A contract rate has to cover more than a salary does. Find the number that actually leaves you even.
Per hour, before any expenses or taxes.
Free money you'd be walking away from.
Annual. Often the single biggest hidden benefit — check your plan documents.
Annual value of life/disability insurance, tuition, stipends, bonuses.
Paid days you don't work. As a contractor, time off earns nothing.
Out of 52. Account for gaps between contracts and your own time off.
Share of your hours a client actually pays for. Admin, sales, and invoicing aren't billable — 70-80% is typical.
Annual premium you'd pay on the open market.
To replace the employer match.
Equipment, software, liability insurance, accounting, home office.
A spouse's job doesn't count — only your own wages use up the Social Security wage base.
| Item | Amount | Why |
|---|
| Measure | Salaried | Contract |
|---|
A salary is paid across 52 weeks whether you work them or not. A contract only pays for hours a client accepts — which is why the same annual income needs a much higher headline rate.
Compares pre-tax value on both sides, so income tax — which both routes owe — is left out. The one tax difference that matters is the employer half of Social Security and Medicare, which a contractor pays themselves; that's included. Excludes unemployment insurance, workers' comp, state-level differences, and the value of job security. Not tax advice — see our disclaimer.