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Hourly rate
Hours a week
Weeks you will work
52 minus holiday, sickness and gaps between clients.
Billable share of your working time
Quoting, admin, invoicing and chasing payment are real hours nobody pays for.
Business expenses a year
Software, equipment, insurance, accountant, phone.
Benefits you now buy yourself
Health cover, pension contributions, paid leave.
Self-employment tax
You pay both halves of what an employer split with you.
Profit on top
What the business earns beyond paying you.
Equivalent salary
$96,000
50.00 an hour, 40 hours a week, 48 weeks
rate = (needed + costs) / billable hours
The naive figure is what clients compare you with. The difference is what the employer used to pay on your behalf.
How do you convert an hourly rate to a salary?
Multiply the hourly rate by the hours you work in a week, then by the weeks you work in a year. The quick version uses 2,080 hours, which is 40 hours over 52 weeks, so $50 an hour looks like $104,000 a year.
That figure is only true for someone paid for every hour of every week. If you take three weeks off, it is $98,000. If a third of your time goes on work nobody pays for, it is closer to $65,000. The calculator above asks for both, because the gap between them is where the disappointment lives.
2,080 hours
40 hours, 52 weeks, no time off. The number job ads use.
1,920 hours
48 weeks, which allows for holiday and a few sick days.
1,344 hours
48 weeks at 70% billable, which is what many freelancers actually invoice.
Why a contract rate is not a salary divided by 2,080
An employer pays for more than the hours on your timesheet. When you invoice instead, those costs move to you, and they are larger than most people expect.
- Both halves of payroll tax. An employee pays 7.65 percent and the employer pays the same again quietly. Self-employed, you pay 15.3 percent, though half of it is deductible.
- Unpaid time. Holiday, illness and the gaps between contracts are all unbilled, and they are the single biggest adjustment.
- Unbillable work. Quoting, admin, invoicing and chasing payment can take a third of the week and nobody pays for any of it.
- Benefits. Health cover, pension contributions and equipment were part of the package and are now line items on your own accounts.
Added together these commonly mean a contract rate needs to be 25 to 40 percent above the naive hourly equivalent to leave the same money in your pocket.
Setting a rate you can defend
Work backwards from the year rather than forwards from an hour. Decide what you need to earn, add the costs of earning it, divide by the hours you will genuinely bill, and you have a floor. The market decides how far above that floor you can sit, but nothing sensible happens below it.
- Quote a price for the job where the scope is clear, and a rate where it is not.
- Raise on new quotes first, then existing clients with notice.
- Charge for the first hour of a small job the same way you charge for the first hour of a large one: the setup cost is identical.
- If a client compares your rate with a salary, show them the arithmetic on this page rather than defending the number.
Once the rate is set, the quote generator puts it in writing and the invoice generator bills it with terms attached.
Hourly to annual salary: the quick conversions
On a standard 2,080 hour year, which is 40 hours a week for 52 weeks with no unpaid time off.
$25 an hour
$1,000 a week, $2,167 a month, $52,000 a year, and $1,923 per biweekly paycheck.
$35 an hour
$1,400 a week, $3,033 a month, $72,800 a year, and $2,800 per biweekly paycheck.
$50 an hour
$2,000 a week, $4,333 a month, $104,000 a year, and $4,000 per biweekly paycheck.
$75 an hour
$3,000 a week, $6,500 a month, $156,000 a year, and $6,000 per biweekly paycheck.
Going the other way, salary to hourly, divide the annual salary by 2,080: $60,000 is $28.85 an hour and $80,000 is $38.46. Those are gross figures, before tax and before any of the costs on this page.
W2, 1099 and corp to corp
The same work pays differently depending on how you are engaged, and the headline rate is not comparable across the three.
- W2 employee: the employer pays half your payroll tax, and usually benefits, paid leave and equipment. The rate looks lowest and often is not.
- 1099 contractor: you invoice, you pay both halves of payroll tax as self-employment tax, and you fund your own time off. Expect to need 25 to 40 percent more than the W2 equivalent.
- Corp to corp: you contract through your own company. More admin and more scope for deductions, and usually the highest headline rate of the three.
The calculator above works in take-home terms, so it compares them honestly rather than by headline rate.
When and how to raise your rates
A rate set two years ago is a pay cut, because your costs moved and it did not.
- Set a minimum rate below which you decline work, and hold it.
- Raise on new quotes first, then existing clients with a month of notice.
- Change something visible at the same time: clearer quotes, firmer scheduling, a written guarantee. Clients accept increases attached to something.
- If nobody has questioned your price in a year, it is too low.
Hourly, day rate, or a price for the job
Hourly
Protects you when nobody knows how long the work will take. Invites conversations about your rate rather than the outcome.
Day rate
Simpler to quote and to schedule. Define what a day means before you start, or it grows.
Fixed price
Rewards you for working efficiently, and punishes you for scope you did not write down.
Rate and salary questions, answered
How much is $50 an hour a year?
$104,000 on a full 2,080 hour year, $96,000 if you take four weeks off, and about $67,000 if a third of your working time is unbillable. All three are the same rate; they differ only in how honest they are about the year.
How do I convert a salary to an hourly rate?
Divide by 2,080 for the standard comparison, so $80,000 is about $38.46 an hour. If you are quoting as a freelancer, divide by the hours you will actually bill instead, which is usually far fewer.
What contract rate matches a salary?
Typically 25 to 40 percent above the naive hourly equivalent. The additions are the employer's half of payroll tax, unpaid time off, unbillable hours and the benefits you now buy yourself.
How many billable hours are realistic?
Between 60 and 80 percent of your working time for most independent workers. Quoting, admin, invoicing and chasing payment are real hours that no client pays for, and pretending otherwise is the most common way a rate turns out too low.
What is self-employment tax and why is it 15.3%?
It is Social Security and Medicare, both halves. As an employee you pay 7.65 percent and your employer pays the same again. Working for yourself you pay both, although half of it is deductible against income tax.
Should I charge by the hour or by the project?
By the project when the scope is clear, because it rewards you for being good at the work rather than slow at it. By the hour when nobody can see the end of it yet.
How do I work out a day rate?
Multiply your hourly rate by the hours in your working day, then decide what a day means and write it down. A day that quietly becomes ten hours is a rate cut.
How much should I set aside for tax?
A common rule is 25 to 30 percent of profit, more in a high-tax state or once you are into the higher brackets. Move it out of the account you spend from on the day the invoice is paid.
When should I raise my rates?
When you are consistently busy, when your costs have risen, or when you have not raised them in two years. Apply the new rate to new quotes first and give existing clients notice.
How much is $25 an hour a year?
About $52,000 gross on a 2,080 hour year, or $1,923 per biweekly paycheck. Take four weeks off unpaid and it is closer to $48,000.
How much is $60,000 a year per hour?
About $28.85 on a 2,080 hour year, or $1,153 a week before tax. As a freelance rate it would need to be considerably higher, because that figure assumes an employer is covering payroll tax, paid leave and benefits.
What is the difference between W2, 1099 and corp to corp?
As a W2 employee the employer pays half your payroll tax and usually benefits. On 1099 you invoice and pay both halves yourself. Corp to corp routes the work through your own company, with more admin and more deductions. Compare take-home rather than headline rates.
What should my minimum hourly rate be?
The rate that covers what you need to earn, plus expenses, benefits and both halves of payroll tax, divided by the hours you will genuinely bill. Below that number the work costs you money however busy it looks.
Is the freelance rate calculator free?
Yes. No signup and nothing uploaded: every figure is worked out in your browser and gone when you close the tab.