Day rate calculator UK: turning a rate into a year you can plan on, and back

A contractor day rate calculator: converting a rate into a figure you can plan on

1. Count billable days, not working days. A calendar year holds roughly 260 weekdays before bank holidays. Take off the holiday you intend to take, an allowance for illness, and a realistic gap between contracts, and the honest number is usually well under that. Everything downstream depends on this one input.
2. Convert in the direction you need. Rate times billable days gives annual billings; annual billings divided by billable days gives the rate a salary implies. Going from a permanent salary to a rate, add what the employer was providing on top: pension, holiday, sick pay and employer National Insurance.
3. Say whether the rate is inside or outside. An inside assignment rate funds employer National Insurance and any umbrella margin before your gross exists; an outside rate is paid gross to your company. The same daily figure therefore means two different annual net results, which is what the calculators on this section work through.
4. Convert to an hourly rate carefully. Divide the day rate by the hours you are actually contracted to work, not by eight if the day is seven and a half or by seven and a half if the client expects nine. Where overtime beyond the contracted day is unpaid, the effective hourly rate is lower than the arithmetic suggests.
5. Sanity check against the market. A rate is only fair against the rates being paid for the same work with the same status in the same region. An outside rate and an inside rate for the same role are not comparable, and comparing them is how contractors talk themselves into accepting less.

Common questions

How do I convert a day rate to an annual salary?

Multiply by the days you expect to bill, not by 260. Then, if you are comparing with a permanent job, subtract what you now fund yourself: holiday, sick pay, pension and the employer National Insurance an employer would have paid.

How many billable days should I assume?

Whatever your own record supports. Contractors with long rolling engagements can plan on more; those between short projects should plan on considerably fewer. It is the assumption that most often turns a comfortable projection into a difficult year.

How to work out your hourly rate from a day rate?

Divide the day rate by the contracted hours in a day. If the working day in practice runs longer than the contract says and the extra is unpaid, work out the effective rate on the real hours too: that is the number you are actually being paid.

Should my rate differ inside and outside IR35?

In practice it usually does, because an inside engagement carries employer National Insurance and, through an umbrella, a margin, and because the employment rights an employee would have do not come with it. Whether a client will pay the difference is a negotiation.

Take-home pay by jurisdiction

• Take-home pay in United Kingdom