Comparing a contractor day rate to a salaried position is like comparing apples to oranges unless you adjust for all the hidden differences in total compensation.
What employees get that contractors don't
| Benefit | Annual value (estimate) |
|---|---|
| Employer health insurance | $6,000–$14,000 |
| Employer 401(k) match (4%) on $75k | $3,000 |
| Paid vacation (15 days) | ~$4,300 on $75k |
| Payroll tax (employer FICA) | 7.65% of salary |
| Sick leave, parental leave | $1,000–$5,000 |
Total benefits load typically adds 25–40% on top of base salary.
Converting day rate to equivalent salary
A contractor billing 220 days at $500/day earns $110,000 gross. After: - Self-employment tax: ~$15,000 - No employer benefits: −$20,000 lost vs. employed - 20% admin/vacancy buffer
Equivalent salaried value: roughly $75,000–$85,000.
The rule of thumb
Contractor hourly rate ≈ employee equivalent hourly rate × 1.5–2x
A $75k employee costs ~$36/hour in salary. A contractor doing equivalent work needs to charge $55–$72/hour to be equally compensated after all taxes and costs.
Model your exact numbers with the salary to hourly calculator.