$40/hour × 2,080 hours (a full-time employee year) is $83,200. But freelancers do not bill 2,080 hours. At a realistic 1,250 billable hours, $40/hour is $50,000 in revenue; after ~15% business costs and US self-employment tax, it compares to an employee salary of roughly $31,598 with benefits.
| Billable hours / yr | Revenue | After 15% costs | SE tax (US) | ≈ Employee salary equivalent |
|---|---|---|---|---|
| 1,000 h | $40,000 | $34,000 | $4,804 | $25,278 |
| 1,250 h | $50,000 | $42,500 | $6,005 | $31,598 |
| 1,500 h | $60,000 | $51,000 | $7,206 | $37,918 |
| 1,800 h | $72,000 | $61,200 | $8,647 | $45,501 |
Per period at 1,250 billable hours
- Per month: $4,167 revenue
- Per week (48 working weeks): $1,042
- Day rate (8 hours): $320
Assumptions
Business costs 15% of revenue; self-employment tax 15.3% on 92.35% of profit (2026 Social Security wage base $184,500); the employee equivalent divides profit (less the employer-equivalent half of SE tax) by 1.25 to account for benefits an employer would provide — health cover, retirement match, paid leave. Income tax is similar in both cases and not included. Change any assumption in the hourly rate calculator or the take-home pay calculator.