Salary To Hourly Calculator
Work out the contract rate that genuinely replaces a salary once self-employment tax, overhead and unbillable hours are paid for — not the number you get by dividing by 2,080.
Salary To Hourly Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- Results are a model, not a quotation — an institution's own figures govern.
- Every input is an assumption; change one and the answer changes with it.
- Rounding is applied only at the display layer, so totals may differ by a cent from a statement that rounds each line.
In short: Replacing an $85,000 salary as a contractor requires $120,018 of gross revenue and, at 65% billable across 47.4 available weeks, an hourly rate of $97.39. Dividing the salary by 2,080 gives $40.87 — the naive conversion understates the necessary rate by 138%, a factor of 2.38.
Formula
Self-employment tax is 15.3% charged on 92.35% of net profit, so the gross must be grossed up — you cannot simply add 15.3% to the target.
Worked Example
- Total the overhead. $9,360 health + $5,100 retirement + $3,600 tools = $18,060.
- Gross up for self-employment tax. ($85,000 + $18,060) ÷ (1 − 0.1413) = $120,018 of revenue.
- Find the hours you can sell. 47.4 available weeks × 40 hours × 65% = 1,232 billable hours.
- Divide. $120,018 ÷ 1,232 = $97.39 an hour.
- Compare with the naive figure. $85,000 ÷ 2,080 = $40.87, so the real requirement is 2.38× higher.
Analyst's note. The 2,080-hour conversion is the single most expensive mistake made by people going independent, because it fails on three counts simultaneously. It assumes every hour is billable, when 65% is a realistic professional-services figure. It ignores the employer's half of payroll tax, which you now pay yourself. And it ignores overhead that an employer previously absorbed. Each factor alone is significant; together they turn $40.87 into $97.39. Note the sensitivity to utilisation: at 50% billable the required rate rises to $126.60, which is why winning work matters more than the rate card.
Strengths & Limits Of This Model
Where this engine is strong
- Runs entirely in your browser — no figure you type is transmitted or stored.
- Shows the full working, so every number can be traced and challenged.
- Free, unmetered and free of affiliate incentives.
Where it stops
- Generalised assumptions cannot capture every individual circumstance.
- Jurisdiction-specific rules and mid-year changes may not be reflected.
- A model output is not a substitute for a professional review of your position.
Practical Use Cases
Setting your rate before going independent
Work backwards from the salary you need rather than forwards from what feels chargeable. If the resulting rate is above what your market pays, the contract move does not work at your current utilisation. Cross-check the salary side with the Salary Calculator.
Deciding whether a contract offer is genuinely better
A $75-an-hour contract sounds like a large increase on a $40.87 employee rate, but it is a substantial pay cut once self-employment tax and overhead are paid. Run both through this engine before comparing them.
Pricing the cost of low utilisation
Utilisation drives the rate more than any other input. Falling from 65% to 50% billable adds $29.21 an hour to what you must charge. Model the cash-flow gap between contracts with the Emergency Fund Calculator — contractors need deeper reserves than employees.
Methodology & Editorial Standards
Self-employment tax is computed at the US rate of 15.3% applied to 92.35% of net profit, an effective 14.13%, and the required revenue is solved algebraically rather than by adding the rate to the target — a common error that understates the requirement. The engine deliberately excludes federal and state income tax, since those apply to employees and contractors alike and would distort the comparison; the target should therefore be read as pre-income-tax salary replacement. Half of self-employment tax is deductible against income tax in practice, which slightly improves the real position. Overhead covers health cover, retirement funding and business costs, but not unbilled administration, marketing time, bad debt or the cost of gaps between contracts, all of which argue for a higher rate still. The engine implements the standard published formula for this calculation. Inputs are validated for domain and sign before evaluation, and any undefined case returns an em-dash rather than a spurious value.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
Salary To Hourly Calculator — 20 Expert FAQs
20 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
What should I charge as a contractor?
Enough to cover the salary you need, your overhead and self-employment tax, spread across only the hours you can actually bill. Replacing $85,000 requires $97.39 an hour at 65% utilisation — not the $40.87 a 2,080-hour division suggests.
Why can I not just divide my salary by 2,080?
Because it assumes every working hour is billable, ignores the employer's half of payroll tax, and ignores overhead your employer used to absorb. Correcting all three multiplies the required rate by 2.38 on these figures.
What is a realistic billable percentage?
Sixty to seventy per cent is typical in professional services once you account for selling, administration, invoicing and training. New contractors frequently assume 90% and discover the shortfall only after a year of underpricing.
What is self-employment tax?
The 15.3% covering Social Security and Medicare, charged on 92.35% of net profit — an effective 14.13%. As an employee your employer paid half of this; as a contractor you pay all of it, which is $14,406 here.
Does this include income tax?
No, deliberately. Income tax applies to employees and contractors alike, so including it would distort the comparison. Treat the target as the pre-income-tax salary you are replacing, and note that half of self-employment tax is deductible in practice.
How much should I add for overhead?
Everything your employer previously funded: health cover, retirement, equipment, software, professional insurance and accountancy. That totals $18,060 here, and most people underestimate it by omitting the small recurring items.
What about time between contracts?
Not modelled, and it is the largest hidden risk. A month unbilled is roughly 8% of annual capacity. Either raise the rate to absorb it or hold a deeper cash reserve than an employee would need.
Should I quote a day rate or an hourly rate?
Day rates are conventional in many markets and reduce disputes over part-hours — $779.08 here at eight hours. Just ensure the day rate is derived from the same arithmetic rather than rounded down to a comfortable number.
Is contracting worth it financially?
Only if your market rate exceeds the figure this engine produces. Above it, contracting pays materially better than employment; below it, you are subsidising the client for the privilege of carrying all the risk yourself.
How does utilisation affect my rate?
More than anything else. Dropping from 65% to 50% billable raises the required rate from $97.39 to $126.60. Winning consistent work is worth more than negotiating a higher rate card.
Should I charge more for short engagements?
Generally yes. Short contracts carry higher selling costs per billable hour and more gap risk. A premium of 15-25% over your standard rate is common for engagements under a month.
What about paid holiday and sick leave?
Contractors have neither, which the engine handles by removing your intended time off from available weeks before computing the rate. Illness is unmodelled and is another argument for a reserve.
Do I need business insurance?
Most professional contracts require professional indemnity and public liability cover. It is included in the tools and insurance line here, and it is rarely optional once you are working through agencies or with larger clients.
How do I raise my rate with existing clients?
Annually, in writing, with notice, and anchored to a specific date rather than a negotiation. Rates that never rise are a real-terms pay cut every year — the Raise Calculator quantifies exactly how much.
How does this differ from the Hourly To Salary Calculator?
That tool annualises a wage you already earn to compare offers. This one solves the reverse and much harder problem: what you must charge so that self-employment genuinely replaces employment.
Is this salary to hourly calculator free to use?
Yes. It is free, requires no account, and has no usage limits. ApexConverter is funded by contextual advertising, never by selling user data.
Is my data sent to a server?
No. The engine runs as Vanilla JavaScript inside your browser under our Zero-Server Client-Side Execution model. Your figures are computed locally and are never transmitted, logged, or stored.
How accurate is this calculator?
It applies the standard closed-form formula in IEEE-754 double precision, rounding only at the display layer. The engine is reconciled against an independent reference implementation before release.
Does it work on mobile?
Yes. The interface is mobile-first with numeric keypad hints and is tested down to a 320-pixel viewport with no horizontal scrolling.
Can I use it offline?
Largely, yes. Because computation is client-side, the page continues to calculate without a network connection once it has loaded.