Salary Converter

Comparing a contract rate with a salaried job means converting both to the same basis — and remembering that paid leave is worth real money.

The conversions

Two assumptions decide everything: hours per week, and paid weeks per year. A salaried employee is normally paid for all 52 weeks, with holiday included. A contractor paid only for days worked is not — and that difference is worth around 11 % of gross pay.

Note the common rounding error: monthly pay is annual ÷ 12, not weekly × 4. There are 4.33 weeks in an average month, so multiplying by four understates monthly pay by roughly 8 %.

Comparing employment with contracting

A £25/hour job and a £25/hour contract are not equivalent. The employee receives things the contractor must fund from the same rate:

• Paid holiday. Typically 25–28 days including public holidays in the UK — roughly 11 % of working time.
• Employer pension contributions. Minimum 3 % in the UK, often considerably more.
• Sick pay, parental leave, notice period and redundancy rights.
• Employer taxes, which a self-employed contractor may bear personally.
• Unpaid gaps between contracts, plus insurance, accountancy and equipment.

A frequently used rule of thumb is that a contract rate needs to be 25–40 % above the equivalent employed rate to leave you level. Set paid weeks to 46 or 47 in this calculator to model unpaid holiday.

Gross, not take-home

Every figure here is gross. What actually reaches your account depends on income tax, social security contributions, pension deductions and student loan repayments, all of which vary by country and by individual circumstance.

As a very rough orientation, a UK employee on £40,000 takes home around £31,000 after income tax and National Insurance before pension contributions. Because most systems are progressive, the proportion retained falls as income rises — which is why a percentage pay rise is worth less net than it looks gross. For an accurate figure, use your own country's official tax calculator.