Contractor Rate Equivalent to $120,000 Salary with 40% Benefits
Calculate the equivalent contractor hourly rate for a $120,000 salaried position with a 40% benefits and overhead load.
How to use this tool
- Enter the employee base salary you are comparing.
- Set the benefits/overhead load you must now self-fund (often 25–40%).
- Set the extra payroll tax you cover yourself (US default 7.65%).
- Enter your realistic billable hours, then read the equivalent contractor rate.
When an employer offers generous benefits worth 40% of salary, this calculator shows what contractor rate you'd need to match a $120,000 package.
Frequently asked questions
- Why is the contractor rate so much higher than salary ÷ 2,080?
- Because a contractor self-funds benefits, pays the employer half of payroll tax, and bills fewer than 2,080 hours. Grossing the salary up and dividing by real billable hours captures all three effects.
- What benefits load should I use?
- A practical range is 25–40% of salary, covering health coverage, retirement contributions, paid leave and equipment. Value your own benefits and adjust; if your old job had rich benefits, use a higher figure.
- Is the 7.65% always right?
- It reflects the US employer share of Social Security and Medicare that self-employed people cover. Outside the US, or if you model self-employment tax separately, set it to zero or to your local figure.