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Contractor hourly rate calculator

Start from the money you want to take home, add taxes and business costs, and divide by the hours you can really bill. The result is the minimum rate you need to charge.

What you want to earn

Many self-employed people set aside 20–30%. Use the 1099 tax estimator to calculate yours.

Business costs

Insurance, vehicle and gas, phone, tools, software, advertising, accountant…

Your time

Only the hours you can charge to clients. Estimates, driving, buying materials and paperwork don't count.

Minimum hourly rate

—

— per 8-hour day

Revenue you need per year
—
For taxes
—
For business expenses
—
Business profit
—
Billable hours per year
—

This is the minimum you need to charge to reach your goal. Compare it with what other contractors charge in your area.

How the rate is calculated

  1. Take-home pay before taxes: the money you want to keep ÷ (1 − your tax percentage).
  2. Plus business expenses for the year (monthly expenses × 12).
  3. Plus business profit, so the business can save, invest and survive slow months.
  4. Divided by billable hours per year (billable hours per week × weeks you work).

With the default values ($50,000 take-home, 25% taxes, $800 per month in expenses, 10% profit, 30 billable hours a week for 48 weeks), you need about $83,893 in revenue and a minimum rate of $58.26 per hour, or about $466 per 8-hour day.

The most common mistake: counting every hour

An employee is paid for 40 hours a week. A contractor is not paid for driving between jobs, giving estimates, buying materials, doing paperwork or waiting for an inspection. If you price as if all 40 hours were billable, your real income will be much lower than you think. Most solo contractors bill 25 to 32 hours a week.

Hourly rate vs. job price

Even if clients pay a fixed price per job, you need your hourly rate to build that price: estimate the hours the job will take and multiply by your rate, then add materials. The painting and cleaning calculators work this way.

Frequently asked questions

Is this rate what I should charge?

It is the minimum to reach your goal. Your final price also depends on your experience, your market and what clients are willing to pay. If the minimum is higher than what others charge, look for ways to reduce costs or increase billable hours.

Should I include vacations and sick days?

Yes. That is why the calculator asks for the weeks you work per year. 48 weeks leaves about 4 weeks for holidays, vacation and sick days.

Why add a business profit on top of my pay?

Your pay is your salary. Profit is money for the business: replacing tools, buying a better truck, surviving slow seasons and growing.

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