Determine your daily rate based on desired income and overhead.
$
Take-home pay goal (after tax/expenses)
$
Software, insurance, equipment, etc.
Days you actually charge clients
Vacation, sick days, holidays
%
Income tax + Self-employment tax
Used to calculate hourly rate
Your Recommended Rates
Minimum Day Rate
$0.00
To meet net goal
Hourly Rate
$0.00
Based on 8h day
Gross Revenue
$0.00
Pre-tax total needed
Annual Breakdown
Total Working Weeks:0
Total Billable Days:0
Business Expenses:$0.00
Estimated Taxes:$0.00
Desired Net Income (Pocket):$0.00
How to Calculate Your Contractor Day Rate
Setting the right day rate is one of the most challenging aspects of becoming an independent contractor or freelancer. If you set your rate too low, you risk burnout and financial instability. Set it too high without justification, and you may struggle to secure clients.
Unlike a salaried employee, a contractor must cover their own overhead costs, including insurance, software subscriptions, hardware, and crucially, the employer portion of taxes. Furthermore, contractors are rarely billable 52 weeks a year. You must account for unpaid vacation, sick leave, and holidays.
Why "Salary / 260" Doesn't Work
A common mistake is taking a desired annual salary and dividing it by 260 (52 weeks × 5 days). This formula fails for contractors because:
Unbillable Time: You need time for administration, marketing, and finding new clients. You are likely only billable 4 days a week on average, or fewer if between contracts.
Taxes: As a contractor, you are often responsible for additional self-employment taxes that an employer would usually pay.
Benefits: You must fund your own health insurance, retirement contributions, and paid time off.
Key Inputs for the Day Rate Calculator
To use the calculator above effectively, consider the following definitions:
Desired Annual Net Income: The actual amount of money you want to take home and spend on your personal life after all business expenses and taxes are paid.
Annual Business Expenses: Total up your costs for liability insurance, accounting fees, coworking spaces, software licenses, and hardware upgrades.
Billable Days per Week: Be realistic. Even if you work 5 days, one of those days might be spent on admin. 4 billable days is a safe standard for calculation.
Weeks Off: Combine public holidays (approx. 10 days), desired vacation time (e.g., 10-15 days), and potential sick days. A standard buffer is 4-6 weeks off per year.
Understanding the Calculation Logic
This tool uses a "reverse engineering" approach. It starts with how much you want to keep in your pocket (Net Income), adds your operating costs (Expenses), and grosses up the total to account for taxes. Finally, it divides this Gross Revenue Requirement by the actual number of days you can invoice clients (Total Billable Days).
Use this figure as your baseline minimum. Depending on your experience level, niche demand, and the value you provide, you should aim to charge above this minimum to generate profit for business growth.
function calculateContractorRate() {
// 1. Get Input Values
var incomeInput = document.getElementById('targetIncome').value;
var expensesInput = document.getElementById('annualExpenses').value;
var billableDaysInput = document.getElementById('billableDays').value;
var weeksOffInput = document.getElementById('weeksOff').value;
var taxRateInput = document.getElementById('taxRate').value;
var hoursInput = document.getElementById('dailyHours').value;
// 2. Parse values and handle defaults
var netIncome = parseFloat(incomeInput);
var expenses = parseFloat(expensesInput);
var billableDaysPerWeek = parseFloat(billableDaysInput);
var weeksOff = parseFloat(weeksOffInput);
var taxRate = parseFloat(taxRateInput);
var dailyHours = parseFloat(hoursInput);
// 3. Validation
if (isNaN(netIncome) || netIncome < 0) {
alert("Please enter a valid desired net income.");
return;
}
if (isNaN(expenses) || expenses < 0) expenses = 0;
if (isNaN(billableDaysPerWeek) || billableDaysPerWeek 7) {
alert("Please enter a valid number of billable days per week (1-7).");
return;
}
if (isNaN(weeksOff) || weeksOff 52) {
alert("Please enter a valid number of weeks off (0-52).");
return;
}
if (isNaN(taxRate) || taxRate = 100) {
alert("Please enter a valid tax rate percentage.");
return;
}
if (isNaN(dailyHours) || dailyHours <= 0) dailyHours = 8;
// 4. Logic Calculation
// Total money needed BEFORE taxes (but after expenses are paid from gross)
// Note: We need (Gross – Expenses) * (1 – TaxRate) = NetIncome ???
// Usually taxes apply to Profit (Revenue – Expenses).
// var Revenue = X. Profit = X – Expenses. Tax = Profit * TaxRate.
// Net Income = Profit – Tax = Profit – (Profit * TaxRate) = Profit * (1 – TaxRate).
// So, Profit = Net Income / (1 – TaxRate).
// And Revenue = Profit + Expenses.
var taxDecimal = taxRate / 100;
var requiredProfit = netIncome / (1 – taxDecimal);
var grossRevenue = requiredProfit + expenses;
var totalTaxAmount = requiredProfit – netIncome;
// Calculate billable time
var workingWeeks = 52 – weeksOff;
var totalBillableDays = workingWeeks * billableDaysPerWeek;
if (totalBillableDays <= 0) {
alert("Total billable days results in zero. Please reduce weeks off or increase days per week.");
return;
}
var dayRate = grossRevenue / totalBillableDays;
var hourlyRate = dayRate / dailyHours;
// 5. Update HTML Output
document.getElementById('resultSection').style.display = 'block';
// Format Currency Helper
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
maximumFractionDigits: 2
});
document.getElementById('res_dayRate').innerText = formatter.format(dayRate);
document.getElementById('res_hourlyRate').innerText = formatter.format(hourlyRate);
document.getElementById('res_grossRevenue').innerText = formatter.format(grossRevenue);
document.getElementById('res_hours_txt').innerText = dailyHours;
document.getElementById('bd_weeks').innerText = workingWeeks;
document.getElementById('bd_days').innerText = totalBillableDays;
document.getElementById('bd_expenses').innerText = formatter.format(expenses);
document.getElementById('bd_taxes').innerText = formatter.format(totalTaxAmount);
document.getElementById('bd_net').innerText = formatter.format(netIncome);
// Scroll to results
document.getElementById('resultSection').scrollIntoView({ behavior: 'smooth' });
}