Contract to Hire Rate Conversion Calculator
When converting from contract to permanent employment, the salary offered must replace what you lose: employer FICA, benefits, paid time off, and self-employed deductions. The conversion is rarely just 'hourly × 2080.'
Why Hourly × 2080 Overstates
The naive formula multiplies hourly by 2080 (52 × 40). Reality: contractors bill 1600-1800 hours/year. Add self-employed tax (7.65% extra FICA), own benefits cost (18% of comp), and time spent on sales/admin. Net contractor comp is 30-40% lower than the formula suggests.
PTO Adjustment Matters
W-2 includes paid time off. 15 days PTO at $200K salary = $11,500 of paid leisure. Contractors fund their own. When comparing, add PTO value to the W-2 side or subtract unpaid days from the contractor side.
When To Take The Conversion
Take W-2 when: company offers strong stability, equity (RSUs), career path, paid leave for life events. Stay contract when: hourly rate gives 30%+ premium over W-2 equivalent, you want flexibility, you value tax deductions (home office, vehicle, retirement plan limits).
Source: IRS Publication 533 Self-Employment Tax, BLS Employer Costs Quarterly Survey 2025. Last updated: May 2026.