Contractor Rate Calculator
Find the hourly rate you need as a contractor to match an employee salary
Employee Position Details
Base annual salary before taxes
40 hours for full-time, otherwise average hours worked per week
Employer contribution
Total paid days off per year
Other insurance, professional development budget, etc.
Required Contractor Rate
Enter your employee details and click "Calculate" to see your required contractor rate
How It Works
1
Enter your salary
Provide your employee salary, hours, PTO, retirement match, and other benefits.
2
We calculate total compensation
The calculator adds the dollar value of every benefit to your base salary to find your true compensation.
3
Get your contractor rate
We divide total compensation by billable hours and add self-employment tax and business expenses to find your minimum rate.
Frequently Asked Questions
How do I convert my salary to a contractor hourly rate?
Enter your current or offered employee salary, hours per week, PTO days, and benefits. The calculator adds the value of benefits and paid time off to your base salary, then divides by your actual billable hours to determine the minimum hourly rate you need as a contractor to match your total employee compensation.
What taxes do contractors pay that employees don't?
Contractors pay self-employment tax (15.3% on net earnings) which covers both the employer and employee portions of Social Security and Medicare. As an employee, your employer pays half of this. Contractors also pay estimated quarterly taxes instead of having taxes withheld from each paycheck.
How many billable hours should I plan for as a contractor?
Most contractors bill 30-35 hours per week on average, even if they work 40+. The remaining time goes to invoicing, finding new clients, admin work, and professional development. This calculator accounts for PTO days you would lose by leaving employment, reducing your total billable hours per year.
Should I charge more as a contractor than my salary equivalent?
Yes — significantly more. A common rule of thumb is that your contractor rate should be 40-70% higher than the equivalent employee hourly rate. This accounts for self-employment taxes, lack of benefits, unpaid time off, business expenses, and the inherent instability of contract work.
What business expenses should contractors budget for?
Common contractor expenses include health insurance ($5,000-$20,000/year), retirement contributions, liability insurance, accounting and legal fees, software and equipment, home office costs, and professional development. This calculator estimates business expenses at 5% of gross pay as a starting point.
Does this calculator account for state taxes?
No. This calculator focuses on federal self-employment tax and the compensation comparison between employee and contractor roles. State and local tax obligations vary significantly by location and should be calculated separately with a tax professional.
Key Considerations
What This Calculator Covers
- • Federal self-employment tax (15.3%)
- • Business expenses estimate (5% of gross)
- • PTO and benefits value conversion
- • Billable hours adjustment
What to Consider Separately
- • State and local income taxes
- • Health insurance costs ($5K-$20K/yr)
- • Retirement savings (Solo 401k, SEP IRA)
- • Liability and professional insurance
- • Market rate for your skills and location