Contractor Day Rate vs. Fixed Term Salary Calculator
Contractor / Freelance
Avg 46-48 weeks (accounting for holidays/sick leave)
Costs you pay yourself as a contractor
Fixed Term / Permanent
Monetary value of perks not in base salary
Used to calculate equivalent day rate
Financial Comparison (Gross)
Contractor Estimated Annual Gross:0.00
Contractor Net of Business Costs:0.00
Employee Total Package Value:0.00
Analysis:
Difference (Contractor – Employee):0.00
Equivalent Day Rate to Match Salary:0.00
Should You Switch? Day Rate vs. Fixed Term Salary
Deciding between a fixed-term contract (pro-rata salary) and a daily rate contract is a common dilemma for IT professionals, consultants, and interim managers. While a daily rate often looks significantly higher on paper, the lack of paid benefits requires careful calculation to determine the true financial value.
How This Calculator Works
This tool compares the total gross income generation of a daily rate contract against a salaried position. It takes into account:
Billable Time: Contractors only get paid when they work. If you take 4 weeks of holiday and 1 week of sick leave, you only bill for 47 weeks. Employees are paid for 52 weeks regardless of leave.
Business Costs: Contractors often incur costs for insurance (PI/PL), accountancy fees, and equipment that employees do not pay.
Total Package Value: Salaried roles often include pensions, healthcare, and bonuses that must be monetized to make a fair comparison.
The "Contractor Premium"
Generally, a contractor daily rate should be 20% to 40% higher than the equivalent salary breakdown to account for:
Job Security Risk: Contracts can often be terminated with short notice (e.g., 1 week).
Lack of Benefits: No sick pay, no holiday pay, no employer pension contributions.
Admin Overhead: Time spent invoicing, filing taxes, and finding new roles.
Using the Results
Look closely at the Equivalent Day Rate. This figure represents the daily amount you must charge to exactly match the total compensation package of the permanent role, assuming the same number of working weeks. If your offered day rate is lower than this number, you are effectively taking a pay cut to become a contractor.
function calculateContractVsFixed() {
// 1. Get Inputs
var dayRate = parseFloat(document.getElementById('dayRate').value);
var daysPerWeek = parseFloat(document.getElementById('daysPerWeek').value);
var weeksPerYear = parseFloat(document.getElementById('weeksPerYear').value);
var annualBusinessCosts = parseFloat(document.getElementById('annualBusinessCosts').value);
var annualSalary = parseFloat(document.getElementById('annualSalary').value);
var annualBenefits = parseFloat(document.getElementById('annualBenefits').value);
// Validate Inputs (Default to 0 if empty or NaN)
if (isNaN(dayRate)) dayRate = 0;
if (isNaN(daysPerWeek)) daysPerWeek = 5;
if (isNaN(weeksPerYear)) weeksPerYear = 46;
if (isNaN(annualBusinessCosts)) annualBusinessCosts = 0;
if (isNaN(annualSalary)) annualSalary = 0;
if (isNaN(annualBenefits)) annualBenefits = 0;
// 2. Calculate Contractor Side
// Total days billed per year
var totalBillableDays = daysPerWeek * weeksPerYear;
// Gross revenue
var contractorGross = dayRate * totalBillableDays;
// Net of business costs (Pre-tax)
var contractorNet = contractorGross – annualBusinessCosts;
// 3. Calculate Employee Side
var employeeTotal = annualSalary + annualBenefits;
// 4. Calculate Comparisons
var difference = contractorNet – employeeTotal;
// Breakeven Rate: What day rate is needed to match the employee total?
// Formula: (Employee Total + Business Costs) / Billable Days
var breakEvenRate = 0;
if (totalBillableDays > 0) {
breakEvenRate = (employeeTotal + annualBusinessCosts) / totalBillableDays;
}
// 5. Update UI
document.getElementById('contractorTotal').innerText = formatCurrency(contractorGross);
document.getElementById('contractorNet').innerText = formatCurrency(contractorNet);
document.getElementById('employeeTotal').innerText = formatCurrency(employeeTotal);
// Color code the difference
var diffEl = document.getElementById('diffValue');
diffEl.innerText = formatCurrency(difference);
if (difference > 0) {
diffEl.style.color = "green";
diffEl.innerText = "+" + diffEl.innerText;
} else if (difference employeeTotal) {
verdictEl.innerHTML = "Contracting pays " + formatCurrency(Math.abs(difference)) + " more annually.";
} else if (contractorNet < employeeTotal) {
verdictEl.innerHTML = "Fixed Term pays " + formatCurrency(Math.abs(difference)) + " more annually.";
} else {
verdictEl.innerHTML = "Financially, both options are identical.";
}
// Show Results
document.getElementById('results-area').style.display = 'block';
}
function formatCurrency(num) {
return num.toLocaleString('en-US', { style: 'decimal', minimumFractionDigits: 2, maximumFractionDigits: 2 });
}