Hourly rate to salary calculator
Convert a salary into the contract rate that actually matches it, including the weeks you will not bill and the costs an employer used to cover.
Equivalent hourly rate
$89.24
1748 billable hours a year, plus 30% for costs an employer would cover
- Day rate (8 hours)
- $713.96
- Billable hours a year
- 1,748
- Weeks worked
- 46
| Hours a week | 38 |
|---|---|
| Weeks off | 6 |
| Overhead loading | 30% |
| Hourly rate | $89.24 |
- Unbillable time — admin, sales, sick days — is the gap between this rate and what you actually earn.
A $120,000 salary with 6 weeks off and 30% of self-funded costs needs about $95 an hour, not the $61 a simple divide suggests.
Side by side
How this is calculated
Billable hours, not paid hours
An employee is paid for 52 weeks; a contractor bills only the weeks they work. At 38 hours across 46 working weeks that is 1,748 billable hours, roughly 12% fewer than the 1,976 a naive calculation uses.
billable hours = hours per week × (52 − weeks off)The overhead loading
Pension contributions, insurance, equipment, software, accounting and unbillable admin all move to you. A 30% loading is a common starting point; a specialist with heavy tooling or insurance can be well above it.
rate = salary × (1 + overhead) ÷ billable hoursWorked example: A $120,000 salary, 38 hours a week, 6 weeks off
| Salary | $120,000 |
|---|---|
| Hours a week | 38 |
| Weeks off | 6 |
| Overhead | 30% |
| Hourly rate | about $89 |
|---|---|
| Day rate | about $714 |
| Billable hours | 1,748 |
The naive answer — salary divided by 2,080 hours — is $58, which is a 35% pay cut disguised as a lateral move.
What this assumes
- Every worked hour is billable.
- The rate is before income tax.
- No unpaid overtime.
- Overhead is a flat percentage of the salary.
Where this commonly goes wrong
- Unbillable time — sales, proposals, invoicing, training — is typically 15–25% of a contractor’s week and is not covered by the weeks-off input alone.
- Employer pension or superannuation contributions sit on top of the quoted salary, so an employee package is larger than the salary figure being converted.
- A rate agreed for a 3-month contract has to carry the gap before the next one, which is what the weeks-off input is really pricing.
Questions
How do I convert a salary to an hourly contract rate?
Add the costs you will now self-fund, then divide by the hours you will actually bill — not 2,080. A $120,000 salary with 30% overhead and 1,748 billable hours is about $89 an hour.
Why is dividing by 2,080 wrong?
Because 2,080 hours assumes you work every week of the year and that nothing an employer paid for has moved to you. Both are false for a contractor, and together they understate the rate by around a third.
What overhead percentage should I use?
Thirty percent covers pension, insurance, equipment and accounting for most knowledge workers. Add more for expensive professional indemnity, specialist tooling, or if you carry an office.
Should I bill hourly or by the day?
Day rates are simpler to sell and quote and are the norm in many markets, but they cap a productive day at eight hours. Hourly suits fragmented work; fixed price suits well-defined outcomes and rewards being fast.
How many weeks off should I assume?
Start at six: four of holiday plus two for sickness and gaps between contracts. If your work arrives in project bursts rather than a rolling contract, eight to ten is more honest.
Does this include tax?
No — every figure here is before income tax, and contractor tax treatment varies enormously by country and structure. Use a country-specific take-home calculator for the after-tax comparison.
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Sources
This calculator does arithmetic on the figures you enter. It does not account for tax, fees, or your personal circumstances.
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