Hourly rate and pro-rata pay

Why the fraction never comes out even

Almost every part-time contract is written as a fraction of a full-time post: 0.6 FTE, four days a week, 18.75 hours instead of 37.5. The salary is scaled by that fraction and the offer letter stops there. What it does not say is that the tax system is not scaled by anything.

Income tax and National Insurance are both charged on the slice of your pay above a fixed threshold. The first £12,570 of income is free of income tax whether you earn that in a fortnight or a year, and employee National Insurance begins at £12,570 — for 2026-27, the same figure. Halve someone's gross pay and those fixed amounts do not move, so they now shelter twice as large a proportion of it. The taxable slice falls by more than half, and so does the tax.

The effect is far stronger where a band boundary sits between the two figures. Drop from a salary in the higher rate band to a part-time share of it that lands in the basic rate band and the marginal pounds you gave up were the most heavily taxed pounds you had. Someone cutting their hours from five days to three does not lose two fifths of their take-home; they lose noticeably less. The calculator above works out exactly how much less for your own numbers, and shows it whenever your hours differ from a full-time week.

This runs the other way too, and it is the reason overtime disappoints. An extra shift is taxed at your marginal rate, not the average rate you see on your payslip, because it sits on top of everything you have already earned. The box above prints both: what an hour is worth gross, and what the next one is actually worth once your marginal rate is applied. For anyone whose income passes through the Personal Allowance taper, the gap between those two numbers becomes startling.

Day rates, and the weeks nobody counts

A day rate looks like the easiest conversion on this page and is quietly the most dangerous. Multiply £350 a day by 5 days by 52 weeks and you get a headline number that assumes you bill every working day of the year — no holiday, no bank holidays, no gap between contracts, no illness. A permanent employee is paid through all of those. A contractor is not.

Ten weeks off is not an unusual year for a contractor once holiday, public holidays and a single gap between engagements are counted, and it takes £17,500 off the invoiced total. The weeks-a-year box in the calculator is therefore not a detail — for anyone quoting a day rate it is the single input that moves the answer most.

Comparing a rate against a salary honestly

The other half of the contractor question is what the two sides of the comparison actually cost. A salary is never the whole cost of a job: employer National Insurance of 15% is charged on everything above £5,000, and it is paid by the employer on top of your pay, which is why it never appears on your payslip. Pension contributions, holiday and sick pay sit on top of that again.

So the figures that belong side by side are the invoice and the total cost of employment, not the invoice and the salary. Billing £80,500 in a 46-week year costs a client the same as employing someone on a salary of about £70,652 — who takes home £51,535.56 of it, with the holiday and the notice period included. Set against the salary rather than the cost, the contract rate looks £9,848 better than it is.

That comparison is deliberately partial in the contractor's favour in one respect: the take-home column above taxes the invoiced total as employment income, which is what happens inside IR35 or through an umbrella company. Outside IR35, working through your own limited company, the tax is a different calculation entirely — corporation tax on the company's profit, then salary and dividends out of it in some combination — and that one is run in full on the salary versus dividends page. What the table here is good for is the part contractors most often skip: how sensitive the whole thing is to the number of weeks you actually bill, and how much smaller the gap to a salary becomes once the employer's National Insurance is on the correct side of the ledger.

What the calculator assumes

That your pay is steady across the year, which is what makes an annual National Insurance basis exact. That the hours you enter are paid hours, because an unpaid lunch break is not part of the contract: a nine-to-five with an hour off for lunch is seven paid hours a day and thirty-five a week, not forty. And that any holiday you are paid for is inside the weeks-a-year figure rather than outside it — which for a salaried employee means leaving it at 52, because you are paid for all of them.

If you are checking a rate against the National Minimum Wage, note that HMRC tests it over each pay reference period rather than the year, so an average that clears the rate can still fail in a week with unpaid overtime in it. A student loan and a pension are both asked for above, and both matter more here than on a salaried page: neither scales with your hours, so a part-time year can cross a threshold the shifts themselves never suggest. What this page still does not ask about is a bonus, a benefit in kind or a second income — the take-home pay calculator takes all of those. Every rate and threshold used on this page is listed with the gov.uk page it was read from on methodology.

Rate and hours questions

How do I work out my annual salary from an hourly rate?

Multiply by the hours you actually work and the weeks you are actually paid for — not by a standard year. The difference between a 37.5-hour week and a 40-hour week is nearly 7% of the answer, and the difference between 52 paid weeks and 46 is larger still for anyone not on a salaried contract.

Is my hourly rate worth more as a contractor?

Only after the things an employer was paying for stop arriving. Holiday, sick pay, an employer pension contribution and the employer National Insurance on top of your salary are all real costs that a day rate has to cover before the comparison is honest.

What is my take-home pay per hour after tax?

Lower than the rate divided by anything, because deductions do not scale evenly: the first slice of your income is untaxed and the last is taxed hardest. The table above shows the net figure per hour, which is the only version that answers whether an extra shift is worth taking.

How much is an extra hour of overtime actually worth?

Whatever is left after the marginal rate, which is the rate on your next pound rather than your average one. For anyone near a student loan threshold or the Personal Allowance taper, that figure is markedly worse than the headline deduction — which is exactly when people are offered the extra hours.