Contractor Rate Calculator
Calculate your contractor hourly or day rate. Whether you're an IT contractor, engineering contractor, or independent professional, ensure your rate covers all costs including self-employment taxes and benefits you'd normally receive as an employee.
Contractor vs Employee Rate Comparison
Contractors must charge 30-50% more than equivalent employee hourly rates. This is not profit—it covers self-employment taxes, benefits, equipment, and downtime that employers normally pay.
The Contractor Rate Calculation
| Item | Employee Gets | Contractor Must Cover |
|---|---|---|
| FICA Taxes | Employer pays 7.65% | You pay full 15.3% |
| Health Insurance | $6K-15K value | Buy your own |
| 401(k) Match | 3-6% of salary | Self-fund retirement |
| Paid Time Off | 2-4 weeks paid | Unpaid vacation |
| Sick Days | 5-10 days paid | No pay when sick |
| Equipment | Company provides | Buy your own |
Contract Types and Pricing
- Time & Materials (T&M): Bill hourly for actual work. Best for variable scope and ongoing projects. Client sees all hours.
- Fixed Price: Set total for defined deliverable. You manage scope and time. Risk: scope creep, estimation errors.
- Staff Augmentation: Fill role on client team, usually 40hr/week commitment. Lower rate for guaranteed hours.
- Cost-Plus: Your costs + markup percentage. Common in construction and government work.
Contractor Rate by Industry
- IT/Software: $75-200/hr depending on specialization
- Engineering: $80-175/hr
- Creative/Design: $50-150/hr
- Accounting/Finance: $75-200/hr
- Project Management: $60-125/hr
Frequently Asked Questions
What's the difference between W-2 and 1099 rates?
W-2 (employee) rates include employer-paid taxes and often benefits. 1099 (contractor) rates should be 20-40% higher since you pay both sides of taxes and all your own benefits.
How do I calculate my day rate?
Day rate = hourly rate × 8 (standard) or × 10 (long days). Many contractors charge 10-hour day rates for on-site work. Some offer a slight discount for day rate vs hourly (7-8× instead of 8×).
Should I discount for long-term contracts?
A small discount (5-10%) for guaranteed long-term work is reasonable—you're trading rate for stability. But never discount more than 15% or you'll resent the work.