How much to charge as a contractor

The most common pricing mistake a new contractor makes is dividing their old salary by the hours they used to work and calling that the rate. It feels equivalent; it's a pay cut. A salary was never just the number on the employment agreement: it came bundled with paid leave, public holidays, sick days, an employer's KiwiSaver contribution, and covered ACC. A contractor's rate has to buy all of that back. This guide works through the conversion.

What your salary quietly included

Start with what disappears the day you hand back the laptop:

• Paid time off.The minimums are 4 weeks of annual leave, 12 public holidays, and 10 days of sick leave. Together that's up to 42 paid weekdays a year, more than 8 working weeks, that your salary covered and your rate now has to.
• Employer KiwiSaver.Your employer was adding at least 3.5% of your pay on top of it (the compulsory minimum, rising to 4% from April 2028). On a $100,000 salary that's $3,500 a year that stops arriving unless your rate carries it.
• ACC.As an employee, your earners' levy came out through PAYE and your employer paid the workplace cover. As a contractor you pay the lot, roughly 2% of earnings for low-risk desk work, more for riskier classifications.
• The quiet extras.Health insurance, phone, professional development budget, equipment. Add up what yours were actually worth; for some packages it's thousands.

You won't bill every weekday

The second half of the conversion is the days themselves. A year has about 260 weekdays, but a contractor can't bill them all:

• Time off still happens; it's just unpaid now (4 weeks if you keep the same rhythm).
• Public holidays still close your clients' offices (12 days).
• Sick days still happen (budget the same 5 to 10 you'd have used).
• Admin, invoicing, finding the next contract, and gaps between contracts eat billable time. Even steady contractors lose days to this; new contractors lose more.

A realistic planning number for a full-time contractor is 200 to 220 billable days a year. Optimists plan on 240 and spend December wondering where the margin went.

A worked example

Take a $100,000 salary with minimum entitlements, converting to full-time contracting:

• The package to recover: $100,000 salary + $3,500 employer KiwiSaver + roughly $2,000 of ACC you now pay yourself. Call it $105,500, before valuing any insurance or other extras.
• The days that pay for it: 260 weekdays, minus 20 leave, 12 public holidays, 5 sick, and about 13 for admin and gaps: roughly 210 billable days.
• The rate: $105,500 over 210 days is about $500 a day, or roughly $63 an hour. The naive salary-only division ($100,000 over 260 days) gives $385 a day; the honest rate is about 30% higher, and every dollar of that gap comes out of you.

These are illustrative round numbers, not a quote. The shape is the point: a fair contracting rate for a $100,000 job sits well above $50 an hour before the contractor is earning a single dollar more than they did as an employee.

Then sanity-check against the market

The conversion gives you your floor: the rate below which contracting pays worse than staying employed. The market sets the ceiling. Rates for your skill, your region, and your industry are discoverable through recruiters, rate cards, and other contractors; if the market clears meaningfully above your floor, charge the market rate, not your floor. The floor is for knowing when to walk away, not for pricing.

How Coffer helps

Coffer picks up where the rate decision ends: once you're invoicing, it does the tax arithmetic on every payment so you can see what your rate actually leaves you after GST, income tax, and ACC. The free take-home pay calculator gives you that picture before you commit to a number.