UK contractor rate vs permanent salary.
Equivalent permanent salary
—
Annual gross from day rate
—
Your breakdown
Updates live as you type| Step | Amount |
|---|
Reading a day rate as a salary
A contract recruiter quotes £500 a day and a permanent role quotes £55,000, and the two numbers feel impossible to compare. This tool translates a day rate into the permanent salary it is genuinely equivalent to, so you can judge an offer on like-for-like terms. It multiplies your day rate by the number of days you actually expect to bill in a year, then strips out the value of the employee benefits a contractor does not receive. What is left is the salary that would leave you in roughly the same position.
It is aimed squarely at someone weighing a jump from permanent to contract, or fielding a contract offer and trying to decide whether the headline rate is as good as it sounds. The honest answer is often that a day rate needs to be a lot higher than instinct suggests, because the gaps between contracts and the missing benefits eat into it.
What this tool deliberately ignores
One thing to be clear about up front: this calculator does not run an Income Tax or National Insurance comparison. It is not telling you take-home pay. It is comparing gross to gross, a contractor's annual gross billings against an equivalent gross permanent salary, because the tax treatment of contracting depends heavily on your IR35 status and whether you trade through a limited company or an umbrella. Those belong in a dedicated take-home tool. Here we isolate the two things that distort the comparison most: how many days you really work, and the benefits you lose.
The working-days box matters more than people expect. A permanent employee is paid for 52 weeks including holiday and bank holidays. A contractor billing 220 days a year has already priced in five or six weeks of unpaid time off. Drop that to 200 days for a contract with gaps between assignments and the equivalent salary falls noticeably.
£500 a day, 220 days, the benefits gap
Take the defaults: £500 a day, 220 billable days, and £12,000 of employer benefits a permanent role would provide that the contract does not.
So £500 a day on these assumptions is broadly equivalent to a £98,000 permanent salary, not the £110,000 the raw billings suggest. The £12,000 stands in for the employer pension contribution, private healthcare, paid sick leave, and paid holiday a salaried role bundles in. Set those at what your target permanent package would actually offer rather than a round guess.
Setting a floor before you negotiate
Run the logic in reverse and the tool gives you a negotiating floor. If you currently earn £55,000 with a decent benefits package, you should not accept a contract that translates to less than that once benefits and realistic billable days are accounted for. As a quick sanity check, dividing a target salary by around 220 gives a bare-minimum day rate, and a sensible contractor then adds 25 to 50 percent on top for the lost benefits, the gaps between assignments, and the admin of running your own affairs. On that basis a £55,000 salary points to a day rate target somewhere around £300 to £375, not £250.
The common mistake is comparing gross billings straight against a salary and feeling rich. Build in the unpaid weeks and the missing pension and the picture is more sober, which is exactly the point of doing the sum before you sign.
Should I include employer National Insurance in the benefits figure?
If the contract is inside IR35 or runs through an umbrella company, employer National Insurance and the apprenticeship levy are typically deducted from your assignment rate before you are paid, which is a real cost a permanent employee never sees. This tool does not model that automatically, so for an inside-IR35 comparison it is reasonable to add an allowance for it into the benefits box, or better, use a dedicated umbrella take-home calculator that handles those deductions explicitly.
How many billable days is realistic?
Few contractors bill a full 253 working days. After holiday, bank holidays, the odd sick day, and the near-inevitable gaps between contracts, 220 is an optimistic but common planning figure and 200 is more cautious. New contractors in particular should model fewer days in year one while they build a client base, because an empty fortnight between assignments has a larger effect on the annual equivalent than most people expect.