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Contractor Rate Conversion Calculator

Work out contractor rate conversion instantly with clear inputs, formula shown and shareable results.

About Contractor Rate Conversion Calculator

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.

Formulas

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

Worked example

With the default values below, Contractor Rate Conversion Calculator returns Required day rate of $14,950.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Target annual employed-equivalent package
2,000,000
Billable days per year
200
Allowance for benefits, pension and overhead
30
Allowance for non-billable time and risk
15

Results

Required day rate
$14,950.00
Required hourly rate
$1,868.75
Grossed-up annual target
$2,990,000.00
Uplift over the salary equivalent
49.50%

Step by step

  1. 1Values used
  2. 2Grossed-up target
  3. 3Day rate
  4. 4Required day rate= 14,950.00
  5. 5Required hourly rate= 1,868.75
  6. 6Grossed-up annual target= 2,990,000.00
  7. 7Uplift over the salary equivalent= 49.50

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax or fees or charges into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Why is the rate so much higher than salary divided by working days?

Because a contractor funds their own pension, insurance, holiday, sick pay, training and bench time, and carries the risk of gaps between engagements.

How many billable days are realistic?

180-220 for an established contractor with good pipeline. New contractors should plan on 150-170 in the first year.

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