Contractor vs Employee Calculator
$120K salary vs $80/hr freelance — which is actually more? The answer isn't what you think.
How to Use This Calculator
Which Pays More? tab
Enter an employee salary and a contractor hourly rate. The calculator adds hidden employee benefits (health insurance, 401k match, PTO, bonus) and deducts contractor costs (self-employment tax, health insurance, business expenses). You'll see which option gives more net income — and the equivalent rate needed to match.
What Rate to Ask? tab
Enter your current salary and your benefits package. The calculator shows exactly what hourly rate you need as a contractor to match your current net pay — and a higher rate to match total compensation including benefits.
The Formula
Contractor Net = (Rate × Hours × 50 weeks) − SE Tax − Income Tax − Health − Expenses
The hidden value of employee benefits is typically 20-40% on top of salary. A $120K salary with standard benefits has a total comp value of $145K-$165K. Most people dramatically underestimate this gap.
Example
Rachel — Product Designer, Bay Area
Rachel earns $120K/year and got offered a contract role at $80/hr. She thought she'd make more.
At $80/hr, Rachel would actually earn $14,300 less per year. She needed $95/hr just to match her salary net income — and $110/hr to match total compensation. She negotiated $105/hr and went independent.