Contractor vs Permanent Hiring Cost Calculator

It depends on the engagement length. For short engagements (typically under 20 weeks), a contractor is often cheaper because you avoid the one-time recruitment fee (10–15% of salary), the mandatory employer PRSI of 11.05%, and the auto-enrolment pension contribution of 1.5%. However, for longer engagements (over 6 months at full-time day rates), the higher daily rate of a contractor compounds and the permanent hire becomes more cost-effective. This calculator computes the exact break-even week for your specific salary and day rate combination.

When engaging a contractor through their own limited company or umbrella structure, you avoid: Employer PRSI (11.05% in Ireland, 15% in UK), employer pension contributions (1.5% auto-enrolment in Ireland, 3% in UK), statutory sick pay obligations, annual leave pay, and employer liability in many cases. The contractor is responsible for their own tax, PRSI, and pension as a self-employed person. You do still bear the agency margin if you hire through a staffing agency, which typically adds 10–20% to the contractor's quoted day rate.

The break-even day rate is the contractor day rate at which the total cost of engaging a contractor for a full year (46 billable weeks at 5 days per week) equals the permanent hire's annual total cost of employment (TCE). TCE includes gross salary, Employer PRSI, pension, statutory sick pay, and any configured benefits. If a contractor charges above the break-even rate for a full year, the permanent hire is cheaper. Below the break-even rate, the contractor is cheaper even over a full year. The break-even rate changes based on the permanent salary, benefits package, and contractor days per week.

Contractors price in their own overhead that permanent employees receive from the employer: they pay their own PRSI or National Insurance, fund their own pension, take unpaid leave, bear their own equipment costs, and have no employer sick pay protection. A contractor on €500/day working 46 weeks earns approximately €115,000 gross before personal tax. After paying PRSI (4%), income tax (40% above €42,000), and USC, their net take-home may be similar to a permanent employee on €75,000–€80,000. The day rate premium reflects this additional cost and risk.

For a €85,000 (approx. £71,000) role in Ireland, Employer PRSI at 11.05% adds approximately €9,400 to the annual cost. For an equivalent role in the UK at £71,000, Employer NI at 15% on earnings above £9,100 adds approximately £9,285. Irish auto-enrolment pension at 1.5% (capped at €80K) adds €1,200, while UK auto-enrolment at 3% of qualifying earnings adds approximately £1,200. The net statutory employer cost in Ireland is broadly comparable to the UK at mid-salary levels, with Ireland becoming relatively more expensive at very high salaries due to PRSI having no upper cap.

Yes, if you are hiring through a staffing agency. The agency charges the client company a day rate that includes their margin on top of what the contractor actually receives. A contractor being paid €450/day with a 15% agency margin costs you €517.50/day as the client. This additional cost should be included when comparing against a permanent hire, as it directly affects your budget. The calculator allows you to input the agency margin separately so you can see both the underlying contractor rate and the total cost to you.

No. A contractor operating through their own limited company or umbrella is only paid for days worked. If they are sick or take a holiday, they do not bill you. This is one of the financial advantages of contractor engagement that the raw day rate comparison often misses. The calculator uses 46 billable weeks per year (rather than 52) to reflect that contractors are not billed for approximately 6 weeks of their own leave and bank holidays. For a permanent employee, you pay salary for all 52 weeks regardless of absence (subject to sick leave rules).

Generally no, provided the contractor is genuinely self-employed and operates through their own limited company. Employer PRSI only applies to PAYE employees on the company payroll. If Revenue determines that a contractor relationship is actually disguised employment (based on control, integration, and economic reality tests), the engaging company can become liable for unpaid PRSI, penalties, and interest. This is analogous to IR35 in the UK. For this reason, it is important that contractor arrangements have genuine commercial substance and that the contractor has multiple clients, own equipment, and real financial risk.

A recruitment agency fee is a one-time cost paid when a permanent employee is sourced through an agency. It is typically 12–18% of the gross annual salary, paid once at the start of employment. For a €85,000 hire with a 15% fee, that is €12,750 (a significant Year 1 cost that does not recur in Year 2 onwards). The fee has the biggest impact on short-term comparisons: it makes the permanent hire look more expensive for engagements under 6 months. This calculator separates the Year 1 total cost (including recruitment) from the ongoing annual TCE so you can model both scenarios accurately.

The calculator uses 46 billable contractor weeks per year. This reflects that most contractors take approximately 6 weeks of leave annually (including bank holidays), during which they do not bill. A permanent employee's salary is paid for 52 weeks regardless of leave (statutory annual leave is included in the compensation package). This distinction is important: a contractor at €500/day for 5 days/week for 46 weeks costs €115,000. A permanent employee on a salary structured to provide equivalent gross earnings would receive that salary for 52 weeks. The 46-week model is the standard comparison benchmark for contractor cost calculations.

Yes. The calculator supports 1 to 5 days per week for the contractor. A part-time contractor engagement (for example, 3 days per week for 6 months) changes the break-even day rate calculation because fewer days are billed. At 3 days/week instead of 5 days/week, the break-even day rate increases proportionally, and the comparison with a permanent hire becomes less straightforward since the permanent employee may still be full-time. The calculator adjusts the break-even rate automatically based on your selected days per week.

Choose a contractor when: the work has a defined end date of under 6 months; you need specialist skills that are not core to your long-term team; you want to delay a permanent headcount commitment (for example, awaiting funding or clarity on strategic direction); or the role requires skills that are expensive to retain full-time. Choose a permanent hire when: the work is ongoing with no defined end; the role is central to your product or operations; you expect the engagement to last more than 6 months; or cultural fit and knowledge retention are important. The break-even analysis in this calculator quantifies the financial trade-off so you can make the decision with full cost visibility.