Contractor Rate Calculator
Going from salaried to self-employed? Find the rate that keeps you whole.
Convert your salary into a contractor hourly rate that covers taxes, benefits, and bench time. Enter your equivalent salary and markup to get a rate in seconds.
Frequently Asked Questions
Why is markup 40% and not just "salary ÷ 2000"?
The salary ÷ 2000 shortcut assumes 2,000 billable hours per year and zero extra costs. In practice, contractors bill fewer hours and absorb costs that employers normally cover—self-employment tax, health insurance, retirement contributions, and bench time between engagements. A 40% markup is a reasonable starting point for those gaps, not a one-size-fits-all formula.
What does markup actually cover?
Markup compensates for everything that disappears when you leave a salaried role: the employer's share of payroll taxes (roughly 7.65% in the US), private health insurance, pension contributions, paid vacation you no longer receive, and the weeks or months you may spend without a billable engagement.
Should US contractors use a higher markup than EU?
Generally yes. In Germany and most EU countries, statutory health and pension systems provide a baseline, often making 25–35% workable. US contractors fund all of that privately, pushing the realistic markup to 40–60% or more depending on family situation, state taxes, and healthcare costs.
How is this different from the freelance hourly rate calculator?
The freelance hourly rate calculator builds a rate from scratch—starting from income goals, adding expenses, and factoring in billable utilization. This calculator starts from a known salary and applies a markup to match it. It is designed for people transitioning from employment who already have a salary as their reference point.
What if I have a working spouse covering benefits?
If you are covered under a partner's employer health plan, you can reduce the markup significantly—sometimes to 20–25%. Remove healthcare costs from your overhead estimate and recalculate. The lower your fixed out-of-pocket obligations, the smaller the markup you need to sustain your target income.