Start with your salary - but do not stop there
Your annual salary is the obvious starting point because it represents your guaranteed gross employment income.
However, employment can provide additional financial value that does not appear in the headline salary figure.
Paid holiday has a real value
An employee normally continues receiving their salary while taking annual leave.
A freelancer usually does not earn billable revenue while taking time away from clients. That means a freelance rate has to support both working time and non-working time.
Employer pension contributions matter too
If your employer contributes to your pension, that contribution forms part of the value of your employment package.
When freelancing, you may choose to continue making pension contributions yourself, meaning the money needs to come from your own revenue.
Not every freelance hour is billable
A freelancer might work 35 hours during a week without invoicing clients for all 35 hours.
Administration, proposals, invoicing, meetings and finding new clients can all consume working time without generating direct revenue.
Compare realistic annual scenarios
A more useful comparison is to model an entire year rather than comparing two hourly figures.
- Annual salary
- Employer pension contribution
- Paid holiday allowance
- Freelance hourly rate
- Realistic billable hours per week
- Number of weeks you expect to work
Example: salary versus freelance revenue
On headline gross figures, the freelance scenario produces more annual revenue. But that does not automatically mean the freelancer will be financially better off.
Tax, business expenses, insurance, pension contributions and other factors still need to be considered.
Money is not the only consideration
Some people value the predictability and employment protections of a salaried role. Others value the flexibility and earning potential that freelancing can offer.
The best option is not always the one producing the largest number on a calculator.
- Income stability
- Flexibility
- Control over working hours
- Career progression
- Client risk
- Job security
- Time with family
- Potential future earnings
Compare your own scenarios
Enter your salary, pension, paid holiday and freelance assumptions to see both options side by side.
Open salary vs freelance calculatorWorkSmart Money provides calculators and educational content to help make work and money decisions easier to understand. Figures and examples are illustrative and should not be treated as personal financial advice.