COMPARISON · MONEY · WORK
A $120,000 salary with 30% benefits is really $156,000 of total pay — while $85/hr × 1,800 billable hours nets just $130,544 after the extra payroll tax, health insurance, and business expenses. Salary wins by $25,456 at the defaults, and your break-even freelance rate is $100.43/hr. Enter your own numbers below.
Your salary’s true value is salary plus benefits. Your freelance net is gross billings minus the employer’s half of payroll tax (which freelancers pay themselves), health insurance, and business expenses. The verdict names the winner and the gap — and the hourly rate that would make it a tie.
A $120,000 salary is not $120,000. With 30% benefits it is $156,000 of total compensation. And freelance gross is not take-home: subtract the employer’s half of payroll tax — 7.65% × 92.35% of net earnings, which freelancers pay themselves — plus health insurance and business expenses. At $85/hr × 1,800 hours: $153,000 − $10,456 − $7,000 − $5,000 = $130,544 net vs $156,000 true comp. Salary wins by $25,456, and the break-even freelance rate is $100.43/hr.
Setup: $120,000 salary, 30% benefits, $85/hr freelance rate, 1,800 billable hours/yr, $7,000/yr health insurance, $5,000/yr business expenses.
Step 1 — true salary comp. $120,000 × (1 + 0.30) = $156,000. This is the number the freelance side has to beat — not $120,000.
Step 2 — freelance gross. $85 × 1,800 = $153,000. Looks close to the salary — it isn’t, because three big subtractions are still coming.
Step 3 — the extra payroll tax. Employees pay half of Social Security + Medicare (7.65%); freelancers pay both halves on 92.35% of net earnings, so the extra vs employment is 7.65% × 92.35% × ($153,000 − $5,000) = 0.07064875 × $148,000 = $10,456. This is the tax almost every new freelancer forgets.
Step 4 — freelance net. $153,000 − $10,456 − $7,000 − $5,000 = $130,544.
Step 5 — the verdict. $156,000 − $130,544 = $25,456 for the salary. The $85 rate feels like a raise over $120,000 ÷ 2,080 ≈ $57.69/hr — but counted honestly, it is a pay cut.
Step 6 — the break-even rate. ($156,000 + $7,000 + $5,000) ÷ (1,800 × 0.92935) = $168,000 ÷ 1,672.83 = $100.43/hr. Charge less than that and the salary wins; charge more and freelance wins.
Branch — freelance wins ($120/hr): gross rises to $216,000, the extra payroll tax to $14,907, net to $189,093 — freelance wins by $33,093. Rate is the whole game.
Branch — the near-tie ($100/hr): gross $180,000, net $155,637, just $363 under the $156,000 true comp — inside the calculator’s $5,000 tie threshold, so it calls it effectively a tie. This is the knife’s edge: a few dollars an hour flips the winner.
| Output | Formula | What it means |
|---|---|---|
| True salary comp | salary × (1 + benefits%) | $156,000 at the defaults — the real number the freelance side must beat. |
| Freelance gross | rate × billable hours | $153,000 at the defaults — top-line billings, not take-home. |
| Extra payroll tax | 7.65% × 92.35% × (gross − expenses) | $10,456 at the defaults — the employer’s half of FICA the freelancer pays. |
| Freelance net | gross − extra tax − health − expenses | $130,544 at the defaults — the honest take-home to compare. |
| Gap | true comp − freelance net | +$25,456 at the defaults — positive means the salary wins. |
| Break-even rate | (true comp + health + expenses) ÷ (hours × 0.92935) | $100.43/hr at the defaults — the rate that makes it a tie. |
This is a pre-income-tax comparison: both sides pay federal and state income tax, so it is left out to keep the comparison apples-to-apples — but progressive brackets and state taxes can move the real gap. The benefits percentage is the single most argued input: the BLS national average is about 42¢ of benefits per $1 of wages, but the 30% default counts only the health plan, 401(k) match, and PTO you would actually lose — raise it if your package is richer. The model prices unpaid time at zero: freelancers spend real hours on sales, admin, and gaps between clients that no one bills for. It also ignores income volatility, the value of schedule control, retirement-match compounding, and job security — money is only one column of this decision.
Bright Side Kit. "Salary vs Freelance: True Pay Compared Calculator 2026." https://brightoolbox.com/salary-vs-freelance/ Accessed October 23, 2026.Data sourcesNo — that shortcut is dead wrong. $120,000 ÷ 2,000 = $60/hr ignores benefits, the extra payroll tax, health insurance, and expenses. The honest break-even here is $100.43/hr — a new freelancer charging the salary-equivalent $60/hr earns far less once everything is counted.
The employer’s half of Social Security and Medicare. Employees pay 7.65% and their employer matches it. Freelancers pay both halves — 15.3% on 92.35% of net earnings — so the extra cost of going solo is 7.65% × 92.35% ≈ 7.06% of (gross − expenses). At the defaults that is $10,456/yr.
42¢ per wage dollar is the national average across all benefits — including ones you can’t easily price or replace. The 30% default is deliberately conservative: it covers the health plan, the 401(k) match, and paid time off — the three things you actually lose. If your package is richer, raise it and watch the salary’s lead grow.
Fewer than you think. 1,800 ≈ 36 billable hrs/wk × 50 weeks, and that already assumes only 2 weeks off and 4 unpaid hours a week for sales and admin. New freelancers often bill far less in year one while building a client base — try 1,200 and see what happens to the verdict.
No — both sides pay income tax, so it cancels out of the comparison. The calculator compares pre-income-tax pay. In reality, progressive brackets, state taxes, and deductions (like the home-office deduction) can shift the real gap either way.
High rates, low overhead, cheap health coverage. At $120/hr the freelance side wins by $33,093. It also wins when you value schedule control and upside over the gap — or when the “salary” on offer comes with 60-hour weeks that destroy its hourly value.
Set the health cost to $0 and rerun. At the defaults the gap shrinks from $25,456 to $18,456 — still a salary win, but noticeably closer. This is one of the biggest single levers in the whole comparison.