Calculating the correct day rate is one of the most critical tasks for independent contractors, freelancers, and consultants. Unlike a salaried employee, your income is not guaranteed, and you must cover your own overhead, taxes, equipment, and unbillable time. A common mistake is simply dividing a previous annual salary by 260 working days, which often leads to undercharging and financial strain.
The Formula for Contractor Rates
To determine a sustainable day rate, you must account for the reality that you cannot bill for every single hour you work. This calculator uses a reverse-engineering approach based on your financial goals and operational constraints:
Total Revenue Requirement: This combines your desired personal income with your business operational costs (software licenses, insurance, hardware, accountant fees, etc.).
Available Working Time: We start with 52 weeks and deduct time for vacations, sick leave, and public holidays.
The "Unbillable" Factor: This is the most often overlooked metric. Contractors spend significant time on administration, invoicing, marketing, finding new clients, and professional development. If you don't factor this into your rate, you are effectively working for free during those hours.
Why Billable Days Matter
A standard employee works roughly 230 to 250 days a year. However, a successful contractor might only be able to bill for 60% to 75% of that time due to the administrative burden of running a business. This calculator adjusts your rate to ensure that your billable days generate enough revenue to cover the days you are working on the business rather than in it.
Understanding the Inputs
Desired Annual Income: The gross salary you would like to pay yourself before personal taxes.
Annual Business Expenses: All costs required to keep your business running. Do not include personal expenses here.
Weeks Off & Holidays: Be realistic. Contractors often skip vacations to work, but this leads to burnout. Build rest time into your rate.
Unbillable Time (%): For most contractors, 15% to 25% is a standard buffer for admin and sales activities.
function calculateDayRate() {
// 1. Get Inputs
var desiredIncome = parseFloat(document.getElementById('annualSalary').value);
var annualOverhead = parseFloat(document.getElementById('annualOverhead').value);
var daysPerWeek = parseFloat(document.getElementById('daysPerWeek').value);
var weeksOff = parseFloat(document.getElementById('vacationWeeks').value);
var holidays = parseFloat(document.getElementById('publicHolidays').value);
var unbillablePercent = parseFloat(document.getElementById('unbillablePercent').value);
// 2. Validation
if (isNaN(desiredIncome) || isNaN(annualOverhead) || isNaN(daysPerWeek) ||
isNaN(weeksOff) || isNaN(holidays) || isNaN(unbillablePercent)) {
alert("Please enter valid numbers in all fields.");
return;
}
if (daysPerWeek > 7) daysPerWeek = 7;
// 3. Logic
// Total revenue needed to cover salary and business costs
var totalRequiredRevenue = desiredIncome + annualOverhead;
// Calculate total potential working days
var totalWeeks = 52;
var workingWeeks = totalWeeks – weeksOff;
var potentialDays = (workingWeeks * daysPerWeek) – holidays;
// Apply unbillable percentage (Admin buffer)
// If unbillable is 20%, then Billable Factor is 0.8
var billableFactor = 1 – (unbillablePercent / 100);
var billableDays = potentialDays * billableFactor;
// Edge case: Prevent division by zero
if (billableDays <= 0) {
alert("Your time off and unbillable settings result in zero billable days. Please adjust your inputs.");
return;
}
// Calculate Day Rate
var dayRate = totalRequiredRevenue / billableDays;
// Calculate Weekly Utilization (Billable days / (52 * 5)) just for stats
var standardYearDays = 260;
var utilization = (billableDays / standardYearDays) * 100;
// 4. Output Results
document.getElementById('dayRateResult').innerHTML = '$' + dayRate.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('totalRevenueResult').innerHTML = '$' + totalRequiredRevenue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('billableDaysResult').innerHTML = Math.round(billableDays) + " days";
document.getElementById('weeklyUtilizationResult').innerHTML = utilization.toFixed(1) + "% of standard work year";
// Show results
document.getElementById('resultsArea').style.display = 'block';
}