Contractor vs Permanent Calculator
How to Compare Contractor vs Permanent Employment
This calculator helps UK professionals compare the financial value of contractor work versus permanent employment.
For contractors: We calculate your annual income based on your day rate and the number of days you expect to work per year. The default is 223 days, which accounts for weekends, bank holidays, and a typical amount of time between contracts or for holidays.
IR35 status: IR35 is UK tax legislation designed to identify contractors who are working through a limited company but are, for all practical purposes, employees. If your contract is "Inside IR35", you'll need to pay additional deductions including employer's National Insurance, Apprentice Levy, and umbrella company fees. These deductions significantly reduce your take-home pay and should be considered when comparing with permanent employment. For employer's National Insurance, we apply the correct bands: earnings from £0-£5,000 are free from NI, earnings between £5,000-£50,270 are charged at your specified rate (default 15%), and earnings above £50,270 are charged at 2%.
Outside IR35 costs: When working outside IR35 as a limited company contractor, you'll incur additional business costs that should be factored into your comparison. These typically include accountant fees (around £100 per month), business insurance (approximately £150 per year), and business bank account fees (about £12 per month). This calculator allows you to enter these costs to provide a more realistic comparison between contracting and permanent employment.
Umbrella fees: When working inside IR35, contractors often use umbrella companies that charge either a percentage-based fee (typically around 3% of your income) or a fixed weekly fee (typically around £30 per week). This calculator allows you to select which type of fee structure your umbrella company uses to provide a more accurate comparison.
For permanent employees: We calculate the total value of your employment package, including your base salary, employer pension contributions, annual bonus, and the monetary value of your holidays. The pension value, holiday value, and bonus are displayed separately in the comparison results to help you understand the full benefits of your package. The bonus can be calculated as either a percentage of your salary or a fixed amount per year. The holiday value (number of holiday days × daily rate) is added to your annual value to provide a more accurate comparison with contractor rates. We also account for paid holidays when calculating your effective day rate to help you understand the full financial benefit of permanent employment.
Important considerations: This calculator provides a financial comparison only. When deciding between contracting and permanent employment, you should also consider:
- Job security and consistency of income
- Additional benefits of permanent employment (healthcare, sick pay, etc.)
- Tax implications (contractors may have different tax arrangements)
- IR35 status for contractors (this calculator now allows you to compare both inside and outside IR35 scenarios)
- Career development opportunities
- Work-life balance preferences
For a comprehensive decision, consider consulting with a financial advisor who specializes in UK employment and tax matters.
We compare your contractor earnings (day rate × working days) against the total value of a permanent package. For permanent roles, we include base salary, employer pension contributions, annual bonus (as % or fixed), and the monetary value of paid holidays. For contractors, we optionally deduct IR35-related costs (employer's NI bands, Apprentice Levy, umbrella fees) or outside‑IR35 business costs (accountant, bank and insurance).
You enter your expected working days per year. The default is 223, which roughly accounts for weekends, bank holidays and time off between contracts or for holidays. You can change this to suit your situation.
If you select Inside IR35, we apply: Employer's NI with bands (0% on the first £5,000; your chosen middle‑band rate on £5,000–£50,270; 2% above £50,270), plus Apprentice Levy at your chosen %, and umbrella company fees (either a % of income or a fixed weekly fee × 52).
Percentage fees scale with your income (e.g. 3% of annual income). Fixed weekly fees are converted to an annual amount by multiplying by 52. Choose the option that matches your umbrella company.
We include typical limited‑company costs you input: accountant fees (monthly × 12), bank fees (monthly × 12), and business insurance (annual). These are subtracted from your contractor total to show an after‑costs figure.
We add the employer pension contribution (as a % of salary), the annual bonus (either % of salary or a fixed £ amount), and the value of paid holidays (holiday days × permanent daily rate). These are displayed separately in the results for transparency.
Contractor daily rate is the amount you enter; contractor hourly rate is that daily rate divided by (hours per week ÷ 5). Permanent daily rate is the annual package value divided by working days (52×5 minus your holiday days). Permanent hourly rate is annual value divided by (52 × hours per week).
We compare the contractor figure after applicable deductions/costs to the permanent annual package value. The label shows which is higher, by how much per year, and the percentage difference.
No. This is a pre‑tax comparison of package values. It does not model your personal income tax, employee NI, corporation tax, VAT, or other individual circumstances.
Yes — all IR35 percentages/fees and outside‑IR35 costs are editable in the form so you can reflect your real situation.
No. This tool is for guidance and education only. Consider seeking professional advice before making decisions.
