IT Contractor Rate Calculator
Determine your ideal hourly and daily rate based on desired income and overhead.
Total Billable Days per Year:
0
Total Billable Hours per Year:
0
Recommended Hourly Rate:
$0.00
Recommended Daily Rate:
$0.00
How to Calculate Your IT Contractor Rate
Transitioning from a permanent employee role to IT contracting requires a fundamental shift in how you view your income. Unlike employees, contractors do not receive paid time off, health benefits, or employer-sponsored retirement contributions. You are also responsible for your own hardware, software licenses, and professional indemnity insurance.
The Math Behind the Rate
The standard calculation for an IT contractor rate follows these steps:
- Step 1: Determine Total Target Revenue. Add your desired take-home salary to your estimated business expenses (including taxes, insurance, and equipment).
- Step 2: Calculate Working Days. Start with 260 weekdays per year. Subtract vacation, public holidays, and potential sick leave.
- Step 3: Account for Billable Hours. Not every hour at your desk is billable. Admin, invoicing, and professional development take time.
- Step 4: Divide Revenue by Hours. Your rate is your total revenue target divided by your total billable hours.
Example Calculation
If you want to earn a $120,000 salary and have $20,000 in expenses (Total $140,000):
Assuming 260 weekdays – 20 days vacation – 10 holidays – 5 sick days = 225 working days. At 7.5 billable hours per day, you have 1,687.5 billable hours per year.
$140,000 / 1,687.5 = $82.96 per hour.
Key Considerations for Contractors
When setting your rate, don't forget the "Bench Time" factor. Most contractors experience gaps between projects. It is common practice to add a 15-20% buffer to your base rate to cover the risk of being between contracts for several weeks a year.