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Contract vs Permanent Calculator
with Break-Even Day Rate

Compare a contract day rate against a permanent salary. Factors in benefits, paid leave, pension contributions, and employer costs to calculate the true break-even rate and which is financially better.

Country
Currency
⚖
Contract vs Permanent Comparison
Contract Details
$
Gross day rate charged to client. For break-even mode this field is auto-calculated.
days
Typical contractor works 220–230 billable days. Excludes gaps between contracts.
wks
Weeks per year not billable due to gaps between contracts. Reduces effective annual income.
$
Accountant fees, insurance, equipment, training, and other contractor costs.
Permanent Role Details
$
Permanent employee gross salary before tax.
days
Paid annual leave. Contractor must fund these themselves from day rate income.
%
Employer pension match or contribution. Not available to contractors.
$
Health insurance, gym, childcare vouchers, life assurance, and other employer-funded benefits.
days
Sick days a permanent employee gets paid for that a contractor loses income on.
days
Public holidays paid to permanent employees but not to contractors.
Break-Even Day Rate
—
day rate equivalent to perm salary + benefits
Contract Annual (Gross)
—
before tax and expenses
Perm Total Comp
—
salary + pension + benefits
Contract Premium
—
contract vs perm total comp
Unpaid Days (Contractor)
—
holiday + sick + public hols
Effective Hourly (Contract)
—
based on 8h day
⚖ Contract
Day rate—
Billable days—
Gross contract income—
Business expenses—
Net after expenses—
💼 Permanent
Base salary—
Employer pension—
Other benefits—
Holiday value—
Total compensation—
What the Contractor Gives Up vs Permanent Role
Paid annual leave (contractor funds these)—
Paid sick days lost—
Paid public holidays lost—
Employer pension not received—
Other benefits not received—
Business expenses (accountant, insurance, etc.)—
Contract gap cost (unbillable weeks)—
Total premium needed above perm salary—
Break-even day rate—
Break-Even Day Rate at Different Billable Days Per Year
Billable Days Break-Even Rate Annual Gross Contract Premium
Annual Income Composition: Contract vs Permanent
Base income
Benefits / pension
Premium (contract)
Costs (contract)
✦ Cal, AI Explanation
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Your comparison is ready. Ask me about the break-even rate, what benefits are worth, or how gaps between contracts affect the true premium.

⚖ Key Concepts

Break-even day rate is the minimum day rate where contracting equals the total value of the permanent role.
Total comp includes salary, employer pension, benefits, paid leave, and sick pay — all of which contractors must fund themselves.
Contract gaps reduce annual income. Four weeks unbillable per year on a $500/day rate costs $10,000.
Business expenses are tax-deductible in most countries but still reduce net income from the gross day rate.
Rule of thumb: A contractor typically needs 20–30% above the equivalent permanent salary to break even after accounting for all missing benefits.

Related Calculators

Salary Converter→ ZZP Tax Calculator→ Overtime Pay→ Effective Tax Rate→

Related Guides

Contractor vs Employee: NL→ ZZP Tax Guide→

How to find the break-even contract day rate

A permanent salary is not just a salary. It comes with employer pension contributions, paid annual leave, paid sick days, public holidays, private health insurance, and other benefits. A contractor receives none of these. The break-even day rate is the daily rate at which contracting matches the total compensation value of the permanent role, not just the base salary.

The core formula

Total perm comp = Salary + Employer pension + Benefits + Holiday value + Sick pay value
Contractor needs (gross) = Total perm comp + Business expenses + Gap cost
Break-even day rate = Contractor needs ÷ Billable days per year
Holiday value = (Salary ÷ Working days) × Paid leave days
Gap cost = Day rate × Gap days per year
Working days = 52 weeks × 5 days minus public holidays. Gap cost uses the break-even rate itself, requiring iterative solving — this calculator uses a single-pass approximation.

Why most people underestimate the break-even rate

People typically compare a day rate against the daily equivalent of a salary. But a $400 per day contractor earning $88,000 over 220 days is not equivalent to an $88,000 salary. The contractor has no employer pension match, pays all their own holiday, takes a hit on sick days, pays business expenses, and faces income gaps between contracts. The real equivalent salary is often 25–35% lower than the gross contract income.

Perm SalaryHoliday DaysPension %BenefitsBreak-Even Day Rate
$60,000205%$2,000approx. $390/day
$80,000255%$2,500approx. $515/day
$100,000256%$3,000approx. $645/day
$120,000308%$4,000approx. $805/day

Frequently Asked Questions

What is the break-even day rate?+
The break-even day rate is the minimum contract day rate at which contracting provides the same total financial value as a permanent role. It accounts for the salary, employer pension, all paid leave, sick pay, benefits, contractor business expenses, and the cost of gaps between contracts. Any day rate above this is a genuine financial premium for contracting. Any day rate below it means contracting is financially worse than the permanent alternative.
Why do I need more than the salary equivalent as a contractor?+
Because as a contractor you receive none of the benefits that come with permanent employment. You must self-fund your annual leave, lose income when sick, receive no employer pension contribution, pay for your own professional insurance and equipment, and absorb the cost of gaps between contracts. These costs are real and material. A contractor on the exact daily equivalent of a permanent salary is almost certainly earning less in total compensation value.
How do contract gaps affect earnings?+
Every week you are not billing is a week of zero income. A contractor expecting 220 billable days per year but experiencing four weeks of gaps loses 20 days of income. On a $500 day rate that is $10,000 per year. The longer and more frequent the gaps, the higher the day rate needs to be to achieve the same annual income. This calculator models a typical annual gap based on weeks entered.
Are contractor business expenses tax deductible?+
In most countries, legitimate business expenses are deductible against contractor income, which reduces taxable profit. This includes accountant fees, professional indemnity insurance, equipment, and training. However, they still reduce your net income from the gross day rate. The deductibility means the after-tax cost of a $3,000 annual expense is lower than $3,000 at your marginal rate, but the expense still exists and must be included in any fair comparison.
Does this calculator account for tax differences?+
No. This calculator compares gross income and total compensation value. Tax treatment of contractors versus employees varies significantly by country and personal circumstances. In many countries contractors can take advantage of expenses and structure to lower their effective tax rate, which can make contracting more attractive than the gross comparison suggests. In others, like the Netherlands post-2025 DBA enforcement, contractor tax treatment is increasingly similar to employment. Use the Salary After Tax or ZZP Tax calculators for country-specific net income estimates.