How day rates and salaries compare
Contractors and freelancers price their time by the day, employees by the year, and comparing the two is where most rate conversations go wrong. The conversion itself is simple:
The tricky part is choosing the number of working days. A calendar year contains around 260 weekdays, but nobody bills all of them. Knock off roughly 25 days of holiday, 8 bank holidays and a handful of days lost to illness, training or the gap between one contract ending and the next starting, and you are left with about 220 billable days. That is why 220 is the default here, and why quotes based on 260 days flatter the numbers. If you know your own pattern, edit the working days to match it: a fully booked contractor who takes little holiday might use 230 or 240, while someone who wants two months off might use 180.
Worked examples
A day rate is not a salary
The annual equivalent this calculator shows is gross billing, not a like-for-like salary. An employee's package quietly includes at least 5.6 weeks of paid holiday, statutory sick pay, employer pension contributions of at least 3% of qualifying earnings, paid notice and redundancy rights. A contractor pays for every one of those out of the day rate, along with insurance, accountancy and equipment, and carries the risk of unbilled weeks between contracts. That is why contractor day rates look generous next to salaries for the same work: part of the difference is not profit, it is the price of everything the rate has to cover. When you set or judge a rate, start from the salary the role would pay, divide by realistic billable days, then add enough margin to fund the missing benefits and the quiet weeks. Many contractors land on an uplift of roughly 20% to 40% over the raw daily equivalent, more in specialisms where contracts are short or demand is patchy, and the right figure for you depends on how much security you are giving up.
IR35, in one line
If a contract falls inside the off-payroll working rules (IR35), the income is taxed broadly like employment income, which can change the take-home picture substantially without changing the day rate at all. Status depends on the working arrangements, not the label on the contract, and the rules and HMRC's checking tool are at gov.uk. This calculator compares gross amounts only. It is guidance, not tax or financial advice.
Frequently asked questions
Why does the calculator default to 220 working days?
A year has about 260 weekdays, but nobody bills all of them. Take off around 25 days of holiday, 8 bank holidays and a few days of sickness, training or gaps between contracts and you land near 220 billable days. It is a widely used planning figure, and you can change it to match your own year.
Is a £400 day rate the same as an £88,000 salary?
No. The annual equivalent is gross billing only. An employee on £88,000 also gets paid holiday, sick pay, employer pension contributions of at least 3%, notice and redundancy rights. A contractor funds all of that from the day rate, plus insurance and accountancy costs, so the two numbers are not directly comparable.
How do I convert a day rate to an hourly rate?
Divide the day rate by the hours in your working day. On £400 a day at 8 hours that is £50 an hour, or £53.33 at 7.5 hours. Check what a professional day means in your contract, because some clients specify 7.5 hours and others 8.
What is IR35 and does it change these numbers?
IR35 (the off-payroll working rules) decides whether a contract is taxed like employment. It does not change your day rate, but it changes how much tax comes off it, sometimes substantially. This calculator compares gross amounts only. Check your status and the rules on gov.uk before relying on any net figure.
Should I use 220, 230 or 260 days when setting a rate?
Use the number of days you realistically expect to bill. If you take less holiday and stay fully booked, 230 or 240 may fit. Using 260 assumes you bill every single weekday of the year with no holiday, illness or gaps, which almost never happens and makes a rate look better than it is.