Piggy1099 vs W-2: the contract rate that matches a salary
Comparing a contract gig with a salaried offer? Find the hourly rate that actually matches it once benefits and employer taxes are priced in.
1099 vs W-2 — what actually differs
| W-2 employee | 1099 contractor | |
|---|---|---|
| Social Security + Medicare | You pay ~7.65%; employer pays the other 6.2% SS (up to $184,500) + 1.45% Medicare | You pay both halves via self-employment tax — see SE tax vs employee FICA |
| Health insurance | Employer premium (example: $9,000/yr) sits on top of salary | You buy it; it is inside the rate, not extra cash from the client |
| Retirement match | Employer 401(k) match (example: 4% of salary) | You fund it from billings |
| Paid time off | Already inside the salary — this calculator does not add it again as dollars | Unpaid gaps; the example uses 46 billable weeks, not 52 |
| Hours in the divisor | Salary ÷ 2,080 is a wage-only benchmark; it does not replace employer benefits or allow for non-billable time | Your realistic billable hours (example: 30 × 46 = 1,380) |
| QBI (Section 199A) | Generally none on wages | Eligible business owners may qualify for a QBI deduction; eligibility and limits depend on the business and taxable income |
| Risk / unemployment | Possible UI if laid off | Plan for client gaps, operating costs and an emergency reserve separately; no universal risk premium applies |
Worked example on this page ($95,000 W-2)
| Line | Amount |
|---|---|
| Headline salary | $95,000 |
| Employer health premium | $9,000 |
| 4% 401(k) match | $3,800 |
| Employer FICA (7.65% of $95,000) | $7,268 |
| True annual value | $115,068 (1.21× salary) |
| Billable hours (30/week × 46 weeks) | 1,380 |
| Equivalent 1099 hourly rate | $83 / hour |
In this example only, $83 ÷ ($95,000 / 2,080) ≈ 1.82× the $45.67/hr wage-only benchmark. Your multiplier changes with benefits and billable hours; this is not a typical-market range or a guaranteed take-home match.
The W-2 offer
Your contract schedule
After-tax comparison
What a W-2 offer is really worth
How this estimate is calculated
How this is calculated
A salary offer is worth more than the salary. The employer also pays 6.2% Social Security (up to the $184,500 wage base) and 1.45% Medicare, plus health premiums and any retirement match. Those costs are added to the salary, then divided by your realistic billable hours. Paid time off is deliberately excluded from the money total because it is already inside the salary — counting it again is the most common error in rate comparisons.
Worked example: a $95,000 salary with $9,000 of health cover and a 4% match is really worth $115,068 — 1.21× the headline figure. Billing 30 hours a week for 46 weeks, matching it takes $83 an hour.
Compare the offer with billable hours you can sustain
Count hours you can invoice, not every hour you work. Sales, bookkeeping, holidays and gaps between clients reduce billable time. Health premiums and retirement match are benefits you may need to fund from contract revenue.
The break-even rate is a planning estimate, not a guaranteed take-home equivalent. Your actual deductions, credits, insurance costs and state rules can differ. Compare the after-tax estimate separately from the pre-tax benefits replacement figure.
Have a take-home target instead of a salary offer? Use the freelance rate calculator. To reserve taxes from business profit, use the tax set-aside calculator.
Planning guide checked 24 October 2026. IRS estimated-tax guidance. Published by PiggyMath; no CPA or enrolled-agent review is claimed.
Why a $95,000 salary is not $45.67 an hour
Dividing a salary by 2,080 hours gives a wage-only benchmark. It does not account for employer benefits or time a contractor cannot bill. A W-2 employer pays several things on top of your salary that a client never will: the employer half of payroll taxes (7.65% of wages for Social Security and Medicare), health insurance premiums, a retirement match, and paid time off — days you are paid for without working. As a 1099 contractor you buy all of that yourself, out of your rate.
What the contract-rate comparison includes
The table compares this calculator with the arithmetic shortcut salary divided by 2,080 hours. That shortcut describes a wage-only hourly benchmark; it does not price the benefits and billable-time assumptions listed below.
| Choice | This page (published) | Salary ÷ 2,080 shortcut |
|---|---|---|
| Divisor | Your billable hours (default 1,380) | 2,080 hours → $45.67/hr on $95,000 |
| Employer FICA | Added (7.65% of salary, SS capped at $184,500) | Not included in salary ÷ 2,080 |
| Health + match | Added as cash ($9,000 + 4% in the example) | Not included in salary ÷ 2,080 |
| PTO | Left out of the dollar total (already inside salary); checked against billable weeks | No adjustment for time off in a fixed 2,080-hour divisor |
| After-tax | SE-aware planning estimate (1099 net vs W-2 net) | Pre-tax wage-only figure |
Pricing from take-home instead of from a job offer? Use the freelance rate calculator. SE slice of the 1099 stack: self-employment tax calculator.
Which page should you use?
Choose the calculator that matches the decision you need to make.
| You have… | Use this | Do not use this page for… |
|---|---|---|
| A W-2 salary offer to match with a contract rate | This calculator (benefits + employer FICA ÷ billable hours) | Guessing a 1.5× multiplier without pricing health and match |
| A take-home target, no job offer | Freelance rate calculator | Salary ÷ 2,080 |
| 1099 profit and need Social Security + Medicare | SE tax calculator (worked W-2+1099 mix included) | Treating SE tax as “the whole tax bill” |
| A date, not a rate | Quarterly deadlines — next: January 15, 2027 (Q4) | Waiting for the 1099 in the mail |
| A first 1099 and no system yet | First 1099 taxes | Skipping estimates because you still have a W-2 |
This calculator adds those employer-side costs to the salary to get the true annual value of the offer, then divides by your realistic billable hours — not 2,080, because contractors lose time to sales, admin and gaps between projects. The result is a pre-tax benefits-replacement rate under the inputs entered, not a guarantee of equal take-home pay. Review the separate after-tax estimate and actual costs before comparing offers.
Paid time off is the one benefit that isn't extra money — it's already inside the salary. Counting it twice is the most common error in rate comparisons, so this calculator leaves it out of the dollar total and instead checks it against the billable weeks you entered: taking six weeks off as a contractor already funds more time off than a fifteen-day PTO policy.
Plan for client gaps and business risk separately. Estimate operating expenses, unpaid time and a cash reserve using your own circumstances. This calculator does not establish a market rate, guarantee a premium or determine eligibility for unemployment benefits.
Frequently asked questions
Is 1099 or W-2 better?
What multiplier should I use as a shortcut?
Do I get any tax advantages as a 1099 contractor?
Sources
QBI eligibility and limits: IRS qualified business income deduction. Classification depends on the actual working relationship: IRS contractor or employee guidance.
- IRS — Independent Contractor or Employee?
- IRS — Self-Employment Tax
- SSA — 2026 Social Security wage base
See the sources, assumptions and calculation-checking method for this tool. How we check our math →