Why "just match the hourly rate" underpays you
The most common way a sole trader undercharges is also the simplest to fall into: taking a job's equivalent salary, dividing it by a standard working week, and quoting that number as an hourly rate. It looks reasonable, and it's short by a lot, because an employee's salary carries two things a contractor's invoice has to fund on its own.
The first is superannuation. An employer pays compulsory super on top of an employee's wage. It's not deducted from what the employee takes home, it's an additional cost the employer wears, as set out in the ATO's guidance on how much super to pay. A contractor invoicing for their time gets none of that from the client by default; whatever lands in their bank account from an invoice is the whole amount, and if they want to end up with real super at the end of the year, they have to set the equivalent aside themselves, out of the same figure they quoted.
The second is paid leave. Under the National Employment Standards, a full-time employee gets 4 weeks of paid annual leave a year, plus paid personal and carer's leave on top, entitlements the Fair Work Ombudsman sets out plainly. That employee is paid across 52 weeks even though they're only physically working around 48 of them, before public holidays are even counted. A contractor invoicing only for hours actually billed has no equivalent: every week not billed is a week with no income, so the "same" annual figure has to be earned across meaningfully fewer working weeks to land in the same place.
This calculator backs both of those out. It grosses the target salary up by the super rate an employer would otherwise be paying, then spreads that larger figure across a smaller number of billable weeks (weeks per year with the annual leave and personal leave equivalent already subtracted) to reach an hourly rate that replaces the take-home a payroll job would deliver.
This is a pay question, but not only a pay question
"Contractor" and "employee" aren't just two ways of charging for the same relationship. Whether someone genuinely operates as an independent contractor turns on things like who controls how the work is done, whether it can be delegated to someone else, and how payment is structured, not simply on what the invoice says. The ATO sets this out in its guidance on the difference between employees and independent contractors, and it matters for both sides: getting it wrong has tax and super consequences for the business paying the invoice, not only the person issuing it. This calculator assumes the arrangement genuinely is a contracting one and only addresses the rate, not whether the classification itself is correct, worth checking against the ATO's own test if there's any doubt.
What this number is a floor for, not the finish
The rate this tool produces closes the super and leave gap between a wage and an invoice. It isn't a full costing of what it takes to run as a sole trader, and treating it as one would be its own kind of underquoting. Left out entirely: workers' compensation and public liability insurance, which an employer would otherwise be carrying and a contractor has to buy themselves; the vehicle, tools and consumables that come out of a contractor's own pocket rather than an employer's; the hours spent quoting, invoicing and driving between jobs that never get billed to anyone, which on a busy week can be a genuinely large slice of total working time; and the simple fact that income as a contractor doesn't arrive in a smooth fortnightly amount the way a wage does, so a rate that looks fine averaged over a year can still leave a bad month or two along the way.
Adding those up for a given situation pushes the real number higher than what's shown here, sometimes considerably. This figure is best read as the minimum needed to match a wage on the super and leave alone. The costs above still have to be built on top of it before it becomes an actual quoted rate.
Super even while you're a contractor
Plenty of sole traders assume going out on their own means funding the whole of their own super, with no exceptions, out of whatever they invoice. That's not universally true. Under the extended definition of "employee" that applies for super guarantee purposes, a contractor paid mainly for their own labour, rather than materials, equipment or a finished product, can be entitled to super guarantee from whoever's paying them, even while genuinely operating as a contractor for tax and Fair Work purposes. The ATO's page on super for independent contractors sets out the test. This calculator doesn't check whether a given engagement meets it, only the business paying the contractor can work that out properly, but if most of an invoice to one client is your own labour rather than gear or materials, it's worth asking whether super should be landing on top of what you invoice rather than being backed out of it yourself.
Why getting the classification wrong is expensive
The ATO and Fair Work Ombudsman both look past the label on the invoice to the actual relationship. Fair Work's whole of relationship test weighs things like who controls how and when the work is done, whether it can be delegated to someone else, and who supplies the tools, and the Ombudsman is upfront that it can only give guidance, not a binding ruling either way. Getting it wrong isn't a paperwork slip. A business that treats a genuine employee as a contractor can end up owing back super, unpaid leave and other entitlements once the relationship is reassessed, on top of the original bill. Deliberately dressing up an employment relationship as contracting is its own separate problem, called sham contracting, and it's unlawful under the Fair Work Act regardless of whether the worker signed off on the arrangement. None of that is this calculator's job to check. What it does assume is that the classification itself is already settled, correctly, before the rate is worked out.
Insurance a contractor carries that an employee doesn't
An employer generally covers workers' compensation for its staff and carries its own public liability policy over the business. Once you're a sole trader, most of that shifts onto you. In Victoria, a sole trader with no employees isn't required to register for WorkCover themselves, according to WorkSafe Victoria's page on getting started with WorkCover insurance, which means cover for your own injury, if you can't work for a stretch, is something you have to arrange privately rather than something that just exists in the background. Add public liability cover, which most clients and head contractors will insist on before letting anyone on site, and, depending on the trade, professional indemnity for advice or design work that could cause a costly mistake down the line. None of that comes out of a wage. It's a bill a contractor pays before the year's first invoice goes out, and it belongs somewhere in the rate, even though, deliberately, this calculator doesn't model it (see the disclaimer below).
Unbilled hours: the work nobody's paying for
A wage covers every hour on the clock, including the boring bits. A contractor's invoice usually only covers the hours actually billed to a job, and a working week has a lot of hours that never make it onto one. Quoting a new job. Driving between sites. Following up an invoice that's gone quiet. Doing the books on a Sunday night because there wasn't time for it during the week. None of that is idle time, it's real work, and none of it earns a cent unless it's priced into the rate somewhere.
Reckon it doesn't add up to much? Track a fortnight of it honestly, every quote written, every drive between jobs, every phone call chasing a late payer, and most contractors are surprised by the total. It's not a sign of running the business badly. It's just what running a business, rather than doing a job, actually involves.
Slow months and why the average has to carry them
A wage lands on the same day every fortnight whether the phone rang or not. A contractor's income doesn't work that way. Some months are booked out weeks in advance, and some months, for no reason you can point to, just aren't. A rate that looks perfectly fine averaged across a full year can still leave a genuinely bad month or two along the way, and the averaging only works if there's something set aside to get through the gap.
Most contractors who've been at it a while land on some version of the same habit: treat a portion of every invoice as not yours yet, move it straight into a separate account, and leave it there until a slow month actually needs it. It's not complicated. It's just the discipline of not spending this month's good run before next month has had a chance to be a bad one.
Day rate or hourly rate: pricing the same work two ways
For anything on-site that takes most of a day anyway, a lot of contractors quote a day rate rather than an hourly one. It's roughly the hourly figure multiplied out across a full working day's billable hours, once travel and setup are accounted for, but a day rate isn't just an hourly rate wearing a different label. It's a promise about what "a day" actually means, and that has to be agreed before the job starts, not argued about afterwards.
Clients often prefer a day rate because it's easier to budget against, no watching the clock, no surprise at how many hours got billed. Hourly suits short call-outs and jobs with genuinely unpredictable scope better, where a fixed day figure would either rip the client off on a quick job or leave the contractor short on a long one. Whichever gets quoted, put in writing what counts as a full day (a set start and finish, whether travel time is included, what happens if the job wraps early), because a client who thought "a day" meant whatever hours it took, and a contractor who meant a fixed block of time, are the two most common versions of the same argument.
Where this fits into pricing the rest of the business
Getting this number right matters most when deciding whether to hire an employee or bring in a subcontractor for the same work, and when setting rates as a sole trader rather than guessing at what "sounds fair." If pricing and quoting is where these numbers actually live day to day, a proper business systems setup takes the guesswork out of applying them consistently across every job, and our pricing page shows exactly how Delta prices its own work, GST treatment included. None of this counts for much if the site or listing that brought the customer in doesn't back it up. Our SEO work is about the right people finding you in the first place. And if the starting point was the other direction (working out what an employee actually costs before comparing it to a subcontractor's rate), the hourly rate calculator is the plain salary-to-hourly version of this same maths, and the GST calculator handles the GST-inclusive figure once a rate's settled on.