Day rate to salary converter
A day rate looks bigger than a salary because it has to cover the holiday, pension and cover that a permanent job provides as standard. This shows the salary your rate is really worth.
How the conversion works
The tool starts from your annual contract revenue, which is the day rate times the number of days you actually bill. It then finds the permanent salary whose full cost to an employer matches that revenue. Full cost means the salary itself, plus employer National Insurance at 15% on pay above the £5,000 secondary threshold, plus an employer pension contribution. That is the fair comparison, because the same pot of money an employer would spend on a permanent hire is what a client hands a contractor.
The billable-days figure is where most rough conversions go wrong. There are around 260 weekdays in a year, but a permanent employee is paid for roughly 28 days of holiday and bank holidays on top of working days, while a contractor earns nothing on those days. Assuming 220 to 230 billable days builds that gap in, so the salary you see is not overstated.
Worked example
A £400 day rate over 220 billable days is £88,000 a year. Matched against an employer package with a 3% pension, that is worth about £75,212 as a permanent salary. On take-home, the permanent salary leaves roughly £4,515 a month. Drawing the whole £88,000 as PAYE salary would leave about £5,133 a month before any holiday or pension is set aside, which is why the raw revenue figure flatters the day rate.
Common questions
Why not just multiply my day rate by the number of working days?
Because a permanent salary is paid through holidays, bank holidays and sick days, while a contractor only earns on days actually billed. There are about 260 weekday slots in a year, but 25 to 30 of those are holiday and public holidays. Using 220 to 230 billable days gives an honest comparison instead of an inflated one.
What does the converter account for that a raw multiplication misses?
Three things a permanent role includes and a contract does not: paid holiday, an employer pension contribution, and sick pay. It matches your annual contract revenue to the total cost an employer carries for a permanent hire, which is salary plus employer National Insurance plus employer pension, so like is compared with like.
Is a £400 day rate better than the equivalent salary?
A £400 day rate over 220 days is about £88,000 of revenue, which matches a permanent package of roughly £75,212. The day rate can still win on take-home, but only if you stay well utilised and price in your own holiday, pension and the risk of gaps between contracts.
How many billable days should I assume?
Most contractors bill 220 to 230 days a year once holiday, bank holidays, occasional sick days and time between contracts are removed. If you expect long gaps or take more leave, drop the figure. Utilisation is the single biggest lever on whether contracting pays.
Does this include IR35 or company costs?
No. This is a headline comparison of gross value. Inside IR35 or through an umbrella you also lose employer NI and the Apprenticeship Levy from the rate, which the umbrella take-home tool shows. Outside IR35 through a company you gain some of that back but take on accountancy and administration costs.