Day rate calculator
Convert a contractor day rate to annual income, or find the day rate needed to match your salary, with a contractor-premium uplift.
Estimated annual contractor income
- Day rate
- £500
- Working days per year
- 220
- Annual gross (contractor)
- £110,000
- Monthly
- £9,167
- Weekly (5 days)
- £2,500
- Equivalent employee salary
- £81,481
- Based on 220 working days/year. Adjust the field for your actual billable days.
- The equivalent employee salary is ~35% lower to account for employer NI, pension auto-enrolment, and paid holiday that employees receive but contractors must self-fund.
- This is gross income before tax. Use the Self-employment tax calculator to estimate take-home.
Day rate to annual salary — why the conversion is not simple division
Converting a contractor day rate to an annual salary equivalent — or the other way around — is not as simple as multiplying by working days. Employees receive a package of benefits that contractors must self-fund: employer National Insurance contributions, auto-enrolment pension, paid annual leave, sick pay, and income during gaps between contracts. Ignoring these leads to contractors underpricing their services or employees overestimating what contracting would earn them.
This calculator models both directions. Day rate to annual shows your gross contractor income and the equivalent employee salary after applying a premium uplift (~35% in the UK, ~25% in the US) that accounts for the costs you bear that an employer would otherwise cover. Annual salary to day rateworks in reverse, giving you the floor rate you need to charge to match your current package.
The billable days field is the most important variable. A UK contractor working 220 days earns very differently from one working 180 days — the latter must charge a proportionally higher day rate to achieve the same annual income. A realistic 220-day assumption accounts for bank holidays, your own holiday, and between-contract gaps.
Frequently asked questions
How do I convert a day rate to an annual salary equivalent?
Multiply your day rate by your billable days per year. A typical UK contractor works around 220 billable days (52 weeks × 5 days, minus bank holidays, holiday, and downtime). A £500/day rate over 220 days gives £110,000 gross — but to compare fairly with an employee salary, you need to account for the extras employees receive that you must self-fund.
Why is the equivalent employee salary lower than my day rate annualised?
As a contractor you must self-fund employer National Insurance contributions, pension, paid holiday, sick pay, and periods between contracts. The equivalent employee salary is therefore around 25–35% lower than the raw annualised day rate. A £500/day contractor earning £110,000 might be equivalent to an employee on £80,000–£85,000 when you factor in those costs.
How many billable days should I use?
A safe starting point for UK contractors is 220 days: 260 working days in the year, minus 8 bank holidays and 20–25 days of holiday and between-contract gaps. US contractors often use 240–250 days as there are fewer public holidays. Reduce further if you expect significant downtime.
What day rate do I need to match my current salary?
Use the 'Annual salary → Day rate' mode. The calculator adds a premium to cover the costs you must self-fund as a contractor: employer NI equivalent, pension, holiday pay, and non-billable time. A £60,000 employee salary roughly equates to a £350–£400/day contractor rate depending on your expenses and billable day assumption.
Should I set up a limited company or go umbrella?
This calculator covers the financial comparison. The right structure depends on your IR35 status, the volume of work, and your accountant's advice. Umbrella companies are simpler but take a margin; limited companies offer more flexibility but more administration. Use the IR35 comparison tool to see the tax impact of each route.
Does this include VAT?
No. Day rates are quoted exclusive of VAT. If you are VAT-registered and your client is not (or cannot reclaim VAT), your effective rate is higher. Most B2B contractor work involves VAT-registered clients who reclaim it, so VAT is typically neutral for both parties.
Source: Standard contractor working-day convention (220–260 days/year)