Why a higher hourly rate doesn't mean more money
The single biggest mistake people make when weighing a contract against a salary is comparing the headline numbers. A $75/hour contract sounds far better than a $90,000 salary — until you remember that the salary quietly includes health insurance, a retirement match, paid vacation, and an employer who covers half your payroll taxes. As a freelancer, all of that becomes your responsibility and comes straight out of your rate.
This calculator levels the field. On the salaried side it adds the real cash value of your benefits and paid time off. On the freelance side it counts only the hours you'll actually bill, subtracts your own business expenses, and accounts for the extra ~7.65% employer-side payroll tax you now shoulder. What's left is a fairer apples-to-apples comparison of total compensation.
The rule of thumb (and why to ignore it)
A common shortcut says a freelance rate should be roughly 1.5× the equivalent salaried hourly wage to break even. It's directionally right — but your real multiplier depends on how generous the salaried benefits are and how many hours you can actually bill. Run your own numbers instead of trusting the rule.
What the calculator can't price
Money isn't everything. Freelancing buys flexibility and uncapped upside but costs you stability, predictable income, and employer-sponsored protections. A contract that's slightly behind on pure dollars might still be the right move — or the reverse. Use this as the financial baseline, then weigh the rest.
FAQ
How much higher should a freelance rate be than a salary?
Often 1.3–1.75× the equivalent salaried hourly wage, to cover benefits, self-employment taxes, unpaid time, and expenses. The exact figure depends on your situation — the calculator above gives you a precise comparison.
What benefits value should I enter?
Add up your employer's annual contribution to health insurance, any 401(k) match, plus the rough value of other perks. For many U.S. jobs this lands between $10,000 and $20,000 a year.
Does this account for taxes?
It subtracts the extra employer-side payroll tax (~7.65%) that freelancers pay but employees don't. It doesn't model your full income tax, since that applies to both options similarly — use the self-employment tax calculator for a full tax estimate.