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Contractor vs Employee Calculator
Enter the day rate and billable days on one side, and the employee salary, tax rate and benefits on the other. The calculator returns both net annual figures and the difference.
The comparison excludes unpaid leave, sick days, pension matching, notice pay and currency risk; contractor revenue also depends on actually filling the billable days.
Why the day rate is not a salary
A day rate is revenue before business costs, unpaid time and self-employment contributions. Contractors typically pay for their own insurance, accounting, software, equipment, training and pension, and they do not bill every working day. Holidays, sickness, quiet periods and admin reduce the billable total well below a full year.
The employee side includes paid leave, employer contributions, benefits and notice or severance rights that may have cash value. Adding the benefits line is an attempt to price those advantages. If the employment contract includes a pension contribution or health cover, include the employer cost as part of the value.
What the difference does not capture
The difference is an annual cash comparison, not a full risk comparison. Contract income can stop at short notice, payment terms can be long and late, and the contractor carries compliance duties. Employment offers stability, statutory protections and often access to credit that self-employment does not.
Run the comparison under more than one billable-days assumption. A day rate that wins at 220 days may lose at 180, which is a realistic year with holidays, illness and gaps between contracts. If the decision only works in the optimistic case, it is not a robust decision.
Frequently asked questions
How many billable days should I assume?
Fewer than the working days in the year. Subtract holidays, public holidays, sickness, admin and expected gaps between contracts. Many contractors plan in the low hundreds, not the full calendar.
Should pension contributions be included?
Yes, on both sides. An employer contribution is part of the employee package, and a contractor who saves for retirement pays it from revenue. Omitting either flatters that side.
Is a contractor role always higher risk?
It carries different risks: income continuity, payment delays and compliance. The annual difference may compensate, but it should be judged against those risks rather than the day rate alone.