Billable Hours
Use hours a client will actually pay for, not every hour you plan to work.
Rate pricing
Contractor Rate Calculator
Estimate the contract rate you need to charge by working backward from target compensation, expected billable hours, business expenses, health insurance, taxes, and income risk.
Contractor Rate Formula
Planning formula
Contractor rate = target compensation plus benefits replacement plus business costs plus risk premium, divided by realistic annual billable hours.
The biggest mistake is dividing a salary by 2,080 and calling that a contractor rate. A contractor usually cannot bill every working hour, and the rate must support unpaid admin, sales, training, taxes, insurance, and gaps between contracts.
Inputs to Include
Business Costs
Include software, hardware, insurance, accounting, legal, licenses, workspace, and professional tools.
Benefits Replacement
Account for health insurance, retirement match, paid time off, holidays, and other employee benefits you will not receive.
Example Contractor Rate Estimate
If you want to replace a $100,000 W-2 package, expect $12,000 in annual business and insurance costs, and can bill 1,600 hours per year, the baseline before extra risk premium is about $70/hr. A risk premium can push the quote higher.
This page is for education and rough planning only. It is not tax, legal, financial, accounting, or employment advice.
FAQ
What is a normal contractor premium?
Many people test a 30% to 40% premium above comparable W-2 compensation, then adjust based on benefits, costs, risk, and market demand.
Should I price by hour or by project?
Hourly pricing is useful for comparison. Project pricing may be better when scope, value, and delivery risk are well understood.