{"id":113,"date":"2026-10-09T09:00:00","date_gmt":"2026-10-09T09:00:00","guid":{"rendered":"https:\/\/payslp.com\/blog\/?p=113"},"modified":"2026-07-04T17:49:17","modified_gmt":"2026-07-04T17:49:17","slug":"day-rate-to-annual-salary-contractors","status":"publish","type":"post","link":"https:\/\/payslp.com\/blog\/guides\/day-rate-to-annual-salary-contractors\/","title":{"rendered":"Day Rate to Annual Salary \u2014 How Contractors Should Think About It"},"content":{"rendered":"

How to properly convert a contractor day rate into an annual-equivalent figure, accounting for the non-billable time a permanent salary doesn’t have to think about.<\/p>\n

The naive calculation, and why it’s wrong<\/h2>\n

Multiplying your day rate by 220 working days a year overstates what you’ll actually earn \u2014 it assumes zero time between contracts, no holiday, and no sick days, none of which is realistic for most contractors.<\/p>\n

A more honest calculation<\/h2>\n

Subtract genuine gaps between contracts (even successful contractors typically have some), unpaid holiday (since contractors don’t get statutory paid leave the way employees do), and a buffer for sick days. A commonly used realistic figure is 200\u2013220 billable days rather than the full working year.<\/p>\n

Why this matters for comparing offers<\/h2>\n

A day rate that looks higher than an equivalent permanent salary can end up lower once realistic non-billable time and the lack of employer pension contributions, sick pay, and holiday pay are factored in \u2014 worth doing the maths properly before assuming contracting is automatically the better-paid option.<\/p>\n

Work out your realistic annual equivalent with the Payslp contractor calculator<\/a>.<\/p>\n

<\/p>\n

A worked example with realistic assumptions<\/h2>\n

At a \u00a3500 day rate with a realistic 210 billable days a year (accounting for gaps, holiday, and sick days), the annualised equivalent is \u00a3105,000 \u2014 notably lower than the naive \u00a3500 \u00d7 260 working days calculation of \u00a3130,000, a genuine \u00a325,000 difference purely from realistic day-count assumptions.<\/p>\n

Frequently asked questions<\/h2>\n

How many billable days should I actually assume?<\/strong>
\nThis varies by experience and sector, but 200\u2013220 days is a commonly used, reasonably conservative planning assumption for an established contractor.<\/p>\n

Should I factor in pension separately?<\/strong>
\nYes \u2014 since contracting typically doesn’t include an employer pension contribution the way permanent employment does, worth building your own pension savings into your day rate calculation explicitly.<\/p>\n

<\/p>\n

Related reading<\/h2>\n