Independent work guide

How much should I charge as a contractor?

What rate supports my income once unpaid work and costs are counted?

Start with the income you need to keep, add recurring business costs, apply a clearly labeled tax assumption, and divide required revenue by hours you can invoice. Use a lower billable-hours case to test the rate.

Open the full model Try it on this page

1. Choose the income the work must support

Use a monthly amount you need available for personal spending and saving. Keep this separate from business costs. If your workload changes seasonally, use a conservative average rather than the busiest month.

2. Estimate billable hours honestly

Remove proposal writing, invoicing, learning, planned time off, and gaps between projects from working time. In the example, 110 billable hours and 35 non-billable hours produce about 75.9% utilization. A lower utilization requires a higher rate for the same income goal.

3. Calculate a planning floor

With $5,000 desired monthly income, $700 costs, a 25% modeled tax rate, and 110 billable hours, the template calculates $7,600 required revenue and about $69.09 per billable hour. Set billable hours to 90 to see how sensitive that floor is to utilization.

4. Check the commercial reality

The calculated floor is not a market quote. Compare it with client budgets, the value and scope of the work, payment timing, and risk. Confirm tax treatment and deductions under your own jurisdiction before using the estimate for a real contract.

Live model

Change an assumption.
Read the consequence.

Enter your assumptions to see an estimate. Use source view to inspect or change the calculation. Your inputs stay in this browser.

Worked exampleCalculate in your browser

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 is the rate higher than salary divided by hours?

Only invoiceable hours generate revenue, while costs, tax, and necessary unpaid work still need funding.

Does this calculate my actual tax?

No. The percentage is a planning input. Actual obligations and deductible expenses depend on location and business structure.

Should time off be another input?

Express planned time off through a realistic average of billable hours across the year, then test a quieter month separately.

Keep the reasoning

Turn this example into
your living model.

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

Open the editable model