Contractor Hourly Rate Calculator
Convert your W-2 salary to an equivalent 1099 contractor hourly rate, accounting for benefits, overhead, and self-employment taxes.
Health insurance, 401k match, PTO value
Equipment, software, office, insurance
Enter your salary and costs, then click Calculate to see your contractor rate.
How Contractor Rate Calculation Works
From Salary to Contractor Rate
Switching from a salaried W-2 position to independent contracting means taking on costs your employer previously covered. This calculator helps you determine the hourly rate you need to charge to maintain or exceed your current total compensation. Simply entering your salary and dividing by 2,080 hours would significantly undervalue your services because it ignores the many hidden costs of self-employment.
Total Compensation vs. Base Salary
Your salary is only part of your compensation as an employee. Employer-provided benefits add significant value: health insurance can be worth $7,000-$20,000 per year, 401k matching might add 3-6% of salary, and paid time off represents 2-4 weeks of salary you receive without working. When calculating your contractor rate, you must account for the full value of these benefits since you will be funding them yourself.
Overhead and Business Costs
As a contractor, you bear costs that employers typically absorb. This includes professional liability insurance, equipment and software, accounting and legal services, home office expenses, and continuing education. These costs vary widely but typically add $5,000-$15,000 per year to your expenses. Underestimating overhead is one of the most common mistakes new contractors make.
The Self-Employment Tax Factor
Employees split FICA taxes (Social Security and Medicare) with their employer, each paying 7.65%. As a self-employed contractor, you pay both halves, adding 7.65% to your tax burden. This calculator accounts for this additional tax by adding the employer portion of FICA (7.65%) to your total costs. The resulting rate ensures you can cover this tax obligation while still meeting your income goals.
The Salary Multiplier
The calculator also shows your salary multiplier, which compares your contractor hourly rate to your salary-equivalent hourly rate (salary divided by 2,080 hours). A typical multiplier falls between 1.3x and 1.5x. This gives you a quick sanity check: if your multiplier is below 1.2x, you are likely undercharging and will struggle to match your employee compensation.