How do I convert an annual salary into a daily rate?

Question

Reason for my question I'm looking to leave paid employment which provides pension, holidays etc, and move into contract work. My current salary is £33k

Answer 1

As a rule of thumb, half your (full time) salary figure equates to your hourly rate, so if you're earning £30k, your hourly rate is roughly £15/hr (v. roughly).

Don't forget though that when you become a contractor you have the following to take into account too:

Employees AND Employers Tax and NI contributions
Accountancy Fees
Professional Indemnity Insurance
Public Liability Insurance/Employers Liability Insurance (yes, apparently they reckon that you might sue yourself)
If you're setting up as a Ltd Company you'll have fees there too.
IR35 Nightmares (google this topic to know more)
Business Banking Fees (small, but a thorn in my side nonetheless)
Pension contributions
Loss of paid holiday
Loss of paid sick/maternity/paternity pay (beyond statutory amounts)

Your employer pays all of these things on your behalf (or deducts tax on your behalf) at the moment and the liability will fall to you.

And countless other bits and pieces that you don't worry about as an employee.

On the otherhand, I've enjoyed my time as a contractor, particularly the flexibility.

Good luck whatever you decide to do.

Answer 2

Work Out Daily Rate

Answer 3

The best way is to take 104 weekend days from 365. This gives you 261. If you are going into contract work you will be self employed so for your minimum rate divide 33,000 by 261 which gives you a daily rate of, £126.00.
As you will be self employed and contract work is supposed to be better paid by the day than employed work, then I would look at a daily rate of £150.00. An employer would have more overheads over and above your salary.
Best of luck with it and have a happy Christmas.

Answer 4

You minus the number of days you don't work, (weekends and holiday - since you'll have paid bank holidays, keep these in the total) then divide the £33k by that.

Typical person would only work around 240 days a year, (104 days are weekends, then an around of 20 days holiday). £33000/approx. 240=£137.50.

What you will have to remember is that as a contractor, you will be responsible for paying not only your own national insurance contributions but also those that your present employer would normally pay (approx 12.5%) and also pensions and other benefits will no longer be applicable (Insurance, paid paternity/maternity leave, any insurance you may need to take out).

You will also realise that not all contracts are going to follow directly after one another i.e. you will spend the odd day/week out of work, so you will need to take this into account.

You will also have to pay for any training courses that may be required so that you can keep your skills up to date. These would normally be paid for by any decent employer but since you'll be working for your own limited company (which incurs fees) or through an umbrella company, (they sort your accounting out but also charge a fee, which you will need to take into consideration) these will need to be included.

A good way to check what the market rates are, is to search the internet for contract jobs that would be suitable for yourself and base your rate around that! You will probably find that they may be higher than the figure that I have suggested...

Answer 5

An average employee works 260 days a year (thats what most payroll depts use as a basis). Don't forget when you are comparing the amounts that out of the contract work salary, you also have to fund your pension and holidays, so you should add on a few more K for that.

Answer 6

Divide annual salary by 52 (weeks in the year) then divide by the number of hours you work each week. This will give you your hourly rate. (Don't forget your 'on-costs' - tax, self employed national insurance etc. - you don't want to be ripping yourself off. Compare your rate with other contractors' rates)

Answer 7

A simple rule of thumb is 180 days employment, taking into account holidays, bank holidays, weekends, days for selling and promoting your business and days when you are between contracts.

Divide £33k by this and you will have c£180 per day. Add to this your pension provision of say 10% and you should have in the region of £200 per day.

As you don't say what you are doing, I have not accounted for materials, travel,. accountants fees, company set up charges, website, marketing materials, business premises etc

Now compare this to what others are charging in your line of work, in your area and you can adjust accordingly.

Good luck!

Answer 8

Divide by 52 then divide by the number of days you work. Thats your daily rate.

Can i have your old job, i'll do it for 66% till i pick up all the info.

Answer 9

Annual salary divided by 365. -Amy.

Answer 10

Divide by 52 and then divide that by the numbers of hours you work in a week.
£33k / 52 = £634.61

If you then work a 40 hour week: £15.86 per hour or £126.88 per 8 hour day.