Reviewed 5 August 2026
Start by labelling each figure correctly
- Contract rate
- The agreed price for a billable hour or day.
- Gross contract revenue
- Amounts invoiced before business costs and personal deductions.
- Salary
- Contractual employment pay before employee deductions.
- Take-home pay
- What remains after the deductions that apply to the individual.
Comparing a £100,000 gross revenue estimate with a £100,000 salary only compares the top line. It does not establish that the two opportunities have equal economic value.
Paid and unpaid time can change the comparison
Employees and people classed as workers may have paid holiday rights. A genuinely self-employed person will normally fund time away from work through the rate charged and cash retained by the business. The same can apply to illness, training and gaps between client engagements.
This is why our annual revenue calculators ask for working weeks. If you use 52 weeks for a contract forecast but compare it with employment that includes paid leave, the contract side starts with an unrealistic advantage.
Compare the whole package, not only cash pay
Depending on the roles, relevant differences may include:
- employer pension contributions and other workplace benefits;
- paid holiday, sick pay and family-related leave;
- insurance, professional subscriptions, accounting and equipment;
- travel or accommodation that cannot be recharged;
- sales time, contract gaps and the risk of late payment; and
- the value of flexibility, autonomy or continuity to you.
VAT collected for HMRC should not be treated as revenue available to spend. Tax and National Insurance depend on the legal structure and personal position, so a simple gross conversion should not be presented as a take-home estimate.
The contract label does not decide employment status
GOV.UK explains that a contractor may be self-employed, a worker or an employee, and that tax status and employment-law status can differ. The practical working relationship matters, including control, invoicing, financial risk and the terms of the engagement.
If status is uncertain, use official guidance or professional advice. Do not change a financial comparison by assuming rights or tax treatment that have not been established.
A practical comparison method
- Estimate cautious contract revenue. Use the rate and billable time you can reasonably support.
- Remove business costs. Include costs required to win and deliver the work.
- List employment value separately. Record salary, employer pension and material benefits without inventing a single universal multiplier.
- Consider risk and flexibility. Decide how continuity, notice, autonomy and gaps matter to you.
- Then assess tax. Use the structure and status that actually apply, with advice where needed.
For the first step, use the billable-time guide and a relevant gross revenue calculator.