RateCalc › Contractor vs Full-Time Salary Calculator
Contractor vs Full-Time Salary Calculator: how it works
An offer of $100,000 as an employee and $50 an hour as a contractor sound similar, and they are not. The employee gets paid holidays, sick leave, a share of payroll tax paid by the employer, health insurance, a retirement contribution and a laptop. The contractor buys all of that from the hourly rate and has gaps between contracts nobody pays for.
We preset RateCalc with a $100,000 take-home target, $15,000 of expenses to replace employer-paid benefits and equipment, a 30 percent tax rate, a 10 percent buffer, six billable hours a day and six weeks off. The result is the rate that keeps you whole; most people are surprised by how far above salary ÷ 2,080 it lands.
What an employer pays that you will now pay yourself
- Employer payroll taxes. In the US the employer's half of Social Security and Medicare is 7.65 percent of salary; as a contractor you pay both halves. Raise the tax rate field accordingly.
- Health insurance for an individual commonly costs $5,000 to $9,000 a year without a subsidy, more for a family. Put it in expenses.
- Retirement match of 3 to 6 percent of salary disappears unless you fund it yourself.
- Paid time off. Twenty days of holiday plus public holidays and sick days is five to six weeks you no longer earn during; that is the weeks-off field.
- Equipment, software and training that used to arrive on your desk.
Add them up honestly and the break-even rate for a $100,000 salary lands well above $100 an hour with these assumptions, not the $48 that salary ÷ 2,080 suggests.
When contracting still wins
Contracting is attractive when your billable hours stay high (long engagements, little bench time), when you can deduct genuine business expenses, and when the rate you can command is well above the break-even figure. It is a bad deal at a rate that merely matches the salary, because you have also taken on the risk of the contract ending.
Use the project quote box with 160 hours to see a monthly figure you can compare with a payslip, and remember to compare take-home with take-home: the salary number on an offer letter is before tax, and so is your rate.
Frequently asked questions
How do I convert a salary to a contractor hourly rate?
Add the employer-paid benefits and taxes you now cover, add equipment and a buffer for gaps, then divide by the hours you will really bill in a year. This calculator does each step; the common shortcut of salary ÷ 1,000 (so $100k → $100/hour) is a rough approximation of the same logic.
Is a 1099 contractor rate of 1.5× the salary hourly enough?
It is often the minimum. With health insurance, both halves of payroll tax and unpaid time off, break-even frequently lands between 1.5× and 2.5× the employee hourly equivalent.
Does this apply outside the US?
The logic does. Replace the tax rate and benefit costs with your country's figures (for example national insurance and pension contributions) and switch the currency.
Can I compare two scenarios side by side?
Yes, with RateCalc Pro: save a profile for each option (for example "contract at 80/h" and "contract at 95/h") and open the compare table.
Looking for the full guide, tips and the complete FAQ? Read the main RateCalc page.