— Salary & Income
Contractor Rate Calculator
Calculate the hourly or day rate to charge as an independent contractor. Start from the W-2-equivalent income you want, add taxes, benefits, expenses, and bench time, then divide by realistic billable hours.
Required hourly rate
$82.70
- Day rate
- $661.62
- Revenue to bill (year)
- $136,955.46
- Billable hours / year
- 1,656
- Rate at 100% utilisation
- $74.43
Try: $120k target, 46 weeks @ 90%, $100k W-2 equivalent, $150k C2C + $15k expenses, 6-month contract, $130k target
— Rate build-up
| Build-up | Annual |
|---|---|
| Target income | $120,000 |
| + Self-employment tax | $16,955.46 |
| = Revenue to bill | $136,955.46 |
— Rate build-up
Download— How it works
Rate to bill = W-2-equivalent target + self-employment tax + business expenses + self-funded benefits + profit, divided by billable hours (weeks on contract × hours/week × utilisation).
Marking up a salary into a contract rate
A contract rate isn’t your old salary divided by 2,080. As a contractor you pick up the costs an employer used to absorb — the full self-employment tax (both FICA halves), your own health insurance and retirement, business expenses and liability cover — and you carry the risk of gaps between engagements. So the same take-home needs a meaningfully higher headline rate. This builds it up from a W-2-equivalent target, adds those costs, and divides by the weeks and hours you actually bill.
Worked example — $120,000 W-2-equivalent target, 40 h/week × 46 weeks at 90%: Billable hours ≈ 1,656. Add self-employment tax (~$16,955) → bill ≈ $136,955 a year. Rate ≈ $82.70/hour (about $662/day) — a markup over the ~$58/hour a $120k salary implies.
Corp-to-corp, 1099 and W-2 contract
Contracts come in three common shapes. Corp-to-corp (C2C) bills through your own LLC or S-corp — you cover everything, including liability and corp admin, so the rate is highest. A 1099 is similar minus the entity overhead: you still pay self-employment tax and fund your own benefits. A W-2 contract runs through an agency that handles payroll taxes and sometimes offers benefits, so you can leave health blank and the markup is smaller. Set the benefit and expense fields to match your arrangement.
Bench time is the contractor’s tax
The gap between contracts — the “bench” — is what most people underprice. If you bill 46 weeks a year rather than 52, those six unpaid weeks have to be covered by the weeks you do bill, lifting the rate. Lower the weeks-on-contract figure to reflect a realistic bench, and the rate rises to compensate. A short, single engagement (say six months) needs a higher rate still, because the year’s target is earned in half the billable hours.
— Reader questions
How do I convert a salary to a contractor rate?
Start from the W-2-equivalent salary you want, add the self-employment tax, your own benefits and business expenses, and divide by the hours you can bill (weeks on contract × hours/week × utilisation). A $120k target works out around $80–85/hour, versus the ~$58/hour a straight salary-÷-2,080 would suggest.
What’s the difference between corp-to-corp, 1099 and W-2 contract?
Corp-to-corp bills through your own company and carries the most overhead (highest rate); 1099 is independent without the entity admin; a W-2 contract runs through an agency that handles payroll taxes and may include benefits (smallest markup). Adjust the benefit and expense inputs to match.
How much should I mark up over my old salary?
Commonly 1.3–1.6× the equivalent hourly, depending on benefits, expenses and bench time. The markup covers the employer’s half of FICA, health, retirement and the weeks you’re not billing — this calculator works out the exact figure for your situation.
Should I include bench time between contracts?
Yes — lower the weeks-on-contract figure (e.g. 46 instead of 52). Those unbilled weeks are covered by raising the rate on the weeks you do bill, which is exactly how experienced contractors price.
Is this the same as the freelance rate calculator?
The maths is identical — both gross up a target income by costs and divide by billable hours. The difference is framing: contractors usually have higher utilisation on a single engagement but lose weeks to the bench, and may use a W-2 contract with some benefits included.