What does your $50/hour rate actually equal in employee salary terms? After SE tax, health insurance, lost PTO, and downtime — probably less than you expect.
Multiply your hourly rate by billable hours per year (typically 1,600–1,900). Then subtract self-employment tax (15.3%), health insurance premiums, retirement contributions, and unpaid time off costs. The remainder approximates your equivalent W-2 salary.
Multiply your target salary by 1.4–1.6 to cover SE tax, benefits, and downtime. To replace an $80,000 W-2 job, you likely need $55–$70/hour assuming ~1,700 billable hours/year. Use this calculator for a personalized estimate based on your expenses.
Freelancers pay the full FICA (15.3% vs employee's 7.65%), health/dental/vision insurance, all vacation and sick leave, retirement contributions with no employer match, and life/disability insurance. This is why freelance rates must be 40–60% higher than equivalent salaries.
Sources: IRS Schedule SE (Self-Employment Tax), IRS Publication 334, BLS Occupational Employment Statistics. Last updated March 2026.