The gross salary you would earn as a full-time employee.
Insurance, software, hardware, accountant fees, etc.
Extra margin for business growth or savings.
Time Availability
Admin, marketing, invoicing, finding new clients.
Total Revenue Required:–
Total Billable Days:–
Required Daily Rate:–
Equivalent Hourly Rate (8h):–
function calculateContractorRate() {
// Get Inputs
var targetSalary = parseFloat(document.getElementById('cdrc_targetSalary').value) || 0;
var overhead = parseFloat(document.getElementById('cdrc_overhead').value) || 0;
var profitMargin = parseFloat(document.getElementById('cdrc_profitMargin').value) || 0;
var vacationWeeks = parseFloat(document.getElementById('cdrc_vacationWeeks').value) || 0;
var holidays = parseFloat(document.getElementById('cdrc_holidays').value) || 0;
var sickDays = parseFloat(document.getElementById('cdrc_sickDays').value) || 0;
var unbillablePerMonth = parseFloat(document.getElementById('cdrc_unbillable').value) || 0;
// Validation
if(targetSalary <= 0) {
alert("Please enter a valid target annual salary.");
return;
}
// Financial Calculation
var baseRequired = targetSalary + overhead;
var totalRevenueRequired = baseRequired * (1 + (profitMargin / 100));
// Time Calculation
var totalWeekdays = 52 * 5; // 260 days
var vacationDays = vacationWeeks * 5;
var unbillableAnnual = unbillablePerMonth * 12;
var totalDeductions = vacationDays + holidays + sickDays + unbillableAnnual;
var billableDays = totalWeekdays – totalDeductions;
if (billableDays <= 0) {
alert("Your time off and unbillable days exceed the total working days in a year.");
return;
}
// Rate Calculation
var dailyRate = totalRevenueRequired / billableDays;
var hourlyRate = dailyRate / 8;
// Display Results
document.getElementById('res_totalRevenue').innerHTML = "$" + totalRevenueRequired.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res_billableDays').innerHTML = billableDays.toFixed(0) + " days / year";
document.getElementById('res_dailyRate').innerHTML = "$" + dailyRate.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res_hourlyRate').innerHTML = "$" + hourlyRate.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('cdrc_results').style.display = 'block';
}
How to Calculate Your Contractor Daily Rate
Transitioning from a salaried employee to an independent contractor or freelancer requires a fundamental shift in how you view your income. A common mistake is simply dividing your desired annual salary by 260 (the number of working days in a year). This approach often leads to financial strain because it fails to account for the hidden costs of running a business and the reality of non-billable time.
The "Billable Days" Reality
Unlike an employee who gets paid for every day they show up (plus paid holidays and sick leave), a contractor only gets paid for days worked. To determine your true daily rate, you must calculate your Actual Billable Days.
A standard year has 52 weeks. If you work 5 days a week, that is 260 potential working days. However, you must deduct:
Vacation: Time off is unpaid. If you take 4 weeks off, that is 20 fewer billing days.
Public Holidays: There are typically 10-11 public holidays per year where clients are closed.
Sick & Personal Days: You need a buffer for illness or emergencies (e.g., 5 days).
Admin & Marketing: This is the silent killer of contractor income. You spend time invoicing, finding new clients, and managing taxes. If you spend just 2 days a month on this, that is 24 unbillable days a year.
The Calculation Formula
Our calculator uses a reverse-engineering method to ensure your daily rate covers your lifestyle and business costs:
260 Days – (Vacation + Holidays + Sick Days + Admin Days)
Daily Rate
Total Revenue Target ÷ Billable Days
Why Include a Profit Margin?
As a business of one, you assume all the risk. A profit margin (often 10-20%) acts as a buffer against dry spells where you have no contracts, or allows you to invest in better equipment and training without dipping into your salary. Never quote a rate that only exactly covers your basic needs; always build in a safety net.
Example Scenario
Let's say you want to earn $100,000 gross. You have $5,000 in insurance and software costs. You want 4 weeks of vacation.
Financial Needs: $105,000 total.
Available Time: 260 days minus 20 days (vacation), 10 days (holidays), 5 days (sick), and 24 days (admin). Total billable days = 201.
Math: $105,000 / 201 days = $522.39 per day.
If you had simply divided $100,000 by 260, you would have charged $384/day, leaving you with a significant shortfall by year-end.