Contractor Hourly Rate Calculator

How to Calculate What to Charge Per Hour as a Contractor

Most contractors set their hourly rate based on what competitors charge or what feels right. Both approaches lead to undercharging — because they don't account for overhead, taxes, and unpaid time (estimating, admin, driving).

The Three Numbers That Drive Your Rate

1. Desired take-home income. What do you actually want to put in your pocket after taxes? Start here. This is your anchor.

2. Annual overhead. Every dollar you spend running the business — insurance, vehicle, tools, software, phone, marketing — must be covered by your billing. Add it all up. Most contractors underestimate this by 30-50%.

3. Billable hours. This is not 40 hours a week. As a contractor, you spend significant time estimating, driving, doing admin, and waiting. 1,000–1,400 billable hours per year is realistic for most solo contractors. Use conservative numbers here.

Why Contractors Underprice

The most common mistake: using 40 hours/week × 52 weeks = 2,080 hours as your divisor. If you're only billing 1,200 hours but dividing by 2,080, your calculated rate is 42% too low. You'll work a full year and not make what you planned.

Similarly, forgetting overhead — which for a solo contractor can run $20,000–40,000/year — means you'll hit your "income goal" but actually net much less after paying business expenses.

This Is Your Floor, Not Your Ceiling

This calculator tells you the minimum rate to charge to hit your income goals and cover overhead. It doesn't include a profit cushion for business growth, equipment replacement, or slow months. Add at least 15–25% above your calculated minimum rate to build a financially sustainable contracting business.