Swiss Freelancer vs. Employee Compensation Calculator

This script calculates the hourly rate a freelancer should charge to maintain the same living standard as a comparably compensated employee in Switzerland. The analysis accounts for differences in:

Social security contributions (AHV/IV/EO, BVG, ALV)
Insurance costs
Non-billable time
Fixed operational expenses
Risk compensation for inconsistent work
Tax implications (VAT)

Key Assumptions:

Base annual salary: CHF 110,000
Working days: 227 days per year (after vacation)
Freelancer occupancy rate: 80% (accounting for gaps between contracts)
Three productivity scenarios (low/mid/high) with different non-billable time estimates
Freelancer works primarily from home (low coworking expense)

Exact Computation

# Define base scenario
FullTimeSalary <- 110000  # Annual salary
WeeklyHours <- 42

# Define constants
WorkingDaysPerYear <- 252 - 25  # Work days minus vacation (https://www.arbeitstage.ch/EN/arbeitstage_2024.html)
OccupancyRate <- 0.75           # Expected billable rate for freelancer

# Social security rates (https://www.bsv.admin.ch/bsv/en/home/social-insurance/ahv/contributions.html)
AHV_IV_EO_Rate_Employee <- 0.1050  # 10.5% for employees
AHV_IV_EO_Rate_SelfEmployed <- 0.095  # 9.5% for self-employed
ALV_Rate <- 0.0225              # 2.25% for employees
BVG_Rate_Employee <- 0.09       # 9% for employees
BVG_Rate_SelfEmployed <- 0.13   # 13% for self-employed

# Insurance rates
AccidentInsurance_Employee <- 130.80  # Annual cost (10.90 * 12)
AccidentInsurance_SelfEmployed <- 130.80  # Annual cost
SicknessInsurance_Rate <- 0.015    # 1.5% of salary
LiabilityInsurance_SelfEmployed <- 700  # Professional liability

# Fixed costs
CoworkingSpace <- 200 * 12  # Working primarily from home
HardwareAmortization <- 2000  # Computing server, notebook, monitor, printer amortization
SoftwareSubscriptions <- 1200  # 100 CHF per month
InternetPhone <- 1800  # Internet + phone + mobile internet
MiscOfficeExpenses <- 200 * 12  # Office supplies, utilities
AccountingServices <- 1000  # Basic accounting/tax filing assistance

# Total fixed costs
FixedCosts <- CoworkingSpace + HardwareAmortization + SoftwareSubscriptions + 
              InternetPhone + MiscOfficeExpenses + AccountingServices

# Additional freelancer costs - c(low, mid, high)
MarketingCosts <- c(2000, 3000, 4000)  # Website, networking, client acquisition
EducationCosts <- c(1500, 2000, 3000)  # Courses, conferences, books

# VAT rate in Switzerland
VAT_Rate <- 0.081  # 8.1%

# Calculate daily and annual billable hours - c(low, mid, high) productivity scenarios
HoursPerDay <- WeeklyHours/5 - c(1.9, 2, 2.2)  # Non-billable time: breaks, admin, learning
BillableHoursPerYear <- WorkingDaysPerYear * HoursPerDay

# EMPLOYEE CALCULATIONS
# Employee's contribution to social security
EmployeeSocialSecurity <- (AHV_IV_EO_Rate_Employee / 2) * FullTimeSalary + 
                         (ALV_Rate / 2) * FullTimeSalary + 
                         (BVG_Rate_Employee / 2) * FullTimeSalary

# Employer's contribution (social security + insurances)
EmployerContribution <- (AHV_IV_EO_Rate_Employee / 2) * FullTimeSalary + 
                       (ALV_Rate / 2) * FullTimeSalary + 
                       (BVG_Rate_Employee / 2) * FullTimeSalary + 
                       AccidentInsurance_Employee + 
                       FullTimeSalary * SicknessInsurance_Rate

# Total employer cost
TotalEmployerCost <- FullTimeSalary + EmployerContribution

# Real hourly cost to employer
RealHourlyEmployeeCost <- TotalEmployerCost / BillableHoursPerYear

# FREELANCER CALCULATIONS
# Additional social security costs for self-employed compared to employee
FreelancerSocialSecurityDifference <- AHV_IV_EO_Rate_SelfEmployed * FullTimeSalary + 
                           BVG_Rate_SelfEmployed * FullTimeSalary - EmployeeSocialSecurity

# Insurance costs
FreelancerInsurance <- AccidentInsurance_SelfEmployed + 
                      FullTimeSalary * SicknessInsurance_Rate + 
                      LiabilityInsurance_SelfEmployed

# Risk compensation (need higher base income to account for downtime)
RiskCompensation <- (FullTimeSalary / OccupancyRate) - FullTimeSalary

# Total needed income before VAT
TotalNeededIncome <- FullTimeSalary + FixedCosts + FreelancerSocialSecurityDifference + 
                    FreelancerInsurance + RiskCompensation + 
                    MarketingCosts + EducationCosts

# Freelancer billable hours (affected by occupancy rate)
FreelancerBillableHours <- BillableHoursPerYear * OccupancyRate

# Required hourly rate without and with VAT
FreelancerHourlyRate <- TotalNeededIncome / FreelancerBillableHours
FreelancerHourlyRateWithVAT <- FreelancerHourlyRate * (1 + VAT_Rate)

Results presentation

# Create detailed results data.frame
results_detailed <- data.frame(
  BillableHoursPerDay = round(HoursPerDay, 1),
  BillableHoursPerYear = round(BillableHoursPerYear),
  TotalEmployerCost = round(TotalEmployerCost),
  RealHourlyEmployeeCost = round(RealHourlyEmployeeCost),
  FixedCosts = FixedCosts,
  MarketingCosts = MarketingCosts,
  EducationCosts = EducationCosts,
  FreelancerSocialSecurityDifference = round(FreelancerSocialSecurityDifference),
  FreelancerInsurance = round(FreelancerInsurance),
  RiskCompensation = round(RiskCompensation),
  TotalNeededIncome = round(TotalNeededIncome),
  FreelancerBillableHours = round(FreelancerBillableHours),
  FreelancerHourlyRate = round(FreelancerHourlyRate),
  FreelancerHourlyRateWithVAT = round(FreelancerHourlyRateWithVAT)
  )
rownames(results_detailed) <- c("Low productivity", "Medium productivity", "High productivity")

# Create summary data.frame with key insights
results_summary <- data.frame(
  Scenario = c("Low productivity", "Medium productivity", "High productivity"),
  BillableHours_Employee = round(BillableHoursPerYear),
  BillableHours_Freelancer = round(FreelancerBillableHours),
  EmployerHourlyCost_CHF = round(RealHourlyEmployeeCost),
  FreelancerRate_CHF = round(FreelancerHourlyRate),
  FreelancerRateWithVAT_CHF = round(FreelancerHourlyRateWithVAT)
  )
rownames(results_summary) <- c("Low", "Medium", "High")

cat("\n## RESULTS\n")


## RESULTS

Results presentation

print(t(as.matrix(results_detailed)))

                                   Low productivity Medium productivity
BillableHoursPerDay                             6.5                 6.4
BillableHoursPerYear                         1476.0              1453.0
TotalEmployerCost                          123743.0            123743.0
RealHourlyEmployeeCost                         84.0                85.0
FixedCosts                                  10800.0             10800.0
MarketingCosts                               2000.0              3000.0
EducationCosts                               1500.0              2000.0
FreelancerSocialSecurityDifference          12788.0             12788.0
FreelancerInsurance                          2481.0              2481.0
RiskCompensation                            36667.0             36667.0
TotalNeededIncome                          176235.0            177735.0
FreelancerBillableHours                      1107.0              1090.0
FreelancerHourlyRate                          159.0               163.0
FreelancerHourlyRateWithVAT                   172.0               176.0
                                   High productivity
BillableHoursPerDay                              6.2
BillableHoursPerYear                          1407.0
TotalEmployerCost                           123743.0
RealHourlyEmployeeCost                          88.0
FixedCosts                                   10800.0
MarketingCosts                                4000.0
EducationCosts                                3000.0
FreelancerSocialSecurityDifference           12788.0
FreelancerInsurance                           2481.0
RiskCompensation                             36667.0
TotalNeededIncome                           179735.0
FreelancerBillableHours                       1056.0
FreelancerHourlyRate                           170.0
FreelancerHourlyRateWithVAT                    184.0

Results presentation

cat("\n## Fixed Costs Breakdown\n")


## Fixed Costs Breakdown

Results presentation

fixed_costs <- data.frame(
  Category = c("Coworking Space", "Hardware Amortization", "Software Subscriptions", 
               "Internet & Phone", "Office Expenses", "Accounting Services", "Total"),
  Annual_Cost_CHF = c(CoworkingSpace, HardwareAmortization, SoftwareSubscriptions,
                      InternetPhone, MiscOfficeExpenses, AccountingServices, FixedCosts)
)
print(fixed_costs)

                Category Annual_Cost_CHF
1        Coworking Space            2400
2  Hardware Amortization            2000
3 Software Subscriptions            1200
4       Internet & Phone            1800
5        Office Expenses            2400
6    Accounting Services            1000
7                  Total           10800