Last updated: July 14, 2026
Here's the trap: an employee earning $90,000 divides by 2,080 working hours, gets $43/hr, quotes $45/hr as a freelancer, and feels generous doing it. Eighteen months later they're working more than they did at their job and taking home less. Nothing went wrong with their skills — the arithmetic was broken from day one.
A salary is not an hourly rate with extra steps. It's an hourly rate plus employer-paid taxes, benefits, paid time off, equipment, and — crucially — a guarantee that every working hour is a paid hour. When you freelance, you buy all of that back yourself. This guide explains the conversion TransparentRate uses (the 1.75× multiplier behind the calculator's Floor Rate), works it through three salary levels, and answers the objections you'll hear from clients with an employer mindset.
Disclaimer: TransparentRate provides estimates only — not financial or tax advice. The percentages below are model assumptions, documented in our methodology; your actual costs will vary.
What a Salary Actually Includes
The 1.75× freelance conversion isn't a greed premium — it's an itemized replacement cost for everything an employer silently provides. Roughly:
Self-Employment Tax (~15%)
In the US, employers pay half of Social Security and Medicare taxes on your behalf. Freelancers pay both halves — roughly 15.3% of net earnings in self-employment tax — before regular income tax even enters the picture. An employee never sees this cost; a freelancer writes the check.
Benefits and Paid Time Off (~25%)
Health insurance premiums, retirement matching, and paid vacation, holidays, and sick days are all real compensation that vanishes when you go independent. An employee taking three weeks of vacation plus holidays still gets paid for them; a freelancer's vacation is unpaid by definition. Buying comparable health coverage and funding your own retirement typically consumes a quarter of an employee-equivalent income.
Unbillable Downtime (~25%)
This is the component new freelancers underestimate most. Marketing, proposals, invoicing, bookkeeping, email, professional development, and gaps between projects are all working hours that no one pays for. A freelancer with a healthy pipeline still typically bills only 60–75% of working time. If a quarter or more of your hours are structurally unbillable, the billable hours must carry them.
Tools and Overhead (~10%)
The laptop, software subscriptions, cloud services, insurance, accounting help, coworking or home-office costs, and payment processing fees your employer used to absorb. Individually small; collectively a real slice of revenue.
Stack those together and the replacement cost of a salary lands around 1.75× the equivalent employee wage — which is why many independent pricing guides converge on the folk rule of "charge double your salary hourly." Doubling isn't greed. It's roughly break-even plus a thin margin.
The Conversion, Worked at Three Salary Levels
The site model: hourly wage = salary ÷ 2,080, Floor Rate = hourly wage × 1.75, Target Rate = Floor × 1.30. The floor is your break-even benchmark; the target is what you aim for with a portfolio and positioning behind you.
$60,000 Salary
- Employee-equivalent wage: $60,000 ÷ 2,080 ≈ $28.85/hr
- Floor Rate: $28.85 × 1.75 ≈ $50/hr
- Target Rate: $50.48 × 1.30 ≈ $66/hr
Quoting $30/hr because "that's what my job paid" means funding your own payroll taxes, insurance, and downtime out of a wage that never included them.
$90,000 Salary
- Employee-equivalent wage: $90,000 ÷ 2,080 ≈ $43.27/hr
- Floor Rate: $43.27 × 1.75 ≈ $76/hr
- Target Rate: $75.72 × 1.30 ≈ $98/hr
Sanity check the floor: at a realistic 1,300 billable hours per year (a 65% utilization of full-time hours), $76/hr grosses about $98,800 — from which you still pay both halves of payroll tax, health premiums, retirement, and overhead. You end up roughly where the $90k job left you. That's what "floor" means.
$130,000 Salary
- Employee-equivalent wage: $130,000 ÷ 2,080 = $62.50/hr
- Floor Rate: $62.50 × 1.75 ≈ $109/hr
- Target Rate: $109.38 × 1.30 ≈ $142/hr
This is consistent with the site's occupation benchmarks: the BLS median for software developers is $65.38/hr (about $136k salary-equivalent), producing a floor of $114/hr and a target of $149/hr — see the software developer rate page. Developers quoting $70/hr because it "sounds like a lot more than my salary" are pricing below their own break-even.
Answering the Employer-Mindset Objections
Clients who've only ever hired employees will push back on these numbers. Every objection has a factual answer:
"That's way more than we pay our staff for the same work."
Per hour of output, it usually isn't. A loaded employee — salary plus employer taxes, benefits, PTO, equipment, office space, and management overhead — typically costs far more than the badge salary, and employers pay for every hour including the slow ones. A freelancer's rate covers all of that and is only paid for productive hours, with zero severance risk, no benefits administration, and the ability to stop any time. Compare loaded cost per delivered outcome and the freelancer is routinely the cheaper option.
"You're charging $76/hr — that's a $158k salary!"
Only if every one of 2,080 hours were billable, which never happens, and if the rate carried no costs, which it always does. Reverse the math honestly: $76/hr × ~1,300 realistic billable hours = ~$99k gross revenue, minus self-employment tax, health insurance, retirement, tools, and insurance — landing near the original $90k salary in take-home terms — with no paid vacation, no employer retirement match, and no guarantee next month looks the same. The scary annualization is an illusion created by multiplying a loaded rate by hours nobody bills.
"Freelancers should be cheaper — we're not paying for your overhead."
Every price of everything includes the seller's overhead; freelancing isn't magically exempt. The plumber's rate includes the van, the agency's rate includes the office, and the freelancer's rate includes the laptop, the software subscriptions, and the unpaid hours spent finding the next client. What the client actually saves is commitment: no long-term payroll obligation, no benefits, no idle time on their books. Flexibility is what they're buying at the freelance rate, and flexibility has always cost more per unit than commitment — the same reason a night in a hotel costs more than a night of rent, and a taxi mile costs more than a mile in a leased car.
"But someone on a marketplace will do it for half."
Someone will always quote less. The relevant question is the loaded cost of missed deadlines, rework, and re-hiring. Clients who have bought purely on price usually only do it once. Compete on reliability and results — and if a client's budget truly can't reach your floor, reduce the scope rather than the rate.
Where the BLS Benchmark Fits In
Everything above converts your old salary — but your old salary may itself have been below market. The TransparentRate calculator sidesteps that by starting from the BLS median wage for your occupation, then applying the same 1.75× conversion plus experience and client-market adjustments. Run both numbers: if the occupation benchmark's floor is higher than your salary-converted floor, trust the benchmark — the data is telling you your employer was underpaying you, and there's no reason to import that discount into your freelance business. From there, our guide on freelance pricing for beginners covers setting your first rate, and hourly vs project vs retainer shows how to package it.
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