a physician.
5. CME money and days. A $5,000 CME stipend plus a week of paid CME time has real value. As a locums physician, you pay for your own CME and take unpaid time to do it.
6. Paid time off itself. Four weeks of PTO on a $300,000 salary is about $23,000 of paid non working time. Locums has no equivalent.

Add it up for a typical $300,000 hospital employed position: $12,000 retirement, $19,300 health insurance, $17,000 payroll tax, $4,000 disability, $5,000 CME, $23,000 PTO. That is about $80,000 in benefits, making the true W2 package worth roughly $380,000, or about $1,652 per working day.

What does the locums side really pay?

The headline daily rate is the starting point, not the answer. Subtract the costs that the W2 job covered.

Health insurance is the big one. Buying a comparable family plan on the exchange or privately can run $20,000 to $30,000 a year. Then add the employer half of payroll tax you now owe, around $15,000 to $20,000. Then disability insurance, $3,000 to $6,000. Then your own retirement contributions, which get no match. Then CME costs and unpaid time off.

On $300,000 of locums income at $1,500 a day for 200 days, you might spend $25,000 on health insurance, $18,000 on the extra payroll tax, $5,000 on disability, and lose $23,000 of paid time off value. That is $71,000 in costs the W2 job covered, leaving you with about $229,000 of comparable value, or $1,145 per day actually worked. The W2 job at $1,652 per day wins by a wide margin at these numbers.

To break even with the $380,000 W2 package over 200 booked days, the locums rate needs to be $1,900 a day. That is about 27 percent above the $1,500 rate, right in the 15 to 35 percent range.

When does locums still win?

Locums wins when the rate premium is large enough, when you value the flexibility more than the math, or when the W2 alternative is bad.

Some specialties and locations command locums rates 50 percent or more above the W2 daily equivalent. Rural emergency departments, critical access hospitals, and hard to fill specialties routinely pay premiums that clear the break even bar with room to spare. If the rate is $2,200 a day against a $1,652 W2 daily value, locums wins on money alone.

Flexibility has value that does not show up in the spreadsheet. Working 6 months a year, choosing your locations, and never attending another committee meeting is worth something. Just be honest that you are paying for it.

And a bad W2 job is not the right comparison. If the employed position has a crushing call burden, a toxic culture, or below market pay, the benefits do not make up for it. Compare locums against a good W2 job, not against the one you are desperate to leave.

One more consideration: retirement account access. As a 1099 contractor you can open a solo 401(k) and contribute as both employee and employer, up to the annual additions limit. For a high earning locums physician, the solo 401(k) can shelter more than a W2 401(k) with a small match. Factor that into the comparison if you will actually fund it.

Follow up questions

Why not compare the annual totals directly?

Annual totals hide the days problem. A salary covers vacation, holidays, and CME days. Locums pays nothing for days you do not work, and gaps between assignments and credentialing delays are unpaid too, so per day worked is the honest comparison.

How much more does locums need to pay to break even?

For many physicians, roughly 15 percent to 35 percent above the W2 daily figure. In the worked example, breaking even with a $380,000 W2 package over 200 booked days takes a $1,900 daily rate against a $1,500 rate.

Can locums still win on money alone?

Yes, when the rate premium is large enough. Some specialties and locations command locums rates 50 percent or more above the W2 daily equivalent, which clears the break even bar with room to spare.

Keep going: the full 1099 machine, entity, taxes, and the solo 401(k), is built step by step in Run the 1099 Side of Medicine.

Sources

• KFF 2024 Employer Health Benefits Survey (average family premium $25,572, worker contribution $6,296, accessed October 2026)
• IRS Notice 2025 67 (2026 retirement plan limits, accessed October 2026)

Published October 12, 2026. Last reviewed October 12, 2026.

Ryan Inman spent 10 years as a financial advisor to physicians, hosted the Financial Residency podcast, and founded Financial Fellowship to teach physicians the money mechanics of a medical career.

Have a money question from your own training or practice? Submit it at financialfellowship.com/submit. Real questions get real answers.

Takeaways

• Compare per day worked, not per year. Locums does not pay for days off, gaps between assignments, or credentialing delays.
• Price the whole W2 package in dollars: in the example, retirement money, health insurance, payroll tax, disability, CME, and paid time off added about $80,000 on a $300,000 salary.
• A locums rate usually needs to beat the W2 daily figure by about 15 percent to 35 percent to break even.
• Subtract your own health insurance, the extra payroll tax, disability coverage, and unpaid time from the locums side before comparing.
• A solo 401(k) can shelter more than a W2 plan with a small match, and it counts in the comparison if you will actually fund it.