Contractor vs Employee Earnings Comparator

What this tool does

CM8-358 puts a salary and a day rate on the same footing. It converts everything to a comparable annual figure, takes account of the days a contractor is not paid for, adds the parts of an employed package that are not salary, subtracts the costs a contractor carries, and works out the day rate a contract would need to pay to match a given salary.

Everything runs inside this single file — no account, no upload, no network request of any kind. What you are being offered, and what you are weighing up, is nobody else's business.

Why there is no tax in here

Every figure in this tool is before tax, and that is a deliberate decision rather than a gap.

Income tax, social contributions and the treatment of self-employment differ by country, change every year, and often turn on details this tool cannot know — how you trade, whether the engagement is caught by a particular rule, what else you earn, what you put into a pension. A tool that guessed would produce a confident number that was wrong for most of the people using it, and the difference is easily large enough to reverse the answer.

So the tool does the part it can do exactly — the earnings arithmetic — and stops. Take the comparable figures to somebody who knows your tax position. That conversation is much shorter and much more useful when you arrive with two comparable numbers instead of a salary and a day rate.

What one row is

One row is one option: a specific offer, or a scenario you are considering. Add the current job as a row too — it is the option you are actually choosing against, and leaving it out is how people talk themselves into a move that pays less.

The days you are not paid for

This is the single biggest difference between the two, and the one most often missed.

With the defaults, an employed year is 260 paid days and a contract year with six weeks between contracts is about 192. A day rate that looks a third higher than the salary equivalent can easily come out lower once those days are gone.

Be honest about the gap. Nobody plans to be on the bench, and almost everybody is. If you genuinely know how many days you will bill — a fixed-term contract, or part-time work — enter it directly in the paid-days field and the tool uses your figure instead.

Comparable earnings

Employer pension is added because it is money going into your name that you do not otherwise get. Bonus is added at what is typically paid, not the maximum on the offer letter. Benefits are added at what they would cost you to buy.

Per day actually worked

The second-most-useful figure in the tool, and the one that survives options with different amounts of work in them:

A part-time contract paying less in total may pay far more per day. A contract paying more in total while requiring forty more days at work is not paying more. If you are weighing up a three-day week against a full-time salary, this is the row to look at.

The day rate that matches a salary

The second table pairs every salary option with every contract option and works out what the contract would have to pay:

This is the number to take into a negotiation. It is specific, it is defensible, and it accounts for the fact that you will bill fewer days than you work. The final column shows whether what is on the table clears it.

Costs a contractor carries

Accountancy, professional indemnity and public liability insurance, equipment and its replacement, software licences, professional memberships, training you would otherwise have been sent on, and the time spent on invoicing and chasing payment. These are ordinary and they are not small.

An option marked as a contract with no business costs entered is flagged, because it is almost always an omission rather than a genuine zero.

Note what is not a cost: your own pension contribution. Money you choose to put into your own pension is still your money — subtracting it would count it as spent when it is saved. The tool blocks an employer pension percentage on a contract row for the same reason.

Valuing benefits honestly

Value a benefit at what it would cost you to buy it, if you would buy it at all. A health plan you would never have paid for yourself is not worth its sticker price to you. A car you would otherwise have to run is worth close to what running one costs.

Two benefits are worth more than they look and are usually left out: paid sick leave, which is the thing a contractor most conspicuously does not have, and a training budget, which compounds.

The part that is not money

Security is recorded on a four-point scale and deliberately not converted into money. Any conversion would be invented, and the fourth chart shows the trade instead: how much each option pays against how secure it is.

Read it simply. More money for less security may be exactly the right trade, particularly if you have savings, no dependants, or a market where the next contract is easy to find. The same money for less security never is, and a contract option that is both insecure and has no gap allowed for is flagged.

The four mistakes this tool exists to stop

• Multiplying the day rate by 260. Nobody bills 260 days. This alone accounts for most bad decisions in this area.
• Forgetting the employed extras. Pension, bonus and benefits routinely add fifteen to twenty percent to a salary and never appear in the headline.
• Assuming no gap between contracts. Everybody's first contract year has a gap in it somewhere.
• Comparing before-tax to after-tax. Every figure here is before tax, on both sides, which is the only comparison this tool can make honestly.

What it cannot tell you

• Anything about tax, in either direction.
• Whether the work is any good, whether you will learn anything, or whether you will like the people.
• What contracting does to a mortgage application, which in many countries is a real and specific cost.
• Whether the contract will actually run for as long as everybody says it will.
• What you would do with the two days a week a part-time option frees up. If the answer is other paid work, add it as its own row.

Printing and sharing

The Report tab prints the tiles, charts and both tables with a title block you fill in. The full workings table is the one to take to an accountant or into a negotiation.

Saving your work

The comparison is held in this browser, on this computer, and stays there between visits. Use the backup button to write a JSON file you control.

Accuracy & disclaimer

This is an arithmetic aid, not financial, tax or employment advice. Every figure is before tax and every input is yours. The tool cannot tell you whether an engagement is correctly classified as self-employment where you are, and that question has consequences in most countries — take advice on it rather than inferring anything from a number here.