How it works
This converts a 1099 contract rate into the W-2 salary that would leave you equally well off. Annual contract gross is hourly rate × billable hours per week × weeks worked per year. From that it subtracts three things a W-2 employer would otherwise cover: the employer-equivalent half of self-employment tax, twelve months of the health premium you fund yourself, and the employer retirement match you forfeit, taken as a percentage of gross. What remains is the equivalent salary.
Weeks worked per year is the input people set too high. The default of 48 already accounts for unpaid gaps between contracts and time off, and the field caps at 52. Other defaults are 75 an hour, 35 billable hours a week, 500 a month for health cover, a 4% 401(k) match and 15 PTO days. The equivalent hourly figure divides the resulting salary by hours × 52, because salaried pay continues through holidays.
Self-employment tax follows IRS Schedule SE. Only 92.35% of net earnings is taxable, the 12.4% Social Security part stops at the 2026 wage base of $184,500 (SSA), and the 2.9% Medicare part has no cap. The tool subtracts half of that total, the share an employer would have paid. That works out at 7.06% of gross up to about $199,800, then falls as a share of income, so at $288,000 gross it is $15,296 (5.3%). Gross is treated as net earnings, with no business expenses, and W-2 wages from another job, which use up the same wage base, are not counted. The PTO days field is informational only: its dollar value, days × rate × 8, appears in the table but is never subtracted, since the weeks-worked figure already reflects unpaid time. Income tax, the QBI deduction and state taxes are not modelled. The page states this is general information, not tax advice.
Frequently asked questions
What contractor rate is equivalent to a six-figure salary? +
Work backwards from the defaults. At 35 hours a week over 48 weeks, a 75 rate produces 126,000 gross, which after 8,902 of employer-side self-employment tax, 6,000 of health cover and a 4% match lands at roughly 106,058 equivalent. Raise the rate until the headline hits your target.
Why does it subtract only half of the 15.3% self-employment tax? +
Because only half is extra. A W-2 employee pays 7.65% and the employer pays a matching 7.65%. As a contractor you pay both halves, so the employer half is the gap. It is worked as Schedule SE does: 15.3% of 92.35% of earnings, with the Social Security part capped at the $184,500 wage base for 2026, then halved. That is about 7.06% of gross below the cap and less above it, not a flat 7.65%.
Does the equivalent hourly rate use my weeks worked figure? +
No, it deliberately divides the equivalent salary by hours per week × 52. Salaried pay continues through holidays and quiet periods, so spreading it across the full year is the fair comparison. Your annual contract gross still uses the weeks-worked number you entered.
Should paid time off be part of the comparison? +
The tool shows the value of PTO, calculated as days × rate × 8 hours, but does not subtract it, to avoid double-counting unpaid time already captured by weeks worked per year. If you set weeks to 52, consider subtracting that PTO figure yourself.
Are federal and state income taxes included? +
Neither is modelled. The tool covers only the employer-side payroll tax difference, plus benefits and retirement match. Income tax broadly applies to both employment types so it largely cancels out, but your state, filing status and QBI eligibility can still shift the comparison.
Comparing two things that are not comparable
A contract rate and a salary describe different packages, so a fair comparison has to put the missing pieces back. On the salary side that means adding the employer's pension contribution, the employer payroll tax, paid leave, and the value of equipment, training and insurance provided.
On the contract side it means subtracting the weeks you will not be billing and the costs you now carry yourself. The two adjustments push in opposite directions and both are large.
Risk has a price, and so does structure
The residual difference after those adjustments is the premium for bearing risk: no notice period, no redundancy protection, no sick pay, and a pipeline that can empty. Whether that premium is adequate is a judgement rather than a calculation, and it depends on how replaceable your contracts are.
Engagement structure changes the arithmetic further — operating through a company, an umbrella arrangement or as a sole trader have materially different tax outcomes, and employment-status rules in several jurisdictions can reclassify a contract regardless of what the paperwork says. Those are questions for an accountant, not for a converter.
