Employ vs subcontract
Full PAYE cost — NI, pension, van, insurance and downtime — per productive day, against a subbie's day rate for the same output.
Employee cost & days
Before employer NI and pension are added.
3% is the auto-enrolment minimum.
If the business provides one for this role.
Employer liability or other cover specific to employing.
Typically 260 for a 5-day week.
28 days is the statutory minimum incl. bank holidays.
Typical average across a small team.
Travel, admin, waiting on materials — paid, not billable.
For the same productive days of work.
Employer cost per productive day
— employing costs £2,850 more a year than the subbie.
Illustrative only. Excludes IR35/employment-status risk, recruitment cost and the value of guaranteed availability. Employer NI: £4,050. Pension: £960.
A £32,000 salary and a £180 day rate look like they're answering different questions, and they are — one's an annual cost, the other's a daily one, and comparing them directly means putting both on the same footing: what does a year of the work actually cost, and how many productive days does that year buy.
What sits on top of a salary
Employer National Insurance adds 15% on earnings above the secondary threshold. Auto-enrolment pension adds at least 3% more. A van, if the business provides one, and any insurance specific to having an employee both add further annual cost that a subcontractor's day rate simply doesn't touch — a subbie brings (or charges separately for) their own van, and there's no employer NI or pension on a self-employed invoice at all.
Why "productive days" is the fair basis
An employee gets paid for holiday, sick days and the inevitable downtime between jobs — travel, admin, waiting on materials — even though none of those days produce billable work. A subcontractor only invoices for days actually worked. Dividing the employee's full annual cost by their realistic number of productive days, rather than by 365 or even by contracted working days, is what makes the resulting "cost per day" genuinely comparable to a day rate quoted by a subbie.
A worked example
£32,000 salary, 3% pension, a £3,000 van and £1,000 insurance a year, out of 260 working days minus 28 holiday, 5 sick and 15 downtime days — 212 productive days. Total employer cost comes to roughly £41,010, or about £193 a day. Against a £180 day-rate subbie doing the same 212 days (£38,160), employing costs about £2,850 more a year on these particular numbers — but the gap narrows or reverses quickly with a lower salary, less downtime, or a higher subbie rate.
What this isn't
This doesn't factor in IR35 or employment-status risk on the subcontractor side, recruitment and training costs on the employee side, or the value of having someone reliably available versus booking a subbie job by job — all of which matter to the real decision and aren't captured by the arithmetic alone.
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