Playbooks
Comparing Offers: Hourly, Salary, Contractor
Published September 23, 2026
Job offers arrive in three currencies that do not naturally compare: an hourly rate, an annual salary, and a contract rate that looks bigger than both. The hourly and contract numbers are flattered by everything they leave out — unpaid weeks, payroll taxes, benefits, bench time — while the salary hides its own trap in unpaid overtime.
This playbook converts all three onto one yearly baseline, then prices the lines candidates forget: paid time off, the benefits load, overtime eligibility, and the contractor's tax gap. Ten minutes of arithmetic turns three confusing offers into one comparable column, and the linked calculators repeat it for your real numbers.
The short answer
To compare offers, convert everything to a yearly figure and price the differences. Thirty dollars an hour without paid time off pays $60,000 over a 50-week working year, not the $62,400 the multiplication implies. Contract 1099 rates should run 20 to 30 percent above staff pay to cover self-employment tax, benefits and bench time.
Step one: put every offer on a yearly baseline
Every comparison starts with the same move: reduce each structure to the money that actually lands in a realistic year. The multipliers are simple, and so are the traps hiding in each one.
| Offer | Conversion | The trap |
|---|---|---|
| Salaried with PTO | Already annual — read as is | Real hours above 40 quietly cut the effective rate; see the overtime section |
| Hourly, unpaid time off | Rate × 2,000, not 2,080 | Slow seasons mean fewer hours at exactly the moment bills do not stop |
| 1099 contract | Rate × realistic billable weeks | Self-employment tax, no benefits, and bench weeks funded by nobody |
The PTO line is real money
Paid time off is salary for weeks you do not work, and it prices cleanly: ten PTO days is two of fifty-two weeks, worth about $2,300 on a $60,000 job — call it 4%. An hourly offer with no PTO therefore has to beat the salaried number by at least that margin just to tie. Accrual mechanics matter too: most employers bank paid leave as it is earned per hour worked, often with caps and use-it-or-lose-it expiry, so an accrued balance you never book is a benefit that quietly evaporates.
Pricing benefits, roughly but honestly
Added up, the benefits load runs 20-30% of base salary. That is the arithmetic behind the standard advice that a 1099 rate should exceed the staff number by a quarter or more before a single bench week is funded: the contractor's breakeven is the target salary loaded with taxes, benefits replacements and realistic utilization.
- Employer health premium share: commonly worth $6,000-15,000 a year depending on plan and family coverage.
- Retirement match: up to 3-6% of salary where offered — free money the 1099 rate must replicate out of pocket.
- Employer payroll taxes: 7.65% of wages that a contractor pays themselves through self-employment tax.
- Paid leave: the 4% PTO line from the section above.
Overtime eligibility flips the math
Non-exempt hourly workers earn 1.5× past forty hours; exempt salaried workers earn nothing extra at any hour. Price each offer at the hours you will actually work. A $58,000 exempt salary across fifty-hour weeks is roughly $22 an hour effective. A $28 non-exempt hourly rate at the same fifty hours pays 40 regular plus 10 time-and-a-half: $1,540 a week, about $80,000 a year. Same person, same hours — the structure, not the headline number, decides.
The five-line comparison to actually make
| Line | What to ask of each offer |
|---|---|
| Yearly baseline | Rate × realistic paid weeks: 2,080 salaried, 2,000 hourly, billable weeks for 1099 |
| Benefits value | Health + match + employer payroll tax ≈ 20-30% of base |
| Overtime reality | Expected weekly hours × eligibility |
| Time off | Paid weeks × weekly rate |
| Risk | Bench weeks, termination notice, invoice lag — the 1099 column owns all three |
Tools for this lesson
Reduce a salary offer to its real hourly figure at your expected weekly hours.
Convert an hourly offer to a yearly number with unpaid weeks counted.
See how fast paid leave accrues and what your balance is worth.
Price non-exempt offers at realistic weekly hours including time and a half.
Leaning contractor? Price your own overhead first with the break-even worked example.
Frequently asked questions
- How much more should a 1099 contract pay than a salaried job?
- 20-30% more for the same work, before negotiating. Roughly 7.65% replaces the employer's payroll tax, 10-15% replaces benefits, and the rest funds unpaid bench weeks. Below a 20% premium you are usually worse off the first time a slow month arrives.
- Is ten days of PTO worth much?
- About 4% of salary: ten days is two of fifty-two weeks, worth roughly $2,300 on a $60,000 job. An hourly offer without paid leave needs to beat a salaried number by at least that much to be equivalent.
- How do I compare better benefits against a higher salary?
- Price the benefits at what you would pay yourself: the premium difference times twelve, the full match percentage, and the payroll tax you would owe as a contractor. Then compare yearly baselines. The calculators handle each line separately so nothing hides.
- Does overtime apply to salaried employees?
- Only if non-exempt, which is rare for professional roles. Exempt salaried workers get no overtime at any hour, so judge a salary at realistic weekly hours, not forty. At fifty hours a week, a comparable hourly offer often out-earns the salary outright.
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