Invoice generator › Day rate vs salary
Day rate vs salary
A 500 day rate sounds like a 130,000 salary. It is closer to 60,000 — and the gap is the whole reason freelancers underprice.
What you need to live on
After tax and after business costs — the money that is actually yours.
Software, hardware, accountant, insurance, coworking, phone, training, bank fees.
A rough combined figure. If you have no idea, 30% is a common starting point in Europe — your accountant knows the real number.
How much you can actually bill
Holiday, illness, public holidays. Seven weeks is the honest figure for most people, not four.
This is the number people get wrong. Admin, proposals, invoicing, sales calls, email and dead time are not billable. Very few freelancers bill more than 60% of their working hours.
For quiet months, equipment, and the pay rise nobody is going to give you.
Where each billed hour goes
Nothing is uploaded. The numbers stay in this browser.
The naive comparison
500 a day times 260 working days in a year is 130,000. That figure is wrong in four places at once, and each one is subtractive.
| What the arithmetic assumes | What is true | Effect |
|---|---|---|
| 260 billable days | Seven weeks off leaves about 225 working days | −13% |
| Every working day is billed | Admin, sales and gaps mean 60–70% at best | −30 to −40% |
| No business costs | Software, accountant, insurance, hardware, workspace | −5,000 to −15,000 |
| Same tax and contributions as employment | Often higher when self-employed, because there is no employer half | varies |
Work it through: 225 days at a 65% billable share is about 146 billed days. At 500 that is 73,000 of revenue. Minus 9,000 of costs leaves 64,000 of profit, and after tax and contributions the take-home lands somewhere near a 45,000–50,000 salary.
A 500 day rate is roughly a 50,000 job. Not a 130,000 one.
Going the other way: what should a salary cost as a day rate?
If you are leaving a job and want to stand still, the honest multiplier on your gross salary is 1.5 to 2 times, converted to a daily figure over billed days rather than working days.
The reason it is not 1.0 is that an employer was paying for a great deal you never saw on your payslip: their share of social contributions, paid holiday, sick pay, pension contributions, equipment, software, training, an office, and the salary of the people who found you the work. As a freelancer all of that is yours, including the last one.
The calculator above is the reliable way to do this conversion: put your old net salary in as the take-home you want, your real costs, and an honest billable share.
What freelancing gets you that the comparison ignores
The numbers are not the whole picture, and it is not all downside:
- Upside. An employee's pay is capped by a band. A freelancer's is capped by their rate and their capacity, and both are yours to change.
- Deductible costs. Equipment, training and workspace come out of pre-tax revenue rather than post-tax salary.
- Diversification. Five clients is a more robust income than one employer — which is the opposite of how it feels in month one.
- Control. Which work, which hours, which clients. Not on a spreadsheet, but not worth nothing either.
And the honest other side: no paid sick leave, no notice period, no employer pension, no unemployment protection in most systems, and the admin burden this entire site exists to reduce.
The number to actually compare
Not day rate against salary. Compare annual take-home against annual take-home, after tax, after costs, with realistic billed days on the freelance side. It is the only comparison where both sides mean the same thing.
And add one line to the freelance side that people forget: the buffer. A salary is smooth; freelance income is not. Two months of expenses in reserve is not conservatism, it is the price of the volatility — and it has to come out of the same rate.
A rule of thumb, since people ask
Freelance day rate needed ~ gross salary / 100
A 60,000 salary points to roughly 600 a day. Crude, and it lands surprisingly close for mid-career knowledge work in Europe at a 60–65% billable share. Use it to sanity-check the calculator, not to replace it.
From the makers of InvoiceAbroad
The costs a salary hides
Freelancing means carrying the admin a company used to absorb. Flowzivo takes back the invoicing, quoting, expenses and contracts part of it for $8 a month.
See Flowzivo →30-day trial, no card required. $8/month after that.
Frequently asked questions
How do I convert a salary into a freelance day rate?
Multiply your gross salary by 1.5 to 2 and divide by the days you will actually bill, not the days you will work. The multiplier covers paid holiday, employer contributions, equipment, sick pay and the gaps between projects.
Is a 500 day rate the same as a 130,000 salary?
No. After realistic billed days, business costs and self-employed tax it is closer to a 45,000 to 50,000 salary in take-home terms.
Why is a freelance rate so much higher than an hourly salary?
Because it also has to pay for holidays, sick days, unbillable hours, business costs, equipment, and the employer contributions an employer used to cover.
What is a good rule of thumb for salary to day rate?
Gross annual salary divided by 100 gives a workable starting day rate for mid-career knowledge work at a 60 to 65% billable share. Verify it with a proper calculation.
Should I include a buffer in my rate?
Yes. Freelance income is uneven and a salary is not, so the reserve that smooths it has to be funded by the rate — typically 10 to 15% on top.