The Day Rate Calculator converts between an annual salary and a contractor day rate in both directions. In salary-to-rate mode it tells you the minimum day rate that reproduces a target salary after allowing for the costs an employee never sees; in rate-to-salary mode it shows what a quoted day rate is actually worth as an employment-equivalent income. Both modes also break the rate down into hourly, weekly, and monthly figures.
How It Works
A salary is not comparable to a day rate until you gross it up for overhead: the taxes and contributions an employer normally pays, the benefits you must now fund, the gaps between contracts, equipment, insurance, and the leave you no longer get paid for. The calculator models that as a single overhead percentage (30% by default, adjustable from 0 to 90%), then spreads the required gross over your billable days per year (220 by default — roughly 260 weekdays minus holidays, leave, and sick days).
The reverse direction multiplies the day rate by billable days to get gross revenue, then applies the overhead in reverse:
Input Parameters
| Input | Default | Description | |---|---|---| | Target salary | 650 | Quoted rate to evaluate (rate-to-salary mode) | | Overhead % | 30% | Share of gross reserved for tax, benefits, gaps, leave, equipment | | Working days per year | 220 | Billable days, 1 to 365 | | Hours per day | 8 | Used for the hourly breakdown |
Worked Example 1: Salary to Day Rate
Target salary $100,000, overhead 30%, 220 billable days, 8-hour days:
- Required gross = 142,857.14**.
- Day rate = 649.35 per day**.
- Breakdown: hourly 81.17**; weekly 3,246.75**; monthly 11,904.76**.
The verdict states it plainly: charge at least about 100,000 salary equivalent on those assumptions.
Worked Example 2: Day Rate to Salary
Quoted rate **650 × 220 = **143,000 × 0.70 = $100,100. Note the symmetry with Example 1 — the two modes are exact inverses, so you can sanity-check a quote by running it backwards.
Setting the Overhead Percentage
Thirty percent is a reasonable default for a contractor who must cover self-employment taxes, health insurance, retirement saving, equipment, and a few unpaid weeks a year. Raise it toward 40% if your work has long gaps between contracts, expensive insurance, or significant unpaid business development; lower it toward 20% if you have a continuous pipeline and low fixed costs. The most common pricing mistake is using 260 days and 0% overhead, which quietly assumes no holidays, no benefits, and no tax wedge.
Limitations
The overhead percentage is a planning model, not a tax computation: actual obligations depend on your jurisdiction, business structure, and income level, and the calculator works in a single currency with no inflation or rate progression. It also assumes every billable day is actually billed — utilization risk sits with you, which is one reason the overhead buffer exists.
Frequently Asked Questions
Why 220 billable days?
A five-day week gives about 260 weekdays. Removing public holidays, four weeks of leave, and a few sick days lands near 220–230 for most contractors. If you plan more time off or expect gaps, lower the number — fewer billable days means each one must carry more.
Should I charge the calculated rate or round up?
The calculated figure is a floor that reproduces your target salary, not a market price. Experienced contractors price above the floor to reflect scarcity, specialization, and risk; round to a clean number your market recognizes, but never below the floor unless the engagement's stability genuinely replaces the overhead it models.
How does this differ from an hourly rate calculator?
This tool works backwards from an annual income goal with an overhead allowance and a realistic billable-year, then derives hourly, weekly, and monthly figures from the day rate. A plain hourly calculator usually just divides a salary by hours and understates what a contractor needs by the full overhead wedge.