How to use this calculator
- Pick a direction. Salary → contract rate prices a contract or compares it with a job offer. Contract rate → salary shows what an hourly or day rate is worth as a job.
- Enter gross pay and currency, before income tax.
- Set benefits and employer payroll taxes: the costs an employer pays on top of salary, which you take over as a contractor.
- Enter time off and non-billable time. Contractors are not paid for vacation, holidays, sales or admin.
- Add yearly business overhead, then read the rate, breakdown and side-by-side table. Inputs save automatically; Copy link shares the scenario.
Why salary ÷ 2,080 underprices a contractor
The quick conversion divides a salary by 2,080, which is 40 hours × 52 weeks. That treats every hour of the year as paid. For an employee it is: vacation, public holidays, sick days and slow Monday meetings are all covered by the salary. As a contractor you are paid only for the hours you bill.
It also ignores three costs that move from the employer to you: benefits (health cover, retirement contributions, insurance), employer payroll taxes (in many countries the employer pays social contributions on top of salary; self-employed, you pay them), and overhead (laptop, software, insurance, an accountant, a desk). So salary ÷ 2,080 is roughly the cash an employer pays you per hour, not the rate that leaves you equally well off. The calculator works it out like this:
Revenue needed = salary × (1 + benefits % + employer tax %) + overhead
Billable hours = (52 × days per week − days off) × hours per day × (1 − non-billable %)
Contract rate = revenue needed ÷ billable hours
Worked example: a $95,000 salary
These are the calculator's defaults: 25% benefits, 7.65% US employer payroll tax, 15 days of paid time off, 10 public holidays, 15% non-billable time, $4,000 a year of overhead and a 40-hour, five-day week.
| Step | Amount |
|---|---|
| Salary | $95,000 |
| + Benefits (25%) | $23,750 |
| + Employer payroll tax (7.65%) | $7,267.50 |
| = Employee total compensation | $126,017.50 |
| + Overhead | $4,000 |
| = Revenue needed | $130,017.50 |
| Working days: 260 − 15 − 10 | 235 |
| Billable hours: 235 × 8 × 85% | 1,598 |
| Contract rate: $130,017.50 ÷ 1,598 | $81.36 per hour |
That is $650.90 for an eight-hour day, or about $10,835 a month on average. The naive figure, $95,000 ÷ 2,080, is $45.67 an hour, so the real equivalent is 1.78 times higher. Quoting $50 an hour because it "beats the salary" would be a large pay cut.
The 1.3× to 2× rule of thumb
A common shortcut multiplies the salary-based hourly rate by 1.3 to 2. It is a good sanity check, but the right number depends on your situation. A long full-time contract with one client, little time spent finding work and low overhead sits near 1.3×. Short projects, several clients, real sales and admin time, gaps between contracts and generous benefits to replace push it toward 2× or more.
Billable time has the biggest effect. Billing 70% of your working hours instead of 90% means you need a rate about 29% higher to earn the same. Change the non-billable field and watch the multiplier move.
W-2 vs 1099, and other countries
In the US, a W-2 employer pays 7.65% on top of wages: 6.2% for Social Security, up to an annual wage cap, and 1.45% for Medicare. A 1099 contractor pays both halves through self-employment tax, so the employer half becomes your cost. Above the Social Security cap the effective rate drops, so lower the field for high salaries. The self-employment tax calculator estimates the full bill.
Elsewhere the inputs change a lot. Employer contributions can be far above or below the US level, paid leave and public holidays differ, and where healthcare is publicly funded the benefits figure is often lower. Many countries also have rules for contractors who work like employees in practice. Rates and thresholds change every year, so check them with your tax authority or an accountant. This calculator is a planning tool, not tax or legal advice.
Hidden costs of contracting
- Gaps between contracts. Weeks spent finding the next client are unpaid. Count them in non-billable time.
- Retirement and insurance. No employer match, no group health plan, no sick pay unless you buy income protection.
- Cash flow. Payment terms of 30 days or longer are normal, and some clients pay late. Keep a buffer.
- Admin and accounting. Invoicing, bookkeeping and tax returns take time and often a paid professional.
Negotiating your contract rate
- Anchor on the equivalent rate, not your old salary ÷ 2,080. Find your walk-away number first: switch to Contract rate → salary and test the client's offer.
- Know the client's comparison. A company weighing a contractor against a hire looks at the employee's full cost, including benefits, taxes, equipment and recruiting. Your rate only looks high next to the bare salary.
- Quote a day rate for full-time work. It is simpler to invoice and avoids haggling over every 15 minutes.
- Check agency margins. If a staffing agency sits in the middle, run the numbers on your share, not the client's rate.
- Trade rate only for certainty. A slightly lower rate for a long, guaranteed term can be fair; short or urgent work deserves a premium. Add a yearly rate review to the contract.
Frequently asked questions
How do I convert a salary to a contract hourly rate?
Add the value of benefits, employer payroll taxes and your business overhead to the salary. Then divide by the hours you will actually bill in a year, after vacation, public holidays and non-billable time. Dividing the salary by 2,080 alone leaves all of this out and underprices your time.
What multiplier should I use to go from salary to contract rate?
A common rule of thumb is 1.3 to 2 times the salary divided by 2,080. Long full-time contracts with few costs to replace sit near the low end. Short projects, several clients and generous benefits push it toward 2 or above. Working it out from your own numbers is more reliable than any rule of thumb.
Is $50 an hour on a 1099 the same as $50 an hour on a W-2?
No. A W-2 employee is paid for holidays and vacation, usually gets benefits, and the employer pays half of the payroll taxes. A 1099 contractor covers all of that out of the rate, so the same hourly number is worth noticeably less to the contractor.
How much salary is $100 an hour as a contractor?
It depends on your assumptions. With this calculator's defaults (25% benefits, 7.65% payroll tax, 25 days off, 15% non-billable time and $4,000 overhead), $100 an hour is roughly equal to a $117,450 salary, not the $208,000 you get by multiplying by 2,080.
Should paid time off go in the benefits percentage?
No. Enter vacation and public holidays in the time-off fields. The calculator removes those days from your billable time, so adding them to benefits as well would count them twice.
What employer payroll tax rate should I use outside the US?
Use your country's employer social contribution rate for that salary level, including any caps or thresholds. These rates vary widely and change often, so check with your tax authority or an accountant. You can enter any rate, including 0%.
Is my salary information saved or sent anywhere?
Your inputs are saved only in this browser on this device, so they are there when you come back. Nothing is uploaded. Copy link puts the numbers in the page address, so only share it with people you are happy to show them to. Reset restores the example and clears the saved copy.