Contract vs permanent calculator
A day rate multiplied by 260 is not a salary. Working through an umbrella, the assignment rate has to cover employer National Insurance at 15% and the 0.5% apprenticeship levy before a penny reaches your gross pay, and no day is billed while you are on holiday, ill or between contracts. This compares the two on what you actually keep, and works out the day rate that matches a given salary.
Calculator
Contract vs permanent calculator
The contract
220 days is roughly a full year once holiday and bank holidays are taken out. Bill fewer and the comparison changes quickly, which is the point.
The permanent job
Paid leave, bank holidays and sick pay are already inside the salary. The employer pension is counted as deferred pay, because it is money you get and a contractor has to fund themselves.
The contract is ahead by
£5,388 a year
To match £70,000 plus a 5% pension, you would need a day rate of £401.23 billing 220 days. Every day you do not bill costs you £450.00 of the rate and nothing comes back.
| Line | Contract | Permanent |
|---|---|---|
| Assignment rate | £99,000 | — |
| Less employer NI, levy and margin | −£13,675 | — |
| Gross pay | £85,325 | £70,000 |
| Take-home after tax and NI | £60,046 | £51,157 |
| Employer pension | — | £3,500 |
| Total value | £60,046 | £54,657 |
What this deliberately leaves out
The outside-IR35 route now deducts company costs, director salary and employer NI, then corporation tax, before distributing the remaining profit as dividends. Personal tax includes the allowance taper. It assumes one company, a full 12-month accounting period, no associated companies, no Employment Allowance, no pension contributions or student loans and no other income. Permanent employer pension is deferred value, not spendable take-home. The outside IR35 calculator shows the company breakdown, and the umbrella calculator shows the full deduction chain on one assignment.
Not priced here: notice periods, the cost of finding the next contract, income protection and life cover a permanent job may provide, redundancy rights that need two years of service, and the effect of a variable income on a mortgage application. Contracting carries all of those and the day rate is meant to compensate for them.
Employer NI at 15% above £5,000 and the 0.5% apprenticeship levy, from gov.uk, checked 2026-08-28.
The three deductions that surprise people
- Employer National Insurance. Inside IR35 through an umbrella you pay it out of your own rate, at 15% on everything above £5,000. A permanent employee never sees this because the employer pays it on top of the salary. It is the single biggest reason a day rate has to be much higher than the salary equivalent.
- The days you do not bill. A permanent salary keeps paying through 28 days of statutory leave and eight bank holidays. A day rate does not, which is why 220 billed days is a realistic full year rather than 260.
- The employer pension. A 5% employer contribution on a £70,000 salary is £3,500 a year of deferred pay that a contractor has to fund out of their own rate. This page counts it on the permanent side, because you get it either way.
Inside and outside IR35
Inside IR35, the engagement is taxed like employment and the umbrella route above applies. Outside IR35 through your own limited company you can take a small salary and the rest as dividends, which is taxed less than salary and does not attract National Insurance. This page now models director salary, employer NI, company costs, corporation tax and dividend tax for the outside route. The outside IR35 calculator shows the same salary and dividend model in more detail, and the umbrella calculator walks one assignment through the full deduction chain. The determination is not yours to make: for most engagements the client decides, and getting it wrong is expensive.
What no calculator can price
Contracting carries risks that are real and not in any of these numbers: notice measured in days rather than months, the gap between contracts, no redundancy rights until two years of service, no employer sick pay, and lenders treating a variable income more cautiously on a mortgage application. A day rate is meant to compensate for all of that. Whether it does is the actual question, and the break-even figure above is only the floor.
Employer rates checked 2026-08-28 by Hadi against gov.uk rates and thresholds for employers, income tax and National Insurance against HMRC for 2026/27. Method on the about page.
How to use the contract vs permanent calculator
- 1
Enter the contract day rate and the salary of the permanent role.
- 2
Set your expected billable days, allowing for holiday and gaps.
- 3
Add the permanent role's pension, holiday and sick pay, which the contract does not carry.
- 4
Read the two take-home figures side by side on the same basis.
When should you use the contract vs permanent calculator?
Use it when choosing between a day rate and a salary, since the two are not comparable until benefits and unpaid weeks are priced in.
Two offers on the table
A day rate and a salary are not comparable until benefits and unpaid weeks are priced in.
Leaving permanent work
Holiday, sick pay, pension and notice all have a cash value you stop receiving.
Negotiating a rate
Knowing the rate that matches your current package gives you a floor.
Inside or outside IR35
The status changes the take-home substantially on the same rate.
Where to go next
- Day rate to salary calculatorTo convert a rate to an annual figure first.Open
- Outside IR35 calculatorTo take-home outside IR35.Open
- Umbrella company calculatorTo take-home inside IR35 through an umbrella.Open
All 51 calculators share one tested engine, so a figure from the contract vs permanent calculator agrees with every other page here. See the full calculator index or the pay and tax guides.