If you're leaving a W-2 job for contracting, here's what you need to charge to maintain the same take-home pay:
Quick Formula: W2 Salary × 1.4 to 1.6 = Required 1099 Revenue
As a W-2 employee, your employer pays:
- 7.65% FICA (Social Security + Medicare)
- Health insurance ($6,000-$20,000/year value)
- Paid vacation (10-20 days = 4-8% of salary)
- Paid sick leave (5-10 days = 2-4% of salary)
- 401k match (3-6% of salary)
- Unemployment insurance, workers comp, etc.
As a contractor, YOU pay all of this.
W-2 Salary: $100,000/year
| Hidden Cost | Annual Value |
|---|---|
| Employer FICA (7.65%) | $7,650 |
| Health Insurance | $12,000 |
| Paid Vacation (15 days) | $5,769 |
| Paid Sick Leave (5 days) | $1,923 |
| 401k Match (4%) | $4,000 |
| Total Hidden Benefits | $31,342 |
Required 1099 Revenue: $131,342 minimum
If you only work 1,600 billable hours (accounting for non-billable time): Minimum Hourly Rate: $82/hour
❌ Charging your old W-2 hourly equivalent ($48/hr for $100k salary) ❌ Forgetting about self-employment tax (15.3%) ❌ Not accounting for unpaid vacation/sick time ❌ Ignoring health insurance costs
Use this free calculator to factor in your specific expenses, taxes, and income goals:
https://hourly-rate-calculator.tp-business.workers.dev
No signup required. Get your number in 60 seconds.
Keywords: contractor rate, 1099 vs W2, freelance hourly rate, consulting rate calculator