Health insurance, PTO, retirement match, etc. (Avg: 20-30%)
The employer's share of FICA taxes you must pay. (Standard: 7.65%)
Insurance, software, hardware, accounting, etc.
Equivalent 1099 Hourly Rate:$0.00
To match total W-2 annual value of:$0.00
Accounting for contractor overhead of:$0.00 / year
function calculateEquivalentRate() {
// 1. Get Inputs
var w2RateInput = document.getElementById("w2HourlyRate").value;
var benefitsLoadInput = document.getElementById("benefitsLoad").value;
var seTaxBurdenInput = document.getElementById("seTaxBurden").value;
var annualExpensesInput = document.getElementById("annualExpenses").value;
// 2. Parse and Validate Inputs
var w2Rate = parseFloat(w2RateInput);
var benefitsPercent = parseFloat(benefitsLoadInput) / 100;
var seTaxPercent = parseFloat(seTaxBurdenInput) / 100;
var annualExpenses = parseFloat(annualExpensesInput);
if (isNaN(w2Rate) || w2Rate < 0) w2Rate = 0;
if (isNaN(benefitsPercent) || benefitsPercent < 0) benefitsPercent = 0;
if (isNaN(seTaxPercent) || seTaxPercent = 1) seTaxPercent = 0.0765; // Default to standard if invalid or too high causing divide by zero risk
if (isNaN(annualExpenses) || annualExpenses < 0) annualExpenses = 0;
// Constants used in calculation
var annualHours = 2080; // Standard 40-hour work week * 52 weeks
// 3. Calculate W-2 Total Annual Value
var w2AnnualBase = w2Rate * annualHours;
var w2AnnualBenefitsValue = w2AnnualBase * benefitsPercent;
var totalW2AnnualValue = w2AnnualBase + w2AnnualBenefitsValue;
// 4. Calculate Required 1099 Gross Income
// The 1099 gross must cover the Total W2 Value PLUS contractor expenses.
// Then, this amount must be grossed up to account for the extra Self-Employment tax drag.
var targetNetBeforeIncomeTax = totalW2AnnualValue + annualExpenses;
// We divide by (1 – tax burden) to find the gross amount needed to net the target amount after the extra SE tax.
var required1099GrossAnnual = targetNetBeforeIncomeTax / (1 – seTaxPercent);
// 5. Calculate Final Hourly Equivalent
var equivalent1099Hourly = required1099GrossAnnual / annualHours;
var totalContractorOverhead = annualExpenses + (required1099GrossAnnual * seTaxPercent);
// 6. Formatting Currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
maximumFractionDigits: 2
});
// 7. Display Results
document.getElementById("result1099Rate").innerHTML = formatter.format(equivalent1099Hourly) + "/hr";
document.getElementById("resultW2TotalValue").innerHTML = formatter.format(totalW2AnnualValue) + " (Salary + Benefits)";
document.getElementById("resultOverhead").innerHTML = formatter.format(totalContractorOverhead) + " (Extra Taxes & Expenses)";
// Show results container
document.getElementById("calcResults").style.display = "block";
}
Understanding the Difference: W-2 vs. 1099 Contractor Rates
When evaluating job offers or setting your freelance rates, directly comparing a W-2 hourly wage to a 1099 contractor hourly rate is like comparing apples to oranges. A W-2 rate comes with significant hidden value in the form of employer-paid taxes and benefits, whereas a 1099 rate carries additional financial burdens for the worker.
This calculator helps you determine the equivalent 1099 hourly rate you need to charge to achieve a similar net financial standing as a specific W-2 hourly wage.
Why Are the Rates Different?
There are three primary factors that make a 1099 dollar worth less than a W-2 dollar:
Self-Employment Taxes (FICA): As a W-2 employee, your employer pays half of your Social Security and Medicare taxes (7.65%), and you pay the other half through withholding. As a 1099 contractor, you are both the employer and the employee, meaning you must pay the full 15.3% Self-Employment Tax yourself. The calculator asks for this "Additional Tax Burden" (usually the missing 7.65%).
Benefits Package: W-2 employees often receive valuable benefits that are not reflected in their hourly wage, such as subsidized health insurance, employer matches on retirement contributions (401k), paid time off (vacation and sick days), and disability insurance. Contractors must purchase these entirely out of pocket or go without.
Business Expenses: Contractors must cover their own operational costs. This includes professional liability insurance, software subscriptions, computer hardware, home office utility costs, and accounting fees. A W-2 employer typically provides the tools needed for the job.
How to Use This Calculator
Target W-2 Hourly Rate: Enter the hourly wage of the salaried position you are comparing against.
Estimated Value of W-2 Benefits (%): Estimate the total value of perks outside of base salary as a percentage. For many corporate jobs, benefits are valued at roughly 25% to 30% of the base salary. If the W-2 job offers no benefits, enter 0.
Additional Contractor Tax Burden (%): This is the extra percentage of tax you pay as a contractor that an employer would usually pay. The standard figure for the employer's share of FICA is 7.65%.
Estimated Annual Contractor Expenses: Enter a rough estimate of how much it costs to run your freelance business annually (e.g., $2,000 for insurance and software).
Example: A W-2 job paying $50/hr with good benefits (valued at 25%) is roughly equivalent in total value to a 1099 contract rate of $70/hr, assuming moderate business expenses. The contractor needs that higher gross rate to cover the extra taxes and buy their own benefits.