Choose a W-2 Salary Target
Start with the salary you want to replace, then add realistic value for paid holidays, PTO, health insurance subsidy, retirement match, and other benefits.
Rate planning
1099 Hourly Rate Calculator
Estimate the contractor hourly rate you need to replace a W-2 salary after health insurance, taxes, business expenses, PTO, holidays, retirement match, and unpaid downtime.
How to Set a 1099 Hourly Rate
Use Billable Hours, Not Work Hours
Contractors may work on sales, admin, training, accounting, and client management that cannot be billed directly. Use realistic billable hours per week and working weeks per year.
Add Overhead and Risk
Build in software, equipment, insurance, licensing, accounting, payment delays, and the possibility of gaps between contracts.
Simple Contractor Rate Formula
Planning formula
1099 hourly rate = target total compensation plus business costs plus risk premium, divided by realistic annual billable hours.
For example, if the target W-2 package is $120,000, annual contractor costs are $12,000, and realistic billable hours are 1,600, the rate before extra risk premium is about $82.50/hr. A premium may push the quote higher.
Common Mistakes When Pricing 1099 Work
Ignoring unpaid time
Vacations, holidays, sick days, training, and sales time reduce effective earnings.
Underpricing health insurance
Monthly premiums and deductibles can change the rate needed.
Forgetting taxes
Self-employment tax and estimated tax payments require cash planning.
Counting every hour as billable
Admin and client acquisition time usually lower billable utilization.
No margin for risk
Late payments, scope changes, and contract gaps need a buffer.
FAQ
What is a good 1099 hourly rate?
A good rate covers target compensation, taxes, insurance, business costs, unpaid time, and risk. The right number depends on industry, location, expertise, and billable utilization.
How much more should a 1099 contractor charge than a W-2 employee?
Many contractors test a 30% to 40% premium as a starting point, then adjust based on benefits, risk, expenses, and how steady the work is.