How to Calculate an Annual Salary Based on a Daily Rate?

Llooseygoosey on 24/10/2022 - 10:53

How much would I see in my bank account each month based on a daily contracting rate of $500 p/day?

For context, I work in HR and have a salary package of $100000 (inc super). The money that comes into my account each month is roughly $5700.

I've been looking at contracting roles that are $500 p/d. When I put this into paycalculator.com.au, it's saying the monthly income is $7213 p/month - is that what I'd see in my bank account each month?

I feel silly asking this question but scared to ask others.

Financial

Comments

  • peacefulpeanut on 24/10/2022 - 15:07
    +1

    According to this salary calculator, you'll get A$7,853 net per month (assuming you work full time 19-22 days per month). Try this website: you can count down to hourly rate and calculate your income tax. Excluding salary sacrifice. https://au.talent.com/tax-calculator?salary=500&from=day&reg…

  • OzFrugie on 24/10/2022 - 20:00

    How much more % increase in pay before you are willing to consider/accept contract roles? I heard ppl say at least 30-40% ??

  • ozbargainsam on 24/10/2022 - 21:02

    Hmm, are you me because I just did a spreadsheet comparing my current job to a casual offer I received.

    The numbers aside, as others have said, you give up a lot of things you take for granted in a permanent role (like being very hard to fire). Make sure you tally up any perks you get: allowances, LSL, annual leave balance that appreciates with pay rises, bonuses, employee support programs, paid training time off, personal/sick/bereavement/parental leave. And intangibles like having access to the resources of a larger company if you need help/advice/training.

    For example, when I did my naive calculation, I was like 'damn, I should've switches ages ago', because the take home was over 75% more. But once I added other benefits and an expected promotion/raise, it was more like 30% bump. In my case, I also have to contend with having to burn a bridge to take up this offer.

    As one already said above, you are 'solo' in the sense that if you want career progression, you have to make your own way. If you're a self-motivated person, this can work out well. You're free to take your own path without being locked into company hierarchy or politics.

  • drfuzzy on 25/10/2022 - 00:27
    +3

    I think you should stay where you are. You don't have a good grasp on this. $500/day is not sufficiently above your annual salary to justify the added risk and added costs you need to factor for. If you could get $750+/day consistently I would change my opinion.

  • SydBoy on 25/10/2022 - 07:08
    +4

    As a contractor I use 221 days per year as working days which allows for 10 public holiday, 20 annual leave without pay, 10 sick leave and 104 weekend days so 365-20-10-10-104 = 221.

    Now, if you don't take annual leave then you can work extra but I always consider that in budget while deciding rate.

    So roughly you get to work average 18.4 days per month so if you ask $500/day then average pay per month=50018.4=9200 per month before tax. Plus super. Or annual pay of 500221 = $110,500 plus super.

    Now, never work for fixed term contract or casual contract on annual pay which is less then 1.3 to 1.5 time normal permanent pay.

    Employer this day to screw employees created fixed term contract which gives you paid leave but contract expires after 2 years so even for that ask for contract rate not the permanent rate as it is also type of contract that doesn't pay redundancy or long service leave or penalty for being temporary work.

    • FlyingMiffy on 25/10/2022 - 13:59
      +1

      221 days is what most businesses use for managing contractors too. And most businesses apply a 20-30% loading against baselined perm costs so what you are suggesting makes sense. The OP will need closer 600 to go contracting to make it worthwhile…

      • SydBoy on 25/10/2022 - 14:07

        i think fairwork do say that for casual work employer to provide 25% loading if i am not wrong. however, this days even a government agency use fixed term contract to manipulate fairwork provision where they will lure you to get into fixed term contract which pays exactly the same amount as permanent but comes with 2 year or 1 year or 6 month contract plus paid leaves but without long-service leave or redundancy payment…..which is dodgy and union never opposed this thing because when liberal took power in NSW they changed this provision through circular in government agencies to start employing people on fixed term contract unless necessary for operational works… IMO.

        i wrote to labor politician including bill shorten but no success.

        this rotting of system started in NSW under liberal but then went into a practice all across country including VIC, WA & QLD … where labor is the government so i stopped writing about it to labor.

        this is exploitation and one way it is back door entry to work choice but worst then work choice in my opinion …. and labor & liberal both using it.

  • RichieRichAus on 25/10/2022 - 07:37

    Just keep it simple:
    Day rate x 5 days x 44 weeks

    That takes into account public holidays, 4 weeks annual leave, 2 weeks sick leave.

    • streetsmart on 31/08/2023 - 01:02

      ditto or as someone already mentioned above use the 220 days x day rate and plug that amount in paycalculator to know your take home, taxes and super amounts

  • offthetap on 25/10/2022 - 08:51
    +2

    this https://paycalculator.com.au/

    • truongster on 25/10/2022 - 11:33
      +1

      This. It has lots of features that you can adjust to see the changes.

  • cubestreamer on 25/10/2022 - 08:57
    +1

    Just use this:
    http://www.contractorpermie.com/

  • misu p on 25/10/2022 - 09:59

    Use the 44 weeks mentioned above by others. I personally use paycalculator.com.au. The trick to comparing contracts and FTE roles is to use 44 weeks as the number of weeks in a year that you will work. This is at least how I use it, to match what a FTE position would have: 4 weeks for holidays, 2 weeks for public holidays and 2 weeks for sick days. Compare the pay per year.

    When I was working on a contract you could see the FTE people being so happy about the holidays when they came up… I was "…. why would I be happy? I am not paid for that day".

    If you use 44 weeks then you will see that $500 per day on a contract is equivalent to 110k FTE if the $500 excludes super and 100K FTE if it is including super.

    As a rule, you should be earning at least 20% more when you go on contract vs FTE. Remember that your contract can be terminated at any point. Also short contract will always have a premium.

    oh, btw, most contracting jobs are 40h per week and FTEs are 38h per week. You should take that into consideration too.

  • gromit on 25/10/2022 - 10:21

    for contracting calculate it on a max of 44 weeks a year (holidays, public holidays, sick leave etc). You will almost certainly lose a percentage to your pimp as well, usually around 10% (sometimes more). Also remember if you have been at your FTE job more than 7 years you would be earning LSL which you will no longer be accumlating as a contractor. stick it all in the calculator, after all those deductions you need to be earning 20%+ considering the risk you are taking on, don't forget to calculate any income protection insurance or other benefits like training, equipment ({e.g. laptop/phone) that your work may have provided that you lose with contracting (or at least have to pay for yourself).

    PS: at $500 a day you would be insane to switch based purely on pay.

  • tihir on 25/10/2022 - 10:58

    Depending on your seniority and what industry you do HR work in, you may well be award covered. If you are award covered then it's almost certainly going to be unlawful for someone to engage you on a daily rate basis. (it's not unlawful for you - but it's unlawful for the employer).

  • G K on 25/10/2022 - 11:48

    If you work 5 days per week, bank will consider $500X5 per week, and consider 48 weeks to calculate your annual income before tax, assuming $500 per day is excluding super. If $500 is including super, you need to find out your per day pay excluding super and use the same formula. St George considers 48 weeks for people doing contracts.

  • archieduh on 25/10/2022 - 12:38

    Yes* you will see 7213 in your account

    *When you have no non-work days in that month

  • Tnetennba on 25/10/2022 - 13:07
    +2

    I wouldn't swap a 100k/year salary for a $500/day contract. Hell no! Realistically you work something like 45 or 46 weeks per year equivalent, assuming some time off and public holidays.

    You're hardly looking at a pay increase in this scenario, and taking a blow to your job security. Unless the current job is a nightmare and the new job has some other benefits that might contribute to your work/life balance significantly, I'd be avoiding for sure.

  • ribze1 on 25/10/2022 - 13:42
    +3

    I hate the concept of a "salary package", it's a fugazi to fool people in to believing they're getting paid more than they are. It should legally be salary + super + bonus or whatever else.

    My wife was offered two roles at the same time and one was a package and she was like well one is 70k package and the other is 67k plus super. I said take the 67k cause the 70k package is more like 63k.

  • dlakers3peat on 25/10/2022 - 13:44

    I put your figures into pay calculator with 100k per year inc super and it comes to $5730.47 net income per month.

    Contracting roles you normall pay for own super, sick leave and annual leave.

  • OzzyOzbourne on 25/10/2022 - 14:16
    +1

    Wow, you can earn over $100k without knowing how to work it out, google it or read the ato website!

  • Surfer Dude on 25/10/2022 - 16:28
    +1

    http://www.contractorpermie.com/

    Simple calcs show you'll be $12.5k better off if you take the $500/day job (assumes some sick leave, unpaid P.holidays and unpaid annual leave).

    If you start heading down the contracting route you should consider the tax implications and think about tax minimisation strategies.

    Quick question: how many years of experience do you have in HR and do you have a degree (will help to give you my opinion on whether the rate is good or if you should be looking for more $$)

    • cimrak on 25/10/2022 - 17:32

      Having just started my first white-collar contracting role after being FTE for quite some time, any suggestions on those tax minimisation strategies or where I can go read more?

      • Surfer Dude on 25/10/2022 - 17:58

        What's your day rate?

        • cimrak on 25/10/2022 - 18:22

          800/day

          • Surfer Dude on 25/10/2022 - 18:29
            +1

            @cimrak: Solid rate mate!
            What industry are you in and have you set up a company or are you contracting directly?

            Biggest way to reduce tax liability at that income as non-company is a novated lease on the shortest term you can afford to pay. (bonus mode is to then re-novate the residual amount with different financier. It's a bit of a Gray area so confirm compliance with your accountant) then rinse and repeat for three years.

            Feel free to DM me to continue this conversation if you'd prefer to chat discretely.

      • hothed on 25/10/2022 - 18:13

        If you are paid from same employer for approx 80% of your income for financial year, you are classed as payg.

        Look up ATO.

        • Surfer Dude on 25/10/2022 - 18:30

          Yes… Yes you are 😉

          There's ways around PSI rules FYI

      • peter05 on 25/10/2022 - 19:09
        +1

        a typical one would be to work under ABN so you can expense things and have flat 28% tax rate

        • OzFrugie on 26/10/2022 - 01:05

          what things can you expense under ABN ?

          • peter05 on 26/10/2022 - 10:30
            +1

            @OzFrugie: everything you'd need to run your business

            when running it as a business it becomes a separate entity.

            For the OP I don't think that it's worth doing as they're not in a high enough tax bracket to make it worth it.

            As example, small businesses can write off asset purchases for pretty significant things like a car. Reduces your taxable income immediately.

            You can also smooth out the pay, you might contract heavily for 2 months then take 2 months off and whatever you pay yourself would be the net after business expenditures (manage cashflow before next tax return season)

            You might also consider having an assistant help you with your administrative tasks for the business for a day a week, maybe a partner that's on a lower tax bracket?

            Whatever you do it should go through an accountant and also be truthful. Keep in mind also that there will be additional costs such as payroll tax. Your accountant is also going to cost a lot more than the typical H&B $80 specials

            • OzFrugie on 26/10/2022 - 13:22

              @peter05: Thanks. If I just pay myself (and potentially my partner) from the company income, do I need to pay payroll tax?

              • peter05 on 26/10/2022 - 15:59

                @OzFrugie: I think in most cases yes. The only companies exempt from paying payroll tax are those that fall under a threshold, i think it's around 40k

                • BartholemewH on 27/10/2022 - 09:58

                  @peter05: The threshold for payroll tax in NSW is 1.2M per annum.

                  • peter05 on 27/10/2022 - 10:01
                    +1

                    @BartholemewH: ah, this is why you have to see a professional :D

                    so the above 40k is actually 58k and it's per month, and as you have stated then on the same scale NSW is around 100k/month

  • eklipsils on 25/10/2022 - 16:45

    I calculate annual salary based on hourly rate. For example, $50/hr will equal to roughly a $100k salary per year. Working full time.

    The maths is Hourly rate x 2 = Yearly salary x 1000
    50 x 2 = 100 x 1000 = 100,000

    • misu p on 25/10/2022 - 19:45

      that calculation makes no sense… I understand what you are doing but that is not how = works.

      • eklipsils on 26/10/2022 - 00:06

        It's just a rough estimate and not exact dollar amount but it is close enough to work out an estimated annual salary based on hourly rate when working full time.

        Try it for yourself and see.

        • CheapWrangler on 26/10/2022 - 17:38
          +1

          If you use my equation you get a much more accurate answer

          hourly rate x 69 x 4.20 x 7 = yearly salary

  • hothed on 25/10/2022 - 17:36
    +1

    500/day is not enough of a jump over your current salary.

    Ask for $600/day due to risk. They can let you go at any time or not renew the contract. You will need to save up emergency fund if you are out of work for 6 weeks at the end of this contract.

  • Mintee on 25/10/2022 - 20:44
    +1

    My gawsh, people in HR get paid that much?! Shoulda gone into a different career

    • qvinto on 25/10/2022 - 21:51

      There sure are some bull*hit jobs out there where the skill to pay ratio is quite favourable

  • kaleidoscope on 25/10/2022 - 21:14

    Been using https://paycalculator.com.au/ since I landed here down under. It hasn’t faulted me eith figures. Be aware that you are calculating assuming its annual package. If you switch roles in between or switch to a different package you might have to either pay more tax by end of year or have a return.

    Cheers.

  • tiredaccountant on 25/10/2022 - 23:20
    +2

    I'm late to the party but I didn't see anyone else mention it - you need to factor in paying GST at that income level.

    When someone looks at switching from PAYG to "contracting", you need to factor in the 30% rule:

    *10% for GST
    *10% for super (now 10.5%)
    *10% for admin, insurance etc - at this level you would really need to think about incorporating and trading through a company rather than as a sole trader.

    If the contract isn't offering you at least 30% more than what you are currently on, then you are actually earning less.

    Once you factor in the loss of paid leave and instability of contracting, $500 per day is looking a whole lot less attractive than a regular 9-5 on $90k plus super.

    • BartholemewH on 27/10/2022 - 10:06

      Agreed.

      -AnotherTiredAccountant

  • rlf on 26/10/2022 - 10:19

    OP if you were an electrician or a plumber fair enough.

    You work in HR. This stuff is literally your job.

  • od810 on 26/10/2022 - 12:01
    +2

    Usually my calculation is:
    day rate * 97.5% *5 *46 = your annual equivalent package

    • 2.5% admin fees (i.e. payroll)
    • 4 weeks of annual leave + 2 weeks of public holiday, you end with 46 weeks

    so your case $500 day rate = ~ $112k package super inclusive

    I only work as a contractor, if the rate is at least 30% more than my full time rate. I wouldn't take $500 day rate if you are on $100k package right now.

    • BartholemewH on 27/10/2022 - 10:07

      Plus GST.

      • od810 on 28/10/2022 - 09:20

        Only if you use your ABN, usually if you go through the agency payroll, you don't need to include gst.

        • BartholemewH on 28/10/2022 - 14:13

          Guess I've always been wary of sham contracting. Guess I should brush up in this area thanks.

  • Pudina Chutney on 26/10/2022 - 20:33

    Day rate X number of days X number of weeks

    Assuming you work 5 days a week:

    $500 X 5 X 52

  • unhuman on 27/10/2022 - 10:07

    500 dollars a day will not be more than 100k you are currently getting. There’s lots of circumstances where you can work extra and make like 10k more but that’s not advisable.

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