That reduces his rate too much without factoring in risk, time on the bench, and vacation. Most consultants/contractors I know use 1900 hours a year to help with the risk. Additionally, 30% isn't enough. You can't just factor in your current salary, you have to factor your total compensation. Your current vacation allocation has a value, insurance, retirement, pension, 401k, equipment (will you be expected to provide your own PC?), life insurance, AD&D, severance (remember if you are hourly, once they cut you, no package) etc. If your salary is $100K, your total comp is probably more like $125k. I also think 30% is arbitrary and not enough. The better option is to search for a market evaluation of what companies in your industry are paying consultants/contractors with similar skillets and experience and not look at current compensation at all. Don't forget, if you'll be technically self employed, you'll have to cover payroll taxes too.