Independent work

Contractor hourly rate calculator

A sustainable contractor rate must pay for business costs, tax, and non-billable work from the smaller pool of hours a client can actually be charged for.

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Assumptions

template: contracting_hourly_rate

desired_net_monthly = 5000 in usd
business_costs_monthly = 700 in usd
tax_rate = 25%
billable_hours_monthly = 110
nonbillable_hours_monthly = 35

Inputs

What the model needs

Desired net income: The monthly amount you want available after modeled tax.
Business costs: Tools, insurance, accounting, equipment, and recurring operating expenses.
Tax rate: A planning assumption, not a tax calculation.
Billable hours: Hours you can realistically invoice in a month.
Non-billable hours: Sales, admin, learning, planning, and other necessary work.

Method

Formulas stay visible

required_revenue = (desired_net + business_costs) / (1 - tax_rate)modeled_tax = required_revenue × tax_raterequired_hourly_rate = required_revenue / billable_hoursutilization = billable_hours / (billable_hours + nonbillable_hours)

The inputs and source use the same model. Open it in Continuum for a document you can keep and revisit.

Worked example

Pricing for 110 billable hours

$5,000 desired net
$700 business costs
25% modeled tax
110 billable hours
35 non-billable hours

ResultRequired revenue is $7,600, implying a minimum rate near $69.09 per billable hour.

The utilization is about 75.9%. If only 90 hours become billable, the required rate rises materially without any change in the income goal.

Stress-test it

Reduce billable hours before increasing the income goal.
Separate taxes from business costs so both assumptions remain visible.
Model unpaid holiday and sick time through a conservative monthly billable average.

Use it when

Setting a freelance or consulting quote floor
Comparing contracting with salaried employment
Checking whether a retainer covers non-billable work

Know the boundary

This conservative model applies the tax assumption to revenue before subtracting costs. Actual deductions and tax obligations depend on jurisdiction and business structure.
The minimum sustainable rate is not automatically the market rate.
Irregular expenses should be converted into a monthly allowance when material.

Questions

Why not divide desired income by 160 hours?

Contractors rarely invoice every working hour. Sales, admin, gaps between projects, and time off reduce the billable pool.

Should VAT or sales tax be included?

Taxes collected on behalf of authorities are usually modeled separately from revenue. Use rules appropriate to your jurisdiction and verify them professionally.

Does the result include profit?

Only if the desired income or cost assumptions include it. Add an explicit margin rather than assuming the minimum rate provides one.

Keep the reasoning

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The full template opens as a local Continuum document. Edit every assumption, explore the result breakdown, and keep the source.

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Contractor hourly rate calculator

What the model needs

Formulas stay visible

Stress-test it

Use it when

Know the boundary

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