Salary packages include benefits, PTO, and employer tax costs. Everhour keeps budgets tied to real billable work after the comparison.
Find the right rate based on your annual expenses, desired profit margin, and available billable hours. Stop guessing.
Rent, software, gear, salary
Time lost to admin, marketing, etc.
The calculator gives you the number — Everhour takes it from there.
One click and you're timing. Start a timer, add an entry, edit the details. This is exactly how it feels in Everhour.
Set a budget, assign rates, and get alerted before you're over.
Measurement
Track your budget through time or costs
Every report you need — configured your way, always up to date.
Tracked hours flow straight into a polished invoice — no copy-paste, no manual math.
A salaried role pays more than base salary. Health coverage, retirement match, paid time off, employer payroll taxes, and steady paid hours all carry value. An hourly or 1099 rate has to replace those items before it matches the salaried package. The calculation answers one practical question: which hourly rate produces the same economic result after benefits and self-funded costs?
The comparison changes when the hourly role has unpaid admin time, unpaid gaps, or no employer-funded benefits. A salaried employee often uses 2,080 paid hours as the annual base. A solo contractor usually divides by realistic billable hours, often far below 2,080, because sales, proposals, bookkeeping, and bench time do not produce invoiceable revenue.
Start with the income you want to keep, then add the costs the employer no longer covers. For U.S. self-employed pricing, the cost-plus formula is `(target income + overhead + benefits substitute + tax reserve) / billable hours`. The benefits substitute should include health coverage, retirement contributions, paid time off equivalent, and any insurance or professional costs you must now fund yourself.
For example, a contractor replacing an $80,000 salaried outcome adds $22,000 for self-funded benefits, $12,000 for ordinary business overhead, and $18,000 for federal income-tax and self-employment-tax reserves. The annual requirement is $132,000. At 1,320 realistic billable hours, the equivalent rate is $100.00 per billable hour.
The common mistake is comparing salary divided by 2,080 with an hourly quote. That shortcut treats paid time and billable time as the same thing. It also ignores the benefits gap. An $80,000 salary divided by 2,080 equals $38.46 per paid hour, but that number does not cover self-funded benefits, business overhead, or tax reserves for a contractor.
U.S. self-employed workers generally report business profit or loss on Schedule C and calculate Social Security and Medicare taxes on Schedule SE. For 2026 estimated tax, net self-employment profit is multiplied by 92.35%, then self-employment tax applies at 15.3% through the Social Security and Medicare structure, with the Social Security portion capped by the $184,500 wage base.
A one-off calculator is enough when you need a quick salary-to-hourly comparison, a negotiation floor, or a sanity check before discussing compensation. It gives you the hourly rate that supports a target package. It does not prove that a client budget, retainer, or project scope will actually absorb that rate over time.
A managed workflow matters once the rate affects live work. Everhour Project Budgeting supports time and money budgets, recurring budget periods, email alerts, budget protection, and multiple billing methods, so teams can watch whether hourly work stays inside the budget that justified the rate. That matters most when salaried, hourly, and contractor costs sit in the same project plan.
This content is for general information only, may not be fully up to date, and is provided without any warranty or liability.
High Performer
G2
Summer 2026
Best Ease Of Use
Capterra
Summer 2026
Rated in the top time trackers across G2, Capterra, and TrustRadius — with consistent praise for ease of use, integrations, and support.
Convert the salaried package into an annual requirement, then divide by realistic paid or billable hours. Include target income, benefits replacement, business overhead, and tax reserves when the hourly role is self-employed. Use 2,080 hours only for a full-time employee-style paid-hour comparison.
Include employer-paid health coverage, retirement contributions, paid time off value, insurance, professional costs, and any other expense the salaried employer covered. For a contractor or 1099 role, add a tax reserve because no employer withholds income tax, Social Security, or Medicare tax from contractor pay.
The hourly equivalent rises because the worker must fund benefits from the hourly rate. The rate also has to cover unpaid time if the work is not fully billable. A salaried employee can be paid during PTO, holidays, training, and slow periods. A contractor usually cannot invoice those hours.
A contractor should use 2,080 hours only for a rough employee-style comparison. Solo contractors usually need a lower billable-hour base because admin, sales, collections, learning time, and gaps between projects reduce invoiceable hours. A lower denominator raises the required hourly rate even when the annual target stays the same.
Self-employment tax does not replace the benefits calculation. It is a separate tax reserve. For 2026 estimated tax, net self-employment profit is multiplied by 92.35%, then Social Security and Medicare tax rules apply, including the $184,500 Social Security wage base and Additional Medicare Tax thresholds for higher-income filers.
Everhour Project Budgeting lets teams set time and money budgets, use recurring budget periods, and receive email alerts as work approaches defined limits. That helps managers test whether the hourly or contractor rate used in the comparison still fits the project budget during real delivery.
Everhour supports non-billable projects, fixed-fee projects, time-and-materials project rates, member rates, and custom task rates. That lets teams price salaried, hourly, and contractor work differently while keeping billable amounts tied to tracked time.
Set the hourly equivalent, then track budget use as work happens. Everhour connects project budgets, alerts, and billing methods so rate decisions stay tied to budget control.
14-day free trial · No credit card · Cancel anytime
