Contractor Hourly Rate Calculator
Calculate the hourly rate you need to charge as an independent contractor to match (or exceed) your W2 salary. As a contractor, you cover your own taxes, benefits, and overhead — so your hourly rate needs to be significantly higher than a W2 equivalent.
Use our full-featured Contractor Rate Calculator to run the numbers:
Open Contractor Rate CalculatorHow to Calculate Your Contractor Hourly Rate
The most common mistake new contractors make is charging the same hourly rate they earned as a W2 employee. As a contractor, you need to account for:
- Self-employment tax — You pay both the employer and employee portions of Social Security and Medicare (15.3% on the first ~$160K).
- Health insurance — No employer subsidizing your premiums. Individual plans average $450-$700/month.
- Retirement contributions — No 401(k) match. You fund your own SEP-IRA or Solo 401(k).
- Paid time off — No paid vacations, sick days, or holidays. Every day off is unpaid.
- Business expenses — Software, equipment, liability insurance, accounting fees, and more.
Quick Rule of Thumb
A common shortcut: take your W2 hourly rate and multiply by 1.4 to 1.6. If you earned $50/hour as an employee, you should charge at least $70-$80/hour as a contractor. For a more precise calculation, use our calculator above which accounts for your specific expenses and desired take-home pay.
Frequently Asked Questions
How do I convert my salary to a contractor hourly rate?
Divide your annual salary by 2,080 (standard full-time hours) to get your base hourly rate, then multiply by 1.3 to 1.5 to account for self-employment taxes, benefits, and overhead. For example, a $100,000 salary yields a base rate of about $48/hour, which becomes $62-72/hour as a contractor rate.
What is the typical contractor rate multiplier?
Most experts recommend a multiplier between 1.25x and 1.5x your equivalent W2 hourly rate. A 1.25x multiplier is the bare minimum that covers self-employment tax, while 1.4-1.5x properly accounts for health insurance, retirement savings, paid time off, and business overhead. Your specific multiplier depends on your benefits needs and expense level.
How much is self-employment tax for contractors?
Self-employment tax is 15.3% of your net earnings, covering both the employee and employer portions of Social Security (12.4%) and Medicare (2.9%). As a W2 employee, your employer pays half of this, but as a contractor you owe the full amount. You can deduct the employer-equivalent half (7.65%) from your adjusted gross income on your tax return.
How do I account for the benefits gap as a contractor?
Add up the annual cost of benefits your employer currently provides: health insurance ($5,000-24,000), retirement match ($3,000-12,000), paid time off ($5,000-15,000), disability insurance ($500-2,000), and any other perks. Divide this total by your billable hours to find the per-hour cost you need to add to your base rate.
Should I quote an hourly rate or an annual rate to clients?
Most contractor engagements use hourly rates, which gives both you and the client flexibility. However, for long-term contracts, an annual or monthly rate can simplify billing and provide income predictability. When quoting annually, make sure the equivalent hourly rate still meets your minimum after accounting for taxes and benefits.
How do I factor in unpaid time off when setting my rate?
As a contractor, vacation and sick days are unpaid, so you need to build that cost into your hourly rate. If you want four weeks of vacation plus holidays, you have about 1,880 billable hours instead of 2,080. Divide your target annual income by your actual billable hours rather than total working hours to ensure you meet your financial goals.
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