Salary, Hourly, and What They Translate To
Most jobs come with a number that defines them — an annual salary, a per-hour wage, or a project rate. But people compare jobs across formats all the time. Is a $50/hour contract better than a $90,000 salary? Should a freelancer charge $75 or $150 to make the same effective income as a salaried peer? This calculator handles both directions: type a salary and see the hourly equivalent, or type an hourly rate and see the annual. Switch into freelancer mode and it adds the realities of self-employed work — billable utilization, overhead, and self-employment taxes — to come up with the rate you actually need to charge.
Salary to Hourly: The Quick Math
The standard shortcut for converting an annual salary to an hourly rate is to divide by 2,000 — the number of hours in a 40-hour, 50-week work year. So an $80,000 salary is roughly $40/hour. The exact number depends on how many weeks per year you actually work. With three weeks of vacation, the divisor drops to 1,960. With the full 52 weeks (no time off), it's 2,080. The differences are small individually but matter in the aggregate, especially when comparing salaried jobs (with paid time off) to contract roles (where time off is unpaid).
Hourly to Salary: Same Math Backwards
Going from hourly to annual is the same calculation in reverse. A $25/hour wage for 40 hours per week and 50 weeks per year is $50,000. Hourly workers usually want to know the salary equivalent to compare against salaried roles or to negotiate a permanent position. Salaried workers want the hourly equivalent for the opposite reason — to evaluate whether a contract gig pays better. Note that hourly workers typically have access to overtime pay (1.5x for hours over 40), which can push the effective annual income meaningfully higher than the headline rate suggests.
Why Freelancers Need a Higher Rate
The biggest mistake new freelancers make is using their old salary divided by 2,000 as their hourly rate. This dramatically undercharges. A freelancer who needs to take home $80,000 per year cannot just charge $40/hour, because three big chunks come out before take-home: non-billable time (admin, marketing, learning, travel), overhead (software, hardware, insurance, accountant), and self-employment taxes (in the US, an extra ~7.65% on top of regular income tax that an employer would have covered). Account for all three and the equivalent freelance rate is usually 1.5x to 2x what a salary calculation suggests.
Billable Utilization
If you bill 40 hours every week, congratulations — you have an exceptional client pipeline. The reality for most freelancers is more like 20 to 30 billable hours per week, with the rest going to admin, marketing, sales calls, learning new skills, and recovering from work. Industry averages put utilization at 50 to 70 percent. The freelance mode here defaults to 25 billable hours out of 40 worked, which is realistic for most consultants and contractors. If your utilization is much higher or lower, adjust the field to see how dramatically it changes the rate you need to charge.
What Counts as Overhead
Common overhead expenses for solo freelancers and consultants include software subscriptions (design tools, IDE, project management), hardware refresh (amortized cost of laptop, monitor, peripherals), workspace (home office portion of utilities, coworking membership), insurance (health, professional liability, equipment), accounting and legal fees, and professional development (courses, conferences, books). For a solo knowledge worker the total often lands between $5,000 and $15,000 per year. For trades and contractors with vehicles and tools the number can be far higher.
Self-Employment Tax
In the United States, employees and employers each pay 7.65 percent of wages into Social Security and Medicare. Self-employed workers pay both halves — 15.3 percent — known as self-employment tax. On top of that, they owe regular federal and state income tax. The combined effective tax rate on freelance income usually lands somewhere between 25 and 40 percent depending on income level and state. The freelance mode here uses a 25 percent default, which is a reasonable middle estimate for moderate-income freelancers in low-tax states. Adjust upward for higher incomes or higher-tax states.
Frequently Asked Questions
Why does the freelance rate seem so high?
Because it includes everything an employer normally covers behind the scenes — payroll taxes, software, office space, insurance, sick days, vacation, retirement matching. When you account for all of it, charging 1.5x to 2x your equivalent salaried rate is just covering the basics, not getting rich.
Should I charge a different rate to different clients?
Many freelancers do — higher rates for short-term or risky projects, lower rates for guaranteed long-term retainers. The number this calculator produces is a baseline; charge above it for projects with friction and below it for projects that fill your calendar reliably.
Where does benefits like health insurance fit in?
For employees, it's typically not in the salary number — it's an additional employer cost. For freelancers, you pay it from your billings. If you want to match an employed peer's true compensation, add the cost of equivalent benefits (health insurance, retirement matching) to your annual income target before computing the rate.
This calculator is free, runs entirely in your browser, and works offline. Use it to negotiate, to evaluate offers, and to set the rates that keep your freelance business viable.
Try also: Pay Raise Calculator · Savings Interest Calculator