Enter your annual salary and the number of work days per year into the calculator to determine the equivalent contract rate per hour. This calculator can help you compare permanent employment salary to contract work rates.
Equivalent Contract Rate Formula
The following formula is used to calculate the equivalent contract rate per hour.
ECR = (AS / WD) / 8
Variables:
- ECR is the equivalent contract rate ($/hour)
- AS is the annual salary ($)
- WD is the number of work days per year
To calculate the equivalent contract rate, divide the annual salary by the number of work days per year to get the daily rate, then divide that number by 8 (assuming an 8-hour workday) to find the hourly rate.
What is an Equivalent Contract Rate?
The equivalent contract rate is the hourly rate that a contractor would need to charge to equate to the salary of a permanent employee. This rate takes into account the number of work days and the typical work hours per day. It is useful for individuals considering a transition from permanent to contract work or for companies looking to compare the costs of hiring permanent versus contract employees.
How to Calculate Equivalent Contract Rate?
The following steps outline how to calculate the Equivalent Contract Rate.
- First, determine the annual salary (AS) in dollars.
- Next, determine the number of work days per year (WD).
- Next, gather the formula from above = ECR = (AS / WD) / 8.
- Finally, calculate the Equivalent Contract Rate (ECR) in dollars per hour.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Annual Salary (AS) = $60,000
Work Days per Year (WD) = 260