A letter about how hiring, pay and promotion actually work — sent most Thursdays, read in about six minutes, written by one person who has sat on both sides of the table.
Issue 31 · Thursday, 20 August 2026
A reader who has spent eleven years on payroll wrote to ask what she should charge if she goes independent, and whether the “double your salary rate” rule of thumb holds. It does not, and the reason it does not is the most useful thing I can tell you about contract pricing.
The rule people repeat is: take your annual salary, divide by 2,000 hours, double it. On a $130,000 salary that gives $130 an hour. The doubling is meant to absorb self-employment tax, health insurance, unpaid holiday and the gaps between engagements. It absorbs those things and nothing else, which is why people who price this way spend their second year wondering where the money went.
What the doubling leaves out is utilisation. A salaried year is 2,000 paid hours. A contract year is not. Between engagements you are looking for work, and looking for work is unpaid. Inside an engagement, the hours you can actually bill are the hours you spend on the buyer's problem — not your invoicing, not your bookkeeping, not the two calls it took to scope the thing. Independents I have compared notes with land somewhere between 55% and 70% billable across a full year. The good ones, in their fourth or fifth year, with a referral pipeline, reach 75%. Nobody hits 100%, and your first year will be worse than your steady state.
So the arithmetic is: target income, divided by (2,000 × your honest utilisation), plus the overhead the doubling was supposed to cover. At 60% utilisation, 2,000 hours becomes 1,200. That alone moves $130 to $217 before you have paid for anything.
The number that matters is not what you charge per hour. It is what you charge per hour multiplied by the hours you can sell. People negotiate hard on the first and never measure the second.
Read the rest of issue 31 — why short contracts cost more than they look, and why the first rate you name is a ceiling.
Issues 1 to 24 went out before this archive existed and live only in the mailing list. I am slowly reformatting them; the ones worth keeping will turn up here.
Who writes this · Nine to Five Notes is written in Providence, Rhode Island. Reply to any issue and it reaches me directly.