Hiring Your First VA: Employee or Contractor? (The Math Breakdown)

You are drowning in email. Your calendar is a mess. You know you need help, but when you look at the hourly rate of a skilled Virtual Assistant ($40-$70/hr), you hesitate. Is it cheaper to just hire a junior employee? We ran the math to find the breaking point.

The debate of virtual assistant vs. employee cost is one of the first major financial hurdles a growing business faces. Get it right, and you unlock massive scalability. Get it wrong, and you burden your cash flow with unnecessary overhead or low-quality output.

Most business owners compare the hourly rate. This is a mistake. To make an accurate decision, you must compare the burdened cost of outcome.

The Illusion of the "Expensive" Freelancer

Let’s start with the sticker shock. You go to a reputable VA agency or a platform like Upwork, and you see top-tier executive assistants charging $50 to $75 per hour.

Simultaneously, you look at the job market and see you could hire a full-time administrative assistant for $25 per hour (approx. $52,000/year).

On the surface, the employee looks 50% cheaper. But this calculation ignores three critical factors that we will explore in this guide:

• The Burden Rate: The taxes, benefits, and equipment costs hidden on top of a salary.
• The Utilization Rate: The difference between "hours paid" and "hours worked."
• The Flexibility Premium: The cost of being unable to scale down.

The Employee Cost "Iceberg"

When you hire a W-2 employee (or your country's equivalent full-time status), the salary is just the tip of the iceberg. Human Resources experts typically use a multiplier of 1.25x to 1.4x the base salary to determine the true cost of an employee.

If you pay someone $50,000 a year, their actual cost to your business is likely closer to $65,000 - $70,000. Here is where that money goes:

1. Payroll Taxes: In the US, the employer pays a portion of Social Security and Medicare (FICA), plus unemployment taxes. This is legally non-negotiable.
2. Benefits: Health insurance, dental, vision, and retirement contributions (401k matching) are now standard expectations for retaining talent.
3. Paid Time Off (PTO): You pay for 52 weeks of work, but you likely only receive 48 or 49 weeks of actual presence after vacation, sick days, and public holidays.
4. Equipment & Software: A laptop ($1,500), software licenses (Microsoft 365, Slack, Zoom - approx $100/mo), and office furniture.
5. Training & Onboarding: The first 3 months of a new employee's tenure are often net-negative in terms of ROI.

The Contractor (VA) Efficiency Model

Conversely, a Virtual Assistant operates as a B2B service provider. Their higher hourly rate includes their own taxes, their own health insurance, their own laptop, and their own electricity.

But the biggest financial differentiator is Productive Time.

When you hire an employee for 8 hours a day, studies show the average worker is productive for only about 3 to 4 hours. The rest is spent on coffee breaks, chatting with colleagues, scrolling social media, or unproductive meetings.

When you hire a professional VA, you are often paying for active time. If they track time using tools like Toggl or Harvest, you pay for the 42 minutes they spent on your inbox. You do not pay for the 18 minutes they spent making lunch.

The "Practical AI" Factor

Since you are reading this on Practical AI Work, we must address the technological elephant in the room: Automation.

One of the risks of hiring a generalist junior employee is that they may not be efficient. You might pay them for 40 hours to do work that AI could do in 5.

High-end Virtual Assistants today are often "AI-Augmented." They know how to use ChatGPT to draft emails, they use Motion to schedule calendars, and they use Zapier to automate data entry. When you hire a contractor at a higher rate, you are often paying for this tech stack proficiency.

If you hire a cheaper employee, you have to train them on these tools. That takes your time—which is the most expensive asset in the company.

Decision Matrix: Which should you choose?

We are not saying Contractors are always better. There is a specific tipping point where a Full-Time Employee becomes the smarter financial move.

Choose a Virtual Assistant (Contractor) IF:

• Your workload fluctuates (seasonal business).
• You have specific, repeatable tasks (inbox management, data entry, invoicing).
• You do not have the time or energy to mentor someone.
• You need a specific skill (e.g., "Excel Expert") for only 5 hours a week.
• Budget: You want to keep fixed costs low.

Choose a Full-Time Employee IF:

• You need someone to "own" a core part of the business (e.g., Customer Success Manager).
• You need someone available instantly between 9 AM and 5 PM for live calls.
• You want to build a company culture and long-term loyalty.
• The workload is consistently over 30+ hours a week.
• You are willing to invest 3 months into training.

Conclusion: Start Lean

If this is your first administrative hire, the math almost always favors the Contractor/VA model initially.

Hiring a VA allows you to "date before you marry." You can start with 10 hours a week. If the value is there, you scale up. If the cash flow tightens, you scale down instantly without legal repercussions or severance packages.

Remember, the goal of an Admin hire is to buy back your time. If you hire a full-time employee too early, you may find yourself working harder just to make payroll. Use the calculator, find your break-even point, and hire based on data, not feelings.