Contractor Pay Guide

Why Estimate Monthly Earnings?

While many contracts are quoted with daily or annual rates, most personal financial planning revolves around monthly income and outgoings. Estimating your monthly earnings helps you:

• Create realistic monthly budgets.
• Understand your cash flow.
• Compare different contract offers on a like-for-like monthly basis.
• Plan for savings and investments.

Using the Contractor Pay Guide Calculator for Monthly Figures

Our main IR35 Calculator automatically provides a periodic breakdown of your earnings, including a monthly estimate. Here’s how to ensure it's accurate for your situation:

1. Input Your Contract Rate

Enter your contract value and correctly select the "Contract Value Period" (Year, Month, Week, Day, or Hour).

• If your rate is already monthly: Great! The calculator will use this directly for some parts of the calculation and then derive other periodic figures.
• If your rate is annual, weekly, daily, or hourly: The calculator will first annualize this rate to determine your gross annual income.

2. Key Settings for Annualization

If your input rate isn't annual, these settings under "Calculation Settings" are vital for accurate annualization, which then feeds into the monthly breakdown:

• Working Days Per Year: This is used to convert daily or hourly rates into an annual figure. For example, if your day rate is £500 and you work 220 days a year, your annual gross is £110,000.
• Hours Per Day (if "Contract Value Period" is "Per Hour"): This, along with "Working Days Per Year," converts your hourly rate to an annual sum.
• Week Settings (Hours & Days per Week): Under "Pay Information", these settings help annualize daily/hourly pension or salary sacrifice inputs if you specify them that way. For the main contract value, the "Hours Per Day" and "Working Days Per Year" in "Calculation Settings" are primary.

3. Enter All Other Relevant Details

Complete the rest of the form accurately, including:

• IR35 Status (Inside/Outside)
• Tax Year and Region
• Pension contributions (type, amount, and period)
• Student loan details
• Umbrella company deductions (if applicable for Inside IR35)
• Business expenses (if Outside IR35)

4. View the "Detailed Financial Breakdown"

After clicking "Calculate," scroll down to the "Detailed Financial Breakdown" table. This table shows:

• Initial Contract Value
• Gross Pay (or Company Revenue)
• All deductions (Tax, NI, Pension, etc.)
• **Estimated Take-Home Pay**
• **Take-Home Pay + Pension**

Crucially, each of these line items is broken down into **Yearly, Monthly, Weekly, Daily, and Hourly** figures. Your estimated monthly take-home pay will be clearly displayed in the "Monthly" column.

Example: Converting a Day Rate to Monthly Take-Home

Imagine your day rate is £400, you work 225 days a year, and your contract is Outside IR35.

1. Enter £400 as "Contract Value" and select "Per Day" as the period.
2. Set "Working Days Per Year" to 225.
3. Fill in all other relevant Outside IR35 details (expenses, pensions, etc.).
4. Click "Calculate."
5. In the "Detailed Financial Breakdown," look at the "Monthly" column for "Estimated Take-Home Pay." This will give you your estimated net monthly income.