Free Tool
Contract Day Rate vs Salary Calculator
Work out the day rate that genuinely matches your current salaried package — once the employer pension, the benefits, the paid holiday and the days nobody pays you for have all disappeared.
| What you have now | |
|---|---|
| Gross salary | $0 |
| Employer pension / 401(k) contribution | $0 |
| Cash value of employer benefits | $0 |
| Total salaried package value | $0 |
| Days you actually work as an employee | 0 |
| Salary earned per day actually worked | $0.00 |
| Salary paid for days you don't work (paid leave) | $0 |
| The contract offer | |
| Contract gross (day rate × billable days) | $0 |
| Business expenses | $0 |
| Self-employment tax / insurance uplift | $0 |
| Salary-equivalent value of the contract | $0 |
| What it takes to break even | |
| Contract revenue needed to match the package | $0 |
| Billable days needed at the offered rate | 0.0 |
| Employer add-ons you give up, per billable day | $0.00 |
Assumptions. Your salaried package is valued as salary + employer pension contribution + the cash value of benefits you entered; paid leave is not added on top of salary because your salary already covers it, so it is shown separately as information. The contract is valued as day rate × billable days, minus business expenses, minus the self-employment uplift applied to what is left after expenses — a rough stand-in for tax and insurance charged on business profit rather than on turnover. The uplift percentage, working days per year and billable days are all inputs, not fixed numbers, because they differ by country, entity type and year; nothing here is hardcoded to one tax system. This is a before-tax comparison of two packages, not a take-home pay calculation: your marginal income tax rate is not modelled, and neither is the timing risk of late-paying clients. Figures are estimates for planning only — check your own position with an accountant.
What day rate actually matches your salary?
The usual answer online is "divide your salary by 220." That number gets thrown around because it is easy, not because it is right. It compares your headline salary to a contract day rate and quietly ignores three things that decide whether the move actually pays.
The first is everything your employer pays that never shows on your payslip as salary. A pension or 401(k) match is real money going into your name. So is health cover, a typical bonus, income protection, a training budget. Add those up and the package you are actually leaving is bigger than the salary you quote when people ask what you earn — a 5% pension match on top of health cover and a typical bonus is already a double-digit percentage of salary before you count anything else. Compare a day rate to salary alone and you have thrown all of it away before you start.
The second is the days nobody pays you for. As an employee, paid holiday and sick days are invisible — your salary arrives whether you are at your desk or on a beach. As a contractor, every one of those days is a day you do not invoice. So are notice periods, the gap between one contract ending and the next starting, and the week you spend interviewing. That is why the billable-days figure above is an input you set yourself rather than a fixed 220: the difference between planning on 220 days and planning on 190 is enormous, and it is the single assumption most likely to be wrong in your favour when you are excited about an offer.
The third is the costs that move onto your side of the table. Liability insurance, an accountant, your own software and equipment, professional subscriptions — plus the extra tax and insurance a self-employed person carries that an employer used to cover. That last figure varies enormously by country, business structure and income level, and it changes from year to year, so this calculator asks you to supply it rather than pretending one number fits everyone.
Put those three together and you get a break-even day rate: the rate at which the contract is worth exactly what you have now. Below it you are taking a pay cut in exchange for more risk. Above it, the margin is what pays you for the risk — because a contract can end with a week's notice, and a quiet quarter costs you real income rather than nothing at all. Most contractors want a visible gap above break-even, not a rounding error. Once you have chosen a rate, the Freelance Rate Calculator helps you sanity-check it against your own cost base, and the Tax Set-Aside Calculator helps you keep the tax portion out of your spending account once invoices start landing.
Frequently asked questions
How do I convert a salary into an equivalent contract day rate?
Start with the whole package, not the headline salary: add the employer's pension or 401(k) contribution and the cash value of benefits like health cover and bonus. Then divide by the days you will realistically bill — not by 260 — and add back your own business expenses and any extra self-employment tax or insurance you now carry. The common shortcut of salary ÷ 220 ignores all three of those adjustments, which is why it usually produces a day rate that is too low.
How many billable days a year should a contractor assume?
There is no single right figure, which is why this calculator makes it an input. A calendar year has roughly 260 weekdays before public holidays. Contractors then lose days to holiday, illness, notice periods and gaps between contracts, none of which anyone pays for. Many contractors plan on somewhere between 180 and 220 billable days and adjust after their first full year of real timesheets.
What is the self-employment uplift and what number should I use?
It is the extra percentage of your business profit that goes to taxes and insurance an employer used to cover for you — in the US that is typically the employer half of Social Security and Medicare plus your own health insurance premium, and every country handles this differently. Rates change over time and depend on your entity type and income level, so this tool asks you to enter your own figure rather than hardcoding one. An accountant in your country can tell you what applies to you.
Should I take the contract if the calculator says it is only slightly ahead?
A small positive gap is thin cover for the risks a salaried job absorbs: a contract can end on short notice, invoices can be paid late, and a quiet quarter costs you real income rather than nothing. Many contractors want a clear margin above break-even before switching, and treat the break-even day rate as a floor to negotiate up from rather than a target to accept.
Want the full system, not just this one number?
This calculator answers one question on one offer. The Freelancer Finance Toolkit is a set of plug-and-play spreadsheets — a rate calculator with a sensitivity table so you can see how the answer moves as billable days drop, a project pricer, an income and expense tracker, and an invoice tracker — so once you take the contract you can price the next one and actually watch what gets paid.
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