Freelance vs Full-Time: True Income Comparison
Freelance vs full-time employment: comparing true income after taxes, benefits, paid leave, retirement, and job security.
Verdict
A useful rule of thumb: a freelancer needs to earn roughly 1.5× a full-time salary to break even after accounting for SE tax, health insurance, unpaid vacation, and no employer retirement match. So if a full-time role pays $80,000, you should target $120,000+ as a freelancer before claiming you're 'earning more.' Use our take-home pay calculator to run your exact numbers — the difference between gross revenue and net take-home surprises most new freelancers.
Invoicing, Tax & Tools
Bill clients, track time, and file taxes — software built for the self-employed
Frequently Asked Questions
How much more does a freelancer need to earn than an employee?
The standard rule of thumb: freelancers need to earn 1.5× a comparable salary to break even after accounting for self-employment tax (15.3%), health insurance, unpaid vacation, and no employer retirement match. So if a full-time role pays $80,000, you should target $120,000+ gross freelance revenue to come out even financially.
What benefits do I lose when I go freelance?
The main benefits lost: employer-paid health insurance (worth $5,000-$15,000/year), employer match on retirement contributions (typically 3-6% of salary), paid vacation and sick days, disability insurance, life insurance, professional development budget, and the employer's 7.65% share of Social Security and Medicare taxes. These typically total $15,000-$30,000/year in hidden compensation.
Is it worth going freelance financially?
It depends on your income potential in your field. Many skilled freelancers earn 2-3× their previous salary, more than compensating for lost benefits. Others earn less, especially in the first 1-2 years building a client base. The financial case for freelancing is strongest in high-value skills (software, design, strategy, finance) where hourly rates can significantly exceed the cost-of-benefits gap.
How do I calculate my freelance equivalent salary?
Take your freelance gross annual revenue, subtract business expenses, subtract self-employment tax, subtract health insurance and retirement contributions you fund yourself, subtract the value of unpaid vacation time. The remainder is roughly your 'equivalent salary'. The Take-Home Pay Calculator runs these numbers automatically.