W-2 vs 1099 Pay Calculator
Contractor yearly and hourly rate from W-2 salary.
What it does
Contractor rates that match salaries lose money by default. A $60,000 employee costs the employer far more than $60,000 once benefits and payroll taxes land, and the contractor pays the employer half of those taxes alone. Parity needs roughly 1.30 times the salary, or $37.50 an hour here.
The tool above converts either direction. Enter salary (or hourly with hours) and it prints the contractor yearly and hourly equivalents. An $85,000 salary converts to $110,500 at $53.13 an hour; a $50 W-2 hour converts to $65.00 contract.
Government data frames the load. BLS Employer Costs puts benefits near 30 % of private compensation, and IRS rules set 15.3 % self-employment tax with the employer matching half on W-2 paychecks. The 1.30 factor treats benefits as salary-loaded and stays conservative before gaps and insurance.
Hours decide honesty. Billable 2,080 assumes no vacation, bench time, or admin drag; real contractors divide by fewer hours or raise the factor. Health insurance, retirement, and quarterly estimates all ride on top of the converted rate.
How to use
- Enter the W-2 salary, or hourly with hours.
- Enter billable hours (2,080 full time).
- Read contractor yearly first, then hourly.
- Adjust load for costly benefits or gaps.
- Add SE tax planning on top.
- Compare offers on equal hours.
Formula
- base
- W-2 salary or hourly x hours.
- 1.30
- Benefits plus payroll-tax load factor.
- 2080 h
- Full-time year, editable.
BLS ECEC shows benefits ~30 % of compensation; IRS sets 15.3 % SE tax with employer matching half on W-2. The 1.30 is conservative practice, flagged as such.
Worked example
Example: $60,000 salary
Defaults: $60,000 salary over 2,080 hours.
- Inputs: $60,000 salary, 2,080 hours.
- Load: 60,000 x 1.30 = $78,000 contractor year.
- Hourly: 78,000 / 2,080 = $37.50.
- Meaning: benefits (~30% BLS) plus employer payroll half.
- Tool shows $78,000.00 /yr, $37.50 /hr.
Reference table
| W-2 base | Contract $/yr | Contract $/hr |
|---|---|---|
| $60,000 | $78,000 | $37.50 |
| $85,000 | $110,500 | $53.13 |
| $104,000 ($50/hr) | $135,200 | $65.00 |
Limits
- Rule-of-thumb load, not a tax return.
- Benefits vary; pricey insurance needs more.
- Ignores state taxes and business costs.
- Classification rules still apply per IRS tests.
Common mistakes
- Matching salary 1:1 as a contractor.
- Dividing by 2,080 with bench time.
- Forgetting the employer payroll half.
- Skipping quarterly estimates.
- Pricing health insurance at zero.
Try it yourself
Quick checks. Answers sit tucked under each question.
$85,000 salary?
85,000 x 1.30 = $110,500 a year. Hourly 110,500 / 2,080 = $53.13.
$50/hr W-2 offer?
Base 50 x 2,080 = $104,000. Contract 104,000 x 1.30 = $135,200 a year, $65.00 an hour.
Questions
What rate equals $60,000 W-2?
Salary times 1.30 over 2,080 hours. Here $78,000 a year or $37.50 an hour.
What does the 1.30 cover?
Benefits near 30 % of compensation per BLS plus the 7.65 % employer payroll half contractors pay alone.
What is self-employment tax?
15.3 % (12.4 % Social Security + 2.9 % Medicare) on 92.35 % of net earnings, per IRS.
How do I price from an hourly W-2?
Hourly times hours times 1.30. At $50 over 2,080: $135,200 a year, $65.00 an hour.
Is 1.30 exact for everyone?
No. Health insurance, retirement match, PTO, and gaps vary; adjust the load for your case.
Do taxes work differently?
Yes. Quarterly estimates replace withholding, and half of SE tax deducts; rules still apply.
Sources
- IRS: Self-Employment Tax (15.3%, 92.35% base)
- IRS: Employee vs Independent Contractor Rules
- BLS: Employer Costs (benefits ~30% of compensation)