Contractor Rate Calculator

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

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)

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.

Frequently asked questions