Contractor Rate Calculator

Find the hourly rate a freelancer or 1099 contractor must charge to match a W-2 salary, covering taxes, benefits and unpaid time.

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Adds a SE-tax cushion and assumes ~25% of hours are non-billable unless you set otherwise.

What should you actually charge as a contractor?

The most common freelancing mistake is charging your old salary's hourly equivalent — "$70,000 is about $34/hour" — and discovering a year later that the money does not stretch. A contractor pays self-employment tax, buys their own insurance and retirement, buys their own equipment, and spends a large share of the week on work nobody pays for: sales, admin, learning and marketing. The rate has to cover all of it. This calculator gives you the floor.

The formula

Gross revenue needed = Target salary ÷ (1 − SE tax rate)
Billable rate = Gross revenue needed ÷ (Billable hours × Weeks)

Self-employment tax alone is 15.3% (Social Security + Medicare) before income tax — roughly double what an employee pays, because the "employer half" now comes out of your rate. Billable hours is the honest input: a consultant who sells 40-hour weeks typically bills 20–28 of them. The default 25 hours and 46 weeks already discount for vacations, sick days and holidays that no one pays a contractor for.

Worked example

You want contractor income equivalent to a $70,000 W-2 salary. Covering 15.3% SE tax means billing for revenue of 70,000 ÷ 0.847 ≈ $82,644. At 25 billable hours × 46 weeks = 1,150 hours, the required rate is 82,644 ÷ 1,150 ≈ $72/hour. Compare that with the naive $34/hour — the real number is more than double. Benefits (health insurance, 401k match, paid leave) can easily justify another $10–20/hour on top; this calculator covers the tax-and-time floor, and you should add a benefits margin above it.

Reference: rate floors for common salaries (25 h/wk, 46 wk, 15.3% SE)

W-2 equivalentGross revenue neededBillable rate
$50,000$59,032~$51/hr
$70,000$82,644~$72/hr
$90,000$106,257~$92/hr
$120,000$141,677~$123/hr

When you need this number

  • Quoting a client: never quote below your floor; discount scope, not rate.
  • Comparing a 1099 contract to a W-2 offer: run the offer's salary here and check the contract pays well above it.
  • Planning a rate increase: raise toward your floor first, then price by value above it.
  • Part-time consulting: fewer billable hours push the required rate up fast — see what a 10-hour week really demands.
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Frequently asked questions

Why is the contractor rate so much higher than the salary hourly rate?
Three stacks: self-employment tax (both "halves" of payroll tax), unpaid non-billable time (often 25–40% of the week), and benefits the client no longer provides. A rule of thumb many freelancers use: bill at 1.5–2× the employee hourly equivalent at minimum.
Is the self-employment tax really 15.3%?
Yes, covering both employee and employer shares of Social Security (12.4%) and Medicare (2.9%), up to the annual Social Security wage base; half of it is deductible at filing. High earners owe an additional Medicare surtax above $200,000 single / $250,000 joint.
Does this include income tax?
The calculator converts your target to a gross that survives SE tax; income tax is progressive and personal, so set your target to what you want after income tax and this tool will gross it up conservatively.
What about expenses like software and insurance?
Add your annual business costs to the target salary before running the numbers — they are revenue requirements just like rent. Keep receipts; many are deductible.
How do I raise my billable-hours percentage?
Template your proposals, batch admin into fixed weekly blocks, and require deposits. Most freelancers recover 5–10 billable hours a week from process alone.

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