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A common rule of thumb says a contractor should charge about 1.5–2× the hourly equivalent of a comparable salary. That’s roughly right, but the multiplier depends on a few things you can estimate yourself. Here’s the reasoning, step by step, and a table for common salaries.
In short: Why a contract rate must beat your W-2 hourly wage: employer FICA, lost benefits, unpaid time off and billable hours. Method and 2026 table.
What an employer pays that a client doesn’t
- The employer half of FICA. An employer pays 7.65% on your wages (6.2% Social Security up to $184,500 in 2026, plus 1.45% Medicare). As a contractor you pay both halves through self-employment tax.
- Benefits. Health insurance premiums, 401(k) match, HSA contributions, stipends. Your benefits statement shows the real number, and it’s often $8,000–$25,000 a year.
- Paid time off. Salaried employees get paid for holidays, vacation, and sick days. A contractor who takes 20 days off earns nothing on those days.
- Non-billable time. Sales, admin, invoicing, learning, and gaps between clients. Many independent professionals bill 60–80% of their working hours.
- Business costs. Laptop, software, insurance, accounting, and a workspace your employer used to provide.
The method
- Start with the salary.
- Add the employer FICA you’d now cover (7.65% up to the wage base, 1.45% above it).
- Add the annual value of benefits you’d lose.
- Add yearly business expenses.
- Divide by your billable hours: working weeks × hours per week × billable share.
The result is a break-even rate: what you need to charge to end up about where the salary left you. It isn’t a market rate, and it doesn’t price in the risk of going without work.
Try the calculatorW-2 to 1099 Rate ConverterThe contract hourly and day rate that replaces a salary once benefits, taxes, and time off are counted.Open2026 conversion table
Assumptions: $12,000 of benefits, $6,000 of business expenses, 40-hour weeks, 20 unpaid days off (48 working weeks), 75% billable, so 1,440 billable hours a year.
| Salary | W-2 hourly (÷2,080) | Break-even 1099 rate | Multiplier | Day rate (8 hrs) |
|---|---|---|---|---|
| $60,000 | $28.85 | $57.35 | 1.99× | $459 |
| $90,000 | $43.27 | $79.78 | 1.84× | $638 |
| $120,000 | $57.69 | $102.21 | 1.77× | $818 |
| $150,000 | $72.12 | $124.64 | 1.73× | $997 |
| $200,000 | $96.15 | $161.35 | 1.68× | $1,291 |
The multiplier falls as salary rises because benefits and expenses are a smaller share of a larger paycheck, and because the 6.2% Social Security part stops above the wage base. Change any assumption with the W-2 to 1099 rate calculator.
Evaluating a contract offer
If a recruiter offers a “$60/hr 1099” role against a $90,000 salary, the table says that’s below break-even ($79.78). That doesn’t make it a bad offer if you’ll bill close to 100% of your hours on a long contract, which is common with staffing-agency roles. Plug in the billable share you’d really have. At 95% billable and minimal expenses, break-even falls to around $60/hr.
A W-2 contract (“W-2 hourly” through an agency) is different: the agency pays the employer FICA, so compare it more directly with salary minus benefits.
After you have a rate
- See what the rate leaves you after taxes with the 1099 tax calculator.
- Build a rate from your target income instead with the freelance rate calculator.
- Read how much to charge as a freelancer and 1099 vs W-2 take-home pay.
FAQ
How do I convert a W-2 salary to a 1099 hourly rate?
Add employer FICA (7.65%), lost benefits, and business expenses to the salary, then divide by billable hours (working weeks × hours per week × billable share). With typical assumptions, a $90,000 salary needs about $80/hour.
Is 1.5× salary enough for a 1099 contract?
Sometimes. If you’ll bill nearly all your hours and don’t lose much in benefits, 1.3–1.5× can break even. With typical time off and non-billable time, it’s closer to 1.7–2×.
What is $50 an hour on a 1099 equal to on a W-2?
Working it backwards with the assumptions above (1,440 billable hours, $12,000 benefits, $6,000 expenses), $50/hour is roughly a $50,000 salary equivalent. With 95% billable hours and fewer lost benefits, it’s closer to $75,000.
Do contractors pay double Social Security?
They pay both the employee and employer halves (15.3% combined, on 92.35% of net earnings), but can deduct half of it for income tax.