Someone offers you 900 dollars a day. You are on 180,000. The mental arithmetic takes about two seconds: 900 times 260 working days is 234,000, so the contract is worth fifty grand more.
That calculation is wrong by about seventy thousand dollars, and it is wrong in the same direction every time.
Where the money goes
Two things are missing from it, and both favour the contract.
You will not bill 260 days. Take off 20 days of annual leave, roughly 11 public holidays depending on your state, and a handful of sick days, and you are at 224. Take off four weeks between contracts, which is a modest assumption in a normal market, and you are at 204. The same rate is now 183,600 rather than 234,000.
Superannuation is on top of a salary, and often not on top of a rate. A permanent base of 180,000 is a package of 201,600 once the 12 per cent guarantee is added. If your day rate does not include super, that 183,600 has to fund it out of the same money. Divide by 1.12 and the equivalent base is 163,900.
| The same 900-a-day offer | Reads as |
|---|---|
| 900 × 260 weekdays | AUD 234,000 |
| … on 204 billable days | AUD 183,600 |
| … once it funds its own super | AUD 163,900 |
| The permanent offer it was beating | AUD 180,000 |
The contract that looked fifty thousand ahead is sixteen thousand behind. Nothing about the offer changed; only the arithmetic did. You can run your own numbers through the day rate calculator, which does this in both directions and shows every deduction rather than hiding them in a multiplier.
The bench is the number that actually decides it
Everything above turns on how many days you bill, and the single biggest input there is time between contracts.
At four weeks on the bench, that 900-a-day rate is worth 163,900. At twelve weeks, in the kind of market where a client freezes headcount and your extension does not come, it is worth 131,800. That is a thirty-two thousand dollar swing driven entirely by something nobody can promise you at signing.
This is why we do not publish an assumed bench figure, and why you should be wary of any calculator that does. There is no honest industry number for it. It depends on your specialism, your network, the market that quarter, and how much notice you get before a contract ends. What we can do is make it a visible input rather than burying it in a multiplier, which is what the tool does.
Confirm the superannuation question in writing
Two rates that look identical can be 12 per cent apart. PAYG contracts through an agency usually pay super on top of the quoted rate. Working through your own company or on an ABN usually does not, in which case the rate has to cover it.
On 204 billable days, 180,000 base matches roughly 990 a day when super is not included and about 880 a day when it is. If you are comparing two contract offers and only one has confirmed the answer, you are not comparing them at all.
What is in neither number
Four things sit outside every figure above, and we deliberately do not put a dollar value on them because any value we chose would be invented:
- Notice and redundancy. A permanent role has both. A contract typically ends when it ends, sometimes with a week.
- Paid parental leave, which accrues to an employee and not to a contractor.
- Insurance, accounting and the admin of running your own entity, which is real money and real hours.
- Training, equipment and conference budgets an employer would otherwise fund.
None of those makes contracting a bad idea. They just mean the cash premium is a payment for carrying risk, not a free upgrade, and it is worth knowing roughly how large the premium is before deciding whether the risk is worth it.
When contracting genuinely wins
It often does, and not only on money:
- The premium is large and the bench is short. If you are in a scarce specialism with a strong network, and the rate clears the break-even by 20 per cent or more, the cash case is straightforward.
- You want range fast. Four clients in two years teaches you things four years at one employer does not, particularly early in a career.
- You are between things. A contract that pays well while you decide what you actually want next is a perfectly good use of a year.
- You want the control. Defined scope, defined end date, and no performance cycle is genuinely worth something to some people.
When permanent wins
- The premium is thin. If the rate is inside a few per cent of break-even, you are taking on all of the risk for none of the return. That is the case to walk away from.
- You need stability you can prove. Mortgage approval is materially harder on twelve months of contract income than on a salary, and that is not a small consideration.
- You want to build something. Contracts end before most systems mature. If you want to own an architecture rather than deliver against someone else's, permanent is the structure for it.
- Progression matters to you. Nobody promotes a contractor. Title and scope growth happen inside organisations.
A day rate is not a salary with a bigger number on it. It is the same job with the leave, the super, the notice and the gaps between contracts taken out and handed back to you as cash. The question is whether the cash covers them.
Before you decide
Work out the equivalent base with the day rate calculator, using your own estimate of the bench rather than ours. Then check that figure against what the role actually pays with the salary checker, so you know whether the permanent side of the comparison was a good offer in the first place. If it was not, that changes the answer more than any of this arithmetic does.
FAQ
What day rate is equivalent to a 180k salary in Australia?
About 990 dollars a day if superannuation is not paid on top of the rate, or about 880 if it is. That assumes 204 billable days: 260 weekdays less 20 days annual leave, 11 public holidays, 5 sick days and 4 weeks between contracts. Fewer billable days means the rate has to be higher to match, which is why the bench matters more than most people allow for.
Is contracting better paid than permanent in Australia?
Usually yes on cash, but by far less than the headline suggests. A rate of 900 dollars a day looks like a 234,000 salary if you multiply by 260 weekdays. On realistic billable days, funding its own superannuation, it is worth about 164,000 as an equivalent base. The premium is real but it is a premium for carrying risk, not free money.
Does a contract day rate include superannuation?
It depends on the engagement. PAYG contracts through an agency usually pay superannuation on top of the quoted rate. Working through your own company or on an ABN usually does not, so the rate has to fund it. It is worth about 12 per cent, which is the difference between two rates that look identical, so confirm it in writing before comparing anything.
How many days a year does a contractor actually bill?
There is no honest published figure, which is why any calculator that assumes one is guessing. Start from 260 weekdays, take off the leave and public holidays you will actually take, and then make your own estimate of time between contracts. Four weeks a year is a modest assumption in a normal market. Twelve is not unusual in a slow one, and it moves the equivalent salary by more than thirty thousand dollars.