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Contract Salary Formula:
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The conversion from permanent to contract salary in the UK typically involves multiplying the permanent salary by 1.4 to account for benefits, job security, and other factors that permanent employees receive but contractors do not.
The calculator uses the standard UK contract rate formula:
Where:
Explanation: The 1.4 multiplier accounts for benefits like pension contributions, paid leave, sick pay, and job security that permanent employees receive but contractors typically don't.
Details: Accurate contract rate calculation ensures contractors are fairly compensated for the lack of benefits and job security compared to permanent positions.
Tips: Enter your current or offered permanent salary in GBP/year. The calculator will show the equivalent contract rate that would provide similar overall compensation.
Q1: Why is the multiplier 1.4?
A: The 1.4 multiplier is a standard industry estimate that accounts for typical benefits and job security differences between permanent and contract roles in the UK.
Q2: Does this include VAT?
A: No, this calculation is for gross salary comparison. VAT considerations would be separate for contractors operating through their own company.
Q3: Is this multiplier appropriate for all industries?
A: While 1.4 is a good starting point, some high-demand tech roles may command higher multipliers (1.5-2.0), while others may be lower.
Q4: How does this compare to day rates?
A: To convert annual contract salary to day rate, divide by approximately 220 working days per year.
Q5: Should I accept exactly 1.4x my permanent salary?
A: This is a guideline. Consider your personal circumstances, market demand, and the specific benefits you're giving up when negotiating.