function calculateRate() {
// 1. Get input values
var salary = parseFloat(document.getElementById('desiredSalary').value);
var costs = parseFloat(document.getElementById('annualCosts').value);
var hoursPerWeek = parseFloat(document.getElementById('billableHours').value);
var weeksOff = parseFloat(document.getElementById('weeksOff').value);
var tax = parseFloat(document.getElementById('taxRate').value);
var profit = parseFloat(document.getElementById('profitMargin').value);
var errorDiv = document.getElementById('error-message');
var resultDiv = document.getElementById('result-area');
// 2. Clear previous errors
errorDiv.style.display = 'none';
resultDiv.style.display = 'none';
// 3. Validation
if (isNaN(salary) || salary < 0) salary = 0;
if (isNaN(costs) || costs < 0) costs = 0;
if (isNaN(hoursPerWeek) || hoursPerWeek <= 0) {
errorDiv.innerText = "Please enter valid billable hours per week.";
errorDiv.style.display = 'block';
return;
}
if (isNaN(weeksOff) || weeksOff < 0) weeksOff = 0;
if (isNaN(tax) || tax < 0) tax = 0;
if (isNaN(profit) || profit = 52) {
errorDiv.innerText = "Weeks off cannot equal or exceed 52 weeks.";
errorDiv.style.display = 'block';
return;
}
// 4. Logic Implementation
// Calculate total working weeks
var workingWeeks = 52 – weeksOff;
// Calculate total annual billable hours
var totalBillableHours = workingWeeks * hoursPerWeek;
// Calculate Gross Revenue Requirement
// Formula: We need enough Gross (G) so that: G – Taxes = Net Needed
// Net Needed = Salary + Expenses
// However, expenses are usually tax deductible, so taxes apply to (Gross – Expenses).
// Let's use the standard "Gross Up" formula for simplicity where Tax is on total Revenue for safe estimation,
// or (Target Net + Expenses) / (1 – TaxRate) is a common heuristic for freelancers to ensure they cover self-employment tax.
// Let's stick to the robust self-employed formula:
// Needed Net = Salary
// Total Pre-Tax Need = (Salary + Costs) / (1 – (TaxRate / 100))
var taxFactor = 1 – (tax / 100);
if (taxFactor <= 0) taxFactor = 0.01; // Prevent division by zero if tax is 100%
var baseRevenueNeeded = (salary + costs) / taxFactor;
// Add Profit Margin on top of the base revenue needed
var totalRevenueNeeded = baseRevenueNeeded * (1 + (profit / 100));
// Calculate Hourly Rate
var hourlyRate = totalRevenueNeeded / totalBillableHours;
// Calculate Daily Rate (assuming 8 hour standard day, though billable might differ)
var dailyRate = hourlyRate * 8;
// 5. Output Formatting
document.getElementById('hourlyResult').innerText = '$' + hourlyRate.toFixed(2);
document.getElementById('dailyResult').innerText = '$' + dailyRate.toFixed(2);
document.getElementById('grossRevenueResult').innerText = '$' + totalRevenueNeeded.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalHoursResult').innerText = totalBillableHours.toFixed(0);
// 6. Show Results
resultDiv.style.display = 'block';
}
How to Calculate Your Hourly Rate for Contract Work
Transitioning from a salaried employee to a contract worker or freelancer requires a fundamental shift in how you view your income. You cannot simply divide your previous annual salary by 2,080 (the standard number of work hours in a year) and expect to maintain the same standard of living. As a contractor, you bear the burden of unbillable time, taxes, insurance, and business overhead.
This calculator helps you reverse-engineer a sustainable hourly rate based on your financial goals and the realities of running a business.
The Contract Rate Formula
To determine an accurate hourly rate, you must account for three primary factors: Billable Efficiency, Overhead, and Taxes.
1. Billable vs. Non-Billable Hours
An employee is paid for 40 hours a week regardless of productivity. A contractor is only paid for hours actually billed to a client. You must track "utilization rate." If you work 40 hours a week, you might only spend 25 of those hours on client work. The remaining 15 hours are spent on:
Invoicing and bookkeeping
Marketing and finding new clients
Skill development
Communication and project management
This calculator adjusts your rate so your billable hours cover your non-billable time.
2. Unpaid Time Off
Contractors do not get paid vacation or sick leave. If you plan to take 2 weeks of vacation and estimate 1 week of sick time, you are only generating revenue for 49 weeks of the year. Your hourly rate must be high enough to build a cash reserve that covers you during these weeks.
3. Self-Employment Taxes
In many jurisdictions, contractors pay both the employee and employer portion of social security and medicare taxes (often called Self-Employment Tax). Additionally, income tax is not withheld automatically. A common mistake is underpricing services by failing to factor in the additional 25-30% needed for tax obligations.
Step-by-Step Calculation Guide
If you prefer to do the math manually, here is the process:
Determine Target Net Salary: The amount you want to land in your bank account after all expenses and taxes.
Add Operating Expenses: Sum up software subscriptions, hardware, coworking space fees, and insurance.
Calculate Gross Revenue Needed: Divide your (Net Salary + Expenses) by (1 – Tax Rate). For example, if you need $100k and tax is 30%, you need $142,857 gross.
Determine Total Billable Hours: (52 weeks – Weeks Off) × Billable Hours per Week.
Divide and Buffer: Divide Gross Revenue by Total Billable Hours. Finally, add a profit margin (10-20%) to reinvest in the business.