How the calculation works
The calculator compares the two offers on everything that differs between them. Income tax is left out because it applies to both.
- Full-time package = base salary + expected bonus + equity you would realistically count + employer retirement match + the value of benefits you would otherwise buy.
- Billable days = working days in a year − unpaid days off − gaps between contracts.
- Contract, comparable = rate × billable hours − extra payroll/social contributions − business expenses.
- Break-even rate = (full-time package + expenses) ÷ (billable hours × (1 − extra contribution rate)).
Worked example
Take the default US scenario: a $135,000 salary with a 10% bonus, a 4% retirement match and $12,000 of benefits, against a 1099 contract at $90 an hour. The contractor takes 25 unpaid days off, expects 4 weeks between contracts and spends $6,000 a year on the business.
- Full-time package: $165,900 a year.
- Billable time: 215 days, or 1,720 hours.
- Contract gross: $154,800; after the extra 7.65% self-employment contribution and expenses: $136,958.
- Break-even: $108.22/hour, which is 1.67× the naive $64.90 you get from salary ÷ 2,080.
In this example a rate that looks generous next to the naive figure is actually $28,942 a year behind the full-time offer. Your numbers will differ — that is the point of running them.
What the presets assume
Presets are only starting points. Change any value to match your offer.
- USA · 1099 / independent. Self-employed people in the US pay the full 15.3% Social Security + Medicare tax; employees have 7.65% withheld. The 7.65-point difference is pre-filled. Above the Social Security wage base the extra drops to Medicare only, so this slightly overstates the cost for very high earners. (IRS — Self-employment tax (Social Security and Medicare taxes))
- USA · W-2 contract (via agency). On a W-2 contract the agency is your employer and pays the employer share of payroll tax, so no extra contribution is pre-filled. Most W-2 contracts still exclude paid time off and often benefits — enter what yours actually offers.
- Canada · incorporated / sole proprietor. Self-employed people in Canada pay both the employee and employer portions of CPP. The employer half (5.95 points, on earnings up to the first CPP ceiling) is pre-filled; above that ceiling the extra is lower, so adjust for high incomes. EI is optional for the self-employed. Quebec uses QPP instead. (Canada Revenue Agency — Responsibilities and entitlements for employees and self-employed workers)
- UK · limited company / outside IR35. UK contractors usually quote a day rate. Whether a role is inside or outside IR35 changes what you take home far more than the rate itself — check the status determination before comparing. Set “extra contributions” to reflect your structure. (GOV.UK — Off-payroll working rules (IR35))
- Germany / Netherlands · freelancer. Freelancers in Germany and the Netherlands generally fund their own health insurance and pension. Add those to expenses or to “extra contributions”. Long single-client contracts can also be reclassified as employment under local false self-employment rules, so check your status before signing.
- India · remote contract for a foreign client. Compare a local full-time offer with a remote contract billed abroad (convert the rate to INR first). Freelancers handle their own provident-fund-style savings, insurance and GST compliance where it applies — add those to expenses.
What this calculator does not do
- It does not calculate income tax, tax credits or deductions.
- It does not decide your legal employment status (IR35, 1099 vs W-2, false self-employment rules).
- It does not value job security, career progression or the type of work — weigh those yourself.