Work out contractor rate conversion instantly with clear inputs, formula shown and shareable results.
Converting a salary to a contract rate requires two gross-ups: one for the benefits, pension and overhead an employer would have provided, and one for non-billable time and income risk. Dividing by billable days rather than calendar days is what makes the rate sustainable.
Grossed-up target
Grossed up = Target package x (1 + Overhead %) x (1 + Non-billable and risk %)
Day rate
Day rate = Grossed-up target / Billable days per year
Because a contractor funds their own pension, insurance, holiday, sick pay, training and bench time, and carries the risk of gaps between engagements.
180-220 for an established contractor with good pipeline. New contractors should plan on 150-170 in the first year.