Salary-to-Contract Rate Calculator

Convert a salary into a contract rate

Moving from a salaried job to contract work, or comparing a contract offer with a permanent one, means comparing an annual salary with an hourly rate that carries none of the employer’s costs. This calculator adds up what the salary job is worth — salary, benefits, retirement contributions, and other employer costs — adds your own business overhead, and divides by the hours you expect to bill. You can then apply a margin or a markup for risk and profit. It also shows the salary as hourly pay so the difference is visible, rather than assuming a standard multiplier.

How to use the Salary-to-Contract Rate Calculator

1. Enter the annual salary, and optionally the benefits, retirement contribution, and other employer costs to replace.
2. Enter your hours a week, any paid leave the salary includes, and the weeks you won’t bill as a contractor.
3. Set the billable share of your working hours, and any self-employment overhead.
4. Optionally add a margin or markup for risk and profit — they are not the same thing.
5. Read the contract rate, the rate before overhead and margin, and how it compares with the salary’s hourly pay.

The formula

Benefits $15,000; retirement 4%; other employer costs 7.65%; overhead $10,000; 40-hour weeks. The same $100,000 salary comes out anywhere from 1.13× to 2.27× its hourly pay depending on what is counted — which is why a single multiplier can be badly wrong in either direction.

Calculated on your device

• The calculation runs in your browser as you type; nothing is sent to a server.
• Your salary, costs, rates, and results are not sent to Looty Tools or stored.
• The calculator area is masked from session-recording analytics, so what you enter isn’t captured in recordings.

Limitations

• This replaces the employment costs you enter over the hours you expect to bill. It doesn’t use a standard contractor multiplier — the ratio to salary-based hourly pay is a result of your figures. Taxes on contract income, and what clients will actually pay, are not included.
• Self-employment and income taxes on contract income are not calculated. Include the employer’s share of payroll taxes as an employer cost if you want the rate to replace it.
• Benefits are entered as one yearly value; what it costs to buy equivalent cover yourself may be more or less.
• Salary up to $1,000,000,000; up to 51 unbilled weeks; margins below 100%. Rates are rounded up to the next cent.

Related calculators

• Annual Work Hours CalculatorAdd up work hours across a year from the schedule you enter.
• Billable Utilization CalculatorSee what share of work hours is billable.
• Freelance Hourly Rate CalculatorEstimate an hourly rate from freelance income goals you enter.

Salary-to-Contract Rate Calculator FAQ

How do I convert a salary to a contract hourly rate?

Add up what the job costs to replace — salary, benefits, retirement contributions, and other employer costs — then divide by the hours you’ll bill as a contractor. $100,000 of salary alone over 46 weeks of 40 hours (1,840 hours) is $54.35 an hour.

Why is a contract rate higher than salary ÷ 2,080?

Salary ÷ 2,080 hours is the employee’s hourly pay, but a contractor must also pay for benefits, the employer’s share of payroll taxes, and business costs, and isn’t paid for holidays or gaps between contracts. With $15,000 of benefits, a 4% retirement contribution, 7.65% other employer costs, $10,000 of overhead, 6 unbilled weeks, and 85% billable time, $100,000 becomes $87.38 an hour — 1.82× the $48.08 salary rate.

Is there a standard contractor multiplier, like 1.5× or 2×?

Rules of thumb exist, but they hide the assumptions. The calculator works the ratio out from your own figures: salary alone gives 1.13× here, while adding benefits, overhead, and unbilled time pushes it past 1.8×.

What is the difference between margin and markup?

A markup is added to cost: 20% on $87.38 is $104.86. A margin is the share of the price left after cost: a 20% margin needs $87.38 ÷ 0.8 = $109.23. The same percentage as a margin always gives the higher rate.

How does paid leave affect the comparison?

An employee is paid for vacation and holidays, so salary ÷ hours actually worked is higher than salary ÷ 2,080. With 4 weeks of paid leave, $100,000 is $52.08 per hour worked. A contractor’s unbilled weeks are unpaid, which the contract rate has to cover.

Are the amounts I enter sent anywhere?

No. The calculation runs in your browser as you type. The amounts, rates, and results are not sent to Looty Tools or stored, and the calculator area is masked from session-recording analytics. Refreshing the page clears it.