Day Rate ↔ Salary Converter
A day rate looks big because it has to cover things a salary never sees. This converter shows what a contract rate is genuinely worth as a salary — and what day rate you’d need to match a salaried offer.
Pre-tax comparison. Tax treatment of contractors vs employees differs — see the Contract vs Full-Time calculator for a full US comparison.
The maths behind the conversion
Day rate → salary: gross billing = day rate × billable days. From that we subtract your annual business costs, then discount by the benefits percentage — the share of an employee package that isn’t cash salary. What remains is the salary that would leave you equally well off before tax.
Salary → day rate: the same logic reversed. We gross the salary up by the benefits percentage, add your business costs, and divide by billable days. This is the minimum rate at which a contract offer matches your salaried position — before you price in any premium for risk.
Worked example
A £600/day contract at 220 billable days grosses £132,000. Subtract £5,000 of running costs, then 15% for self-funded benefits, and the salary-equivalent value is about £108,000 — a strong package, but a fifth less than the naive £600 × 260 = £156,000 arithmetic suggests. Run your own offer through the tool; the honest number is the one to negotiate from.
Contractors: don’t forget the risk premium
Everything above compares like for like. But contracting carries risks employment doesn’t — no notice period, no redundancy pay, gaps you can’t predict. Seasoned contractors typically want the day-rate conversion to come out 15–30% above the salary they’d accept, precisely to be paid for that risk. If the numbers come out equal, the salary job is usually the better deal.
Frequently asked questions
Why isn’t a £500 day rate just £500 × 260 days as a salary?
Because contractors don’t bill 260 days a year. After holidays, sick days, bank holidays, training and — crucially — gaps between contracts, most full-time contractors bill 200–225 days. And the comparison must also subtract costs an employer would otherwise carry: pension contributions, insurance, equipment, and accountancy. That’s why £500/day is nowhere near a £130,000 salary in real terms.
How many billable days per year should I assume?
A common planning number is 220 days: 260 weekdays minus ~25 days holiday, ~8 public holidays, and a handful of sick or admin days. If your market has frequent bench time between contracts, 200 or fewer is more honest. Adjust the input to see the sensitivity — it is large.
What does “benefits value” mean in the salary comparison?
Employees receive more than salary: employer pension contributions (often 3–10% of pay), health or life insurance, paid leave, equipment, and job security. When converting a day rate to a salary equivalent, you subtract the cost of replacing those benefits yourself. The calculator’s default of 15% is a reasonable middle estimate — raise it if you value security and a strong pension match highly.
Should I use this before accepting a contract offer?
Yes — that’s exactly what it’s for. Run the offered day rate through with honest billable-day assumptions, then compare the salary-equivalent figure against the permanent offers or your current salary. Many “impressive” day rates turn out to be sideways moves once bench time and benefits are counted.
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This tool provides general estimates for planning purposes only and is not financial advice. Figures depend on the assumptions you enter.Full disclaimer.