A freelance hour and a salaried hour look like the same unit, but they aren't priced the same way. This tool converts between an hourly rate and an annual salary using the hours per week and weeks per year you actually work, then goes a step further: it backs out self-employment tax and the benefits a W-2 job bundles in for free, so you see the "employee-equivalent salary" a rate is really worth — not just the sticker number rate × hours produces.
How it works
Everything starts with one figure: your annual hours, which is hours per week times weeks per year. From there the two conversions are mirror images — multiply your rate by annual hours to get a raw annual figure, or divide a salary by the same annual hours to recover the rate. Monthly pay is that raw annual divided by twelve, and weekly pay is your hourly rate times your hours per week.
The raw annual number, though, is only ever a unit conversion — it says nothing about what a freelance dollar is actually worth. So this tool also computes an employee-equivalent salary: it treats the raw annual figure as self-employment revenue and subtracts two costs a salaried job absorbs invisibly. First, self-employment tax — the IRS charges the self-employed both halves of Social Security and Medicare, about 15.3% on 92.35% of the total, versus the single half withheld from a paycheck. Second, a benefits-and-PTO gap you set as a percent of revenue, standing in for health insurance, a retirement match, and paid time off an employer would otherwise fund. What's left over is the number that actually compares to a salary.
Worked example
Take a rate of $50 an hour, worked 40 hours a week across 48 weeks of the year, with the benefits-and-PTO overhead left at its default 20%.
- Annual hours: 40 × 48 = 1,920 hours
- Raw annual: $50 × 1,920 = $96,000
- Self-employment tax: ≈ $13,564.37
- Benefits & PTO gap (20% of $96,000): $19,200
- Employee-equivalent salary: $96,000 − $13,564.37 − $19,200 = $63,235.63
That employee-equivalent salary is about 34% lower than the $96,000 sticker number — next to a W-2 offer, the raw rate is worth far less than it sounds. The gap gets more dramatic at higher rates: $75 an hour across a full 2,000-hour year (40 × 50) prices out to a $150,000 raw annual — a number that sounds like a strong salary — but the employee-equivalent salary comes out closer to $98,806 once tax and benefits are backed out. $75/hour freelance is not a $150k job; it's closer to a $99k one.
How to interpret your result
The raw annual, monthly, and weekly figures are gross — before income tax, self-employment tax, or withholding — so treat them as a unit conversion, not a comparison of total compensation. The employee-equivalent salary is the number built for comparison: it's what's left after covering the taxes and benefits an employer would otherwise absorb, so it's the closer read on what a freelance rate buys you against a salaried offer.
Why is a freelance dollar worth less than a salaried one? An employee's paycheck already has the employer's half of payroll tax paid on their behalf, plus health insurance, retirement contributions, and paid vacation folded into the job. A freelancer has to fund every one of those out of the same hourly rate that also has to cover income tax and business risk. That's not a rounding error — it's a structural 30–45% gap between what a rate sounds like and what it's worth, which is exactly why quoting "market salary ÷ hours" as a freelance rate always comes up short. Note the equivalent salary is a deliberately conservative, take-home-oriented figure: it nets out the full self-employment tax, so read it as a floor on what a rate is worth, not an exact gross-salary match. When you need the reverse calculation — building a target salary up into a proper freelance rate — use the salary to freelance rate calculator instead.
Methodology & sources
Raw figures: annual hours = hours per week × weeks per year; raw annual = hourly × annual hours or, in reverse, hourly = salary ÷ annual hours; monthly is annual ÷ 12 and weekly is hourly × hours per week. The employee-equivalent salary is raw annual − self-employment tax − (raw annual × overhead percent), floored at zero.
Self-employment tax follows IRS Schedule SE mechanics: 92.35% of the raw annual figure is the taxable base, taxed at 12.4% for Social Security (capped at the annual wage base) plus 2.9% for Medicare (uncapped) — the same formula behind this site's self-employment tax calculator, per the IRS's Self-Employment Tax (Social Security and Medicare Taxes) guidance. The benefits-and-PTO overhead is a user-set estimate rather than a fixed rate, since employer benefit loads vary; the U.S. Bureau of Labor Statistics' Employer Costs for Employee Compensation release is a reasonable benchmark for sizing it against real employer spending on benefits.