What daily contract rate is equivalent to a salary of 80K?

bearaman

Some friends of mine are saying how well they are doing in daily rate contracts of 550 a day. I always wonder about this as they haven't take into account things like paid healthcare, pension contribution, paid holidays and sick days, etc.

Taking this into account, what daily rate would you need to be equal to a salary of 80K? I assume tax implications would also be very different?

Jim2007

I don't have an answer for you because I'm not up to date on all the tax stuff, but there is more to it than that. You'd also need to take into account all the other aspects as well:

• Paid holidays, which can vary depending on what is offered by the individual employer
• Training and advancement opportunities
• Pension entitlements
• Employer side expenses paid for by the agency employee themselves via a rate reduction
• Agency's commissions
• Down time between agency contracts, when the person would be on unemployment benefits

retalivity

80k gross salary I guess doesnt include employer pension contributions or health insurance. The tax is much of a muchness, depending on pension arrangements and whether a contractor is an umbrella employee, director or has their own company.

A straight comparison is to divide the 80k by 220, which is approximately the amount of work days in a year, minus public holidays and ~20 days vacation. That equates to just under €365 per day.

Fr Tod Umptious

I always use 46 weeks as the number of weeks I'll work in a year to calculate gross salary, you will have 9 days worth of bank holidays and then give yourself 20 days annual leave.

You might want to drop that down to 45 if you consider sick days.

So it's daily rate by 5 by 46.

So your 550 is 126,500 pa.

5starpool

As said above, using 45 weeks as your baseline gives you 126,500 income. Depending on how much they want to put into a pension, which is one of the better aspects of contracting given that you avoid all tax not just income tax like PAYE workers, they will easily to able to pay a salary of 80k. Healthcare, accounting costs (if you pay someone else to do payslips and tax returns), and obviously uncertainty of future income need to be taken into account.

The way I did it when I was contracting was to pay myself a little less at the start of the year (I was on 6 month contracts generally) and if it got renewed to or past the end of the year I'd up it then. If you have some time between contracts but there is still money in your bank account, you can continue to pay yourself even when not working. Any income not paid out though in expenses or salary throughout the tax year will be taxed at 12.5% at years end.

One of the main upsides of being a contractor though is that you don't have to do performance reviews, goals, evaluations, etc. It'll be distilled down to contract renewal or not in most cases. Less BS to deal with.