How a day rate translates to an annual salary

If you transition from employment to freelancing, a £300 day rate might look like a huge pay rise. But straight math (£300 × 5 days × 52 weeks = £78,000) is dangerously misleading.

The "46 Week" Rule

Employees get paid when they are sick, when they are on holiday, and on bank holidays. Freelancers only get paid when they work.

A standard working year has 52 weeks, but you must subtract:

• Holidays: ~4 weeks
• Bank holidays: ~1.5 weeks (8 days)
• Sick leave/Admin/Unbillable time: ~0.5 weeks

This leaves you with roughly 46 billable weeks in a good year. So a £300 day rate is actually £300 × 5 days × 46 weeks = £69,000 gross.

The Hidden Costs of Freelancing

To compare that £69,000 accurately to a PAYE salary, you have to account for the benefits employees get that you now have to pay for yourself:

• Pensions: Employers must contribute at least 3% to a workplace pension. As a freelancer, you fund 100% of your retirement.
• Equipment & Software: You buy your own laptop, phone, software licenses, and pay your own accountant.
• Job Security: Freelancers charge a premium partly to cover the risk of gaps between contracts.

The Rule of Thumb

A common rule of thumb is to divide your target permanent salary by 100 to find your minimum day rate. For example, if you want the lifestyle of a £50,000 salary, you should charge at least £500 per day.

Another way is to take your day rate, multiply by 5 days, multiply by 46 weeks, and then subtract about 20% for expenses and lack of benefits to find the true "salary equivalent".