Weighing a £/day contract against a permanent PAYE role? A day rate isn't just salary ÷ 260 — a contractor self-funds holiday, pension and sick pay and carries the risk. This two-way converter turns a day rate into a like-for-like permanent salary (and back), with take-home for each on 2026/27 rates.
6 min read·Updated Thu Aug 20 2026 00:00:00 GMT+0000 (Coordinated Universal Time)·🇬🇧 UK
Calculator
Direction
Day rate → salary
Salary → day rate
Inputs
£
£
%
Student Loan
Scottish taxpayer
Conversion
Your result
Enter a day rate and press Convert.
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Key takeaways
Key takeaways · 2026/27
A day rate is not salary ÷ 260 — a contractor has no paid holiday, no employer pension, no sick pay and carries the gaps between contracts.
Set billable days realistically (220–230, not 260) to reflect holiday, illness and time between assignments.
The permanent-salary equivalent nets off the employer pension a permanent role would add on top, so it's a like-for-like comparison.
Convert the other way to find the day rate that merely replaces a permanent package — then add a risk premium on top.
How it works
Day rate vs permanent salary — a real comparison
The mistake most people make is dividing a salary by 260 working days (or multiplying a day rate by 260). That ignores everything a permanent job bundles in for free: paid holiday, an employer pension contribution, sick pay, employer National Insurance and the security of notice. A contractor pays for all of that out of the day rate — so a like-for-like comparison has to strip those back out.
How the conversion works
Contract income is your day rate times the days you can actually bill — not 260, but the 220–230 that's left after holiday, illness and gaps. The permanent-salary equivalent then nets off the employer pension a permanent role would add on top, giving a figure you can genuinely compare against a job offer. Run it the other way and the tool tells you the day rate that would replace a given salary — your break-even floor before any risk premium.
Set billable days honestly. The single biggest lever is how many days you'll invoice. Assume 260 and you'll under-price; assume 220–230 and the equivalent rate reflects the real gaps in contract work.
Inside IR35? Mind the employer costs
If your contract is Inside IR35 and paid through an umbrella company, the headline assignment rate is not what you're taxed on — the umbrella deducts Employer NIC, the Apprenticeship Levy and its margin first. The umbrella (Inside IR35) calculator models that waterfall so you can see the real net.
A comparison tool for planning only — it does not constitute tax or financial advice. Outside-IR35 limited-company contractors should also factor dividends, corporation tax and expenses. Verify your position with an accountant.
Frequently Asked Questions
How do I convert a day rate to a salary?
Multiply the day rate by the number of days you can actually bill in a year — typically 220 to 230, not the full 260 working days, because you lose time to holiday, illness and gaps between contracts. That gives your contract income. To make it comparable to a permanent salary, net off the employer pension a permanent role would pay on top (the default here is 5%). So £400/day × 230 days = £92,000 contract income, roughly a £87,600 permanent-salary equivalent at 5% employer pension.
How many billable days are there in a year?
There are about 260 weekdays in a year, but a contractor can't invoice all of them. Take off statutory-equivalent holiday (around 28 days), a few days for illness, and time between assignments, and 220–230 billable days is a realistic planning figure. Fewer billable days means each one has to carry more of your target income, so it pushes the equivalent day rate up. Adjust the billable-days input to match how much work you actually expect.
Why is a day rate higher than the equivalent salary ÷ 260?
Because the day rate has to cover everything a permanent employer provides for free: paid holiday, employer pension contributions, sick pay, employer National Insurance, and the security of a notice period. A contractor funds all of that themselves and absorbs the risk of gaps between contracts, so a like-for-like day rate is meaningfully higher than simply dividing a salary by the number of working days.
Does this account for tax and IR35?
This converter compares gross packages and shows PAYE take-home for each side, which is the right basis for an Inside-IR35 or umbrella contractor whose income is taxed as employment. If you contract through your own limited company Outside IR35, your net position also depends on dividends, corporation tax and expenses, which this tool doesn't model. For the Inside-IR35 umbrella case — where employer costs are deducted from your rate — use the umbrella calculator linked below.
What risk premium should I add?
The converter shows the rate that merely replaces a permanent package — it has no risk premium built in. Contractors typically add a margin on top to compensate for the lack of job security, notice, benefits and paid time off, and for the effort of finding the next contract. How much is a judgement call, but many aim for a day rate 20–40% above the pure break-even figure.
Disclaimer: Figures are estimates based on 2026/27 rates and rules and may change. Verify with HMRC or a qualified adviser before making financial decisions.