Comparison results
Gross income, net income, benefits, risk, and rate targets.
Detailed comparison
Review each major component before choosing an offer.
| Category | Salaried role | Contract role | Difference |
|---|---|---|---|
| Gross earnings | $85,000.00 | $101,200.00 | $16,200.00 |
| Benefits and employer retirement | $15,390.00 | $0.00 | $-15,390.00 |
| Business expenses | $0.00 | $20,080.00 | $-20,080.00 |
| Agency and platform fees | $0.00 | $1,012.00 | $-1,012.00 |
| Estimated taxes | $24,016.50 | $26,896.28 | $-2,879.78 |
| Net annual income | $56,983.50 | $45,211.72 | $-11,771.78 |
| Effective hourly income | $55.53 | $22.23 | $-33.30 |
| Risk and downtime adjustment | $0.00 | $35,285.80 | $-35,285.80 |
| Adjusted total value | $72,373.50 | $17,925.92 | $-54,447.58 |
Charts and visual reports
Visualize income, costs, and cumulative value.
Salary versus contract values
Contract deductions
Multi-year cumulative value
Gross-to-net comparison
Sensitivity analysis
Required rates at different billable utilization levels.
| Utilization | Billable hours | Required hourly | Required daily |
|---|---|---|---|
| 60% | 1,104 | $143.43 | $1,147.47 |
| 70% | 1,288 | $122.94 | $983.55 |
| 80% | 1,472 | $107.58 | $860.60 |
| 90% | 1,656 | $95.62 | $764.98 |
| 100% | 1,840 | $86.06 | $688.48 |
Multi-year projection
Compare growth and retirement balances over time.
| Year | Employee value | Contract value | Employee cumulative | Contract cumulative | Employee retirement | Contract retirement |
|---|---|---|---|---|---|---|
| 1 | $72,373.50 | $17,925.92 | $72,373.50 | $17,925.92 | $8,904.00 | $8,480.00 |
| 2 | $74,544.71 | $17,961.69 | $146,918.21 | $35,887.61 | $18,342.24 | $17,468.80 |
| 3 | $76,781.05 | $18,001.05 | $223,699.25 | $53,888.66 | $28,346.77 | $26,996.93 |
| 4 | $79,084.48 | $18,044.17 | $302,783.73 | $71,932.83 | $38,951.58 | $37,096.74 |
| 5 | $81,457.01 | $18,091.21 | $384,240.74 | $90,024.05 | $50,192.68 | $47,802.55 |
Example data table
| Example | Salary | Contract rate | Basis | Use |
|---|---|---|---|---|
| General professional | $80,000 | $55 | Hourly | Employee versus independent contractor |
| Senior specialist | $100,000 | $600 | Daily | Agency or direct consulting |
| United Kingdom consultant | £60,000 | £400 | Daily | Permanent versus limited-company work |
| Six-month assignment | $90,000 | $8,500 | Monthly | Temporary specialist placement |
| Fixed project | $75,000 | $25,000 | Project | Project fee and hourly return |
Formula used
Employee gross = salary + bonus + commission + overtime + other pay Employee total compensation = employee gross + benefits + employer retirement Employee take-home = employee gross − employee taxes − employee retirement Contract gross = selected rate × billable quantity + premium income Contract take-home = contract gross − expenses − fees − taxes − retirement Required contract revenue = employee compensation + contractor costs + risk + downtime + profit Break-even hourly rate = required revenue ÷ billable hours ÷ (1 − percentage fees)
How to use this calculator
Enter the salary and contract offer first. Select hourly, daily, weekly, monthly, or project pricing. Then enter realistic working time for both roles.
Add paid leave and employer benefits. Include every contractor expense that replaces an employer-provided item. Use effective tax rates when detailed brackets are unavailable.
Estimate contract gaps and unpaid administration. Add a risk premium for uncertainty. Review break-even rates before comparing headline income.
Understanding salary and contract income
Contract rates usually exceed employee hourly rates. Contractors replace paid leave, benefits, payroll support, and employment protections. They also absorb operating and collection risks.
High contract revenue can still produce lower take-home income. Taxes, insurance, downtime, software, and platform fees reduce cash. Billable utilization strongly changes the outcome.
Salary compensation includes more than base pay. Retirement matching, insurance, bonuses, paid holidays, and equity add value. Include them during negotiations.
Billable utilization
Billable utilization measures invoiced time against available working time. Contractors rarely invoice every working hour. Administration, proposals, training, and gaps consume unpaid time.
Conservative utilization creates safer rate targets. Optimistic utilization may underprice work. The sensitivity table compares several utilization assumptions.
Risk premiums
Risk premiums compensate for uncertainty transferred to contractors. Early termination, delayed payment, and unstable demand matter. Savings and market strength affect the required premium.
Risk premiums are not guaranteed profit. They fund reserves and protect future cash flow. Strong emergency savings may reduce the required premium.
Long-term projections
Projections compare salary growth and contract rate growth. Inflation increases contractor expenses. Retirement balances compound using the selected return.
Projected results are not guarantees. Actual markets, taxes, and benefits will differ. Verify important assumptions with qualified professionals.
Important limitations
This tool provides planning estimates, not legal or tax advice. Worker classification rules vary by country. Deductions require local verification and documentation.
Review contracts for termination, insurance, payment, and intellectual property clauses. Consider professional advice before changing employment status.
Frequently asked questions
1. How do I convert salary into an hourly contract rate?
Add compensation, costs, downtime, and risk. Divide required revenue by realistic billable hours.
2. What contract premium should I add?
The premium depends on benefits, utilization, expenses, demand, and risk. Compare several assumptions.
3. How are paid holidays valued?
The calculator estimates a daily salary value for paid leave.
4. Should health insurance count as compensation?
Yes. Employer-paid insurance is an economic benefit contractors often replace.
5. How does unpaid vacation affect contract income?
It reduces billable days and raises the required contract rate.
6. What is billable utilization?
It is the share of available time producing invoices.
7. How are contractor taxes estimated?
The tool combines entered tax percentages after costs and deductions.
8. Should expenses be deducted before comparison?
Yes. Operating costs reduce usable contractor income.
9. How do agency fees affect rates?
They reduce received revenue and increase the gross required rate.
10. What daily rate equals my salary?
The calculator multiplies the break-even hourly rate by daily billable hours.
11. Is contracting always better?
No. Flexibility and revenue may increase, but costs and uncertainty also increase.
12. How should contract gaps be estimated?
Use conservative experience and include marketing or transition time.
13. Can several offers be compared?
Yes. Save each offer as a local scenario.
14. Does the result include retirement?
Yes. Employee, employer, matching, and contractor contributions are separate.
15. Why can higher gross contract income create lower net income?
Taxes, expenses, unpaid time, insurance, and fees consume revenue.