Day rate to salary calculator

How the conversion works

Start with a year of billing. A day rate multiplied by the days actually billed gives annual contract income: £500 a day over 220 days is £110,000. Take off what the contractor pays to run their company, say £2,500 a year for an accountant, insurance and equipment, and £107,500 is left.

A permanent employee is paid for holidays and gets benefits a contractor has to fund themselves. The calculator values those benefits as a percentage of salary and divides them out. At 12 per cent, £107,500 divided by 1.12 is a salary equivalent of about £95,980. The reverse direction runs the same sum the other way: salary plus benefits plus running costs, divided by billed days.

Why 220 billed days, and when to change it

A year has about 260 weekdays. Take off 8 bank holidays in England and Wales and around 25 days of holiday, and roughly 227 remain. The default of 220 leaves a week for sickness, training and the gap between contracts. A contractor who has had long gaps should use a lower number; one on a long run of extensions might use a higher one.

This is the assumption that moves the answer most. At 200 billed days the same £500 rate is worth about £87,000 as a salary; at 230 it is about £100,000. When a candidate is weighing a perm offer against contract work, it is the number to talk about.

What the comparison does not capture

Tax is left out on purpose. How a limited company contractor is taxed depends on how they pay themselves, whether the work is inside or outside IR35 and their own circumstances, so any single net figure would be wrong for most people. The calculator compares gross earning power; the tax conversation belongs with an accountant.

It also ignores what is hard to price: the security of employment, redundancy rights, and the freedom and risk of running your own company. The number is where the conversation starts, not where it ends.

Common questions

What day rate equals a £60,000 salary?

With the default assumptions, 220 billed days, benefits worth 12 per cent and £2,500 of running costs, £60,000 works out at about £317 a day. With fewer billed days or richer benefits it rises. Change the inputs in the calculator to match the offer you are comparing.

Is there a simple rule for converting day rate to salary?

People use shortcuts such as multiplying the day rate by a fixed number of days, but they hide the assumptions that matter most: billed days and benefits. It is better to state those assumptions and do the sum, which is what this calculator does.

How many days a year does a contractor actually bill?

Fewer than most people assume. Of roughly 260 weekdays, bank holidays and a normal holiday allowance take out about 33, and sickness, training and the gap between one contract and the next take out more. Somewhere between 200 and 230 billed days is a realistic range for most limited company contractors, which is why the calculator lets you set it.

Does this apply inside IR35?

The gross comparison still holds, but inside IR35 the contractor is taxed much like an employee on the income, without most employment benefits, so the day rate needed to match a perm salary is higher than this shows. Treat the result as an outside-IR35 comparison.