Contractor vs Perm: Which Is Better Value for Your Team?
Long-term contractors provide rapid capacity, but high day rates and continuous agency mark-ups can quickly drain an engineering budget. Our free contractor vs perm evaluator compares the total expense of keeping contractors on board with recruiting permanent engineers through Bernoullis flat-rate subscription.
Compare Contractor vs Perm Costs
Set the sliders to match your current staffing mix and the evaluator updates instantly. It is free, needs no sign-up and runs entirely in your browser.
Contractor Spend vs. Permanent Subscription Evaluator
Evaluate the true cost of long-term software contractors versus building permanent engineering capability under Bernoullis flat-rate subscription.
(Salaries + Subscription) £0
Discuss your contractor-to-perm strategy with our talent team.
Five Inputs Behind Every Contractor vs Perm Decision
You set five simple controls to match your team’s current staffing mix. Use real figures from recent invoices and offers where you can – the closer the inputs are to reality, the more useful the comparison will be when you present it internally.
Contractors needed
The number of contract engineering roles you are filling, for example two contractors covering a project peak.
Average day rate
The daily fee paid per contractor, for example £500 per day. Include any agency margin so the contractor day rate reflects what you actually pay.
Engagement duration
How long you plan to keep the contractors: 3, 6 or 12 months. Duration is usually the single biggest factor in the result.
Equivalent permanent salary
The annual salary for a full-time employee in the same role, for example £65,000 a year.
Subscription term
Your Bernoulli subscription plan: 3, 6 or 12 months. Longer terms carry a lower monthly price.
How the Contractor vs Permanent Maths Works
The evaluator compares the total cash outlay of contract roles with building permanent capability over the same timeframe, in three steps.
Total contractor spend
Two contractors at £500 a day work roughly 20 days a month. Over six months, keeping them on board costs £120,000.
Permanent payroll and subscription
Two permanent engineers on £65,000 cost £65,000 in base salary over six months. Add a six-month Bernoulli subscription (£2,550 a month, £15,300 in total) and the investment is £80,300.
Net capital saved
The evaluator subtracts the permanent investment from the contractor total – in this example a saving of £39,700 over six months.
A Worked Example Over Six Months
A renewable energy business has two contract electrical engineers on £500 a day, supporting a programme that is now expected to run for years rather than months. Over the next six months, the contractors will cost £120,000.
Hiring two permanent engineers on £65,000 each costs £65,000 in base salary over the same period. With a six-month Bernoulli subscription at £2,550 a month, the total permanent investment is £80,300, leaving £39,700 in the business.
The gap widens the longer the work continues. Over twelve months the contractor spend doubles, while the permanent engineers are building knowledge of your systems, your customers and your standards – value that walks out of the door when a contract ends.
Step 3 – what you see in real time
- Total contractor spend over your chosen timeline
- Total permanent investment: salaries plus the flat subscription
- Net capital saved by converting roles to permanent
- A reminder that subscription clients pay no contractor-to-perm conversion fees
Contractor vs Perm: When Each Option Wins
Contractors are the right choice when you need specialist skills quickly and for a defined period. Commissioning a new line, covering parental leave, delivering a short design package or adding capacity for a bid are all classic contract engagements. You pay a premium, but you avoid long-term commitments and gain someone who can start within days.
Permanent hires win when the work is ongoing. Once a contract runs beyond six to nine months, the premium you pay for flexibility usually outweighs the savings. Permanent engineers also build knowledge that stays in the business, take ownership of long-term improvements and mentor junior staff, benefits that are hard to price but easy to miss when they are gone.
Many engineering teams use a blend: a stable permanent core supported by contractors for peaks. The evaluator helps you find the tipping point for each role, so the mix is driven by numbers rather than habit.
- Short, defined projects: contract
- Specialist skills needed within days: contract
- Ongoing roles beyond 6–9 months: permanent
- Roles that hold key knowledge or client relationships: permanent
The Full Cost of Employing Someone Permanently
The evaluator compares contractor spend with base salary, which keeps the comparison simple. For a complete budget, remember that the cost of employing someone includes more than salary. Employers in the UK also pay employer National Insurance, workplace pension contributions (at least 3% of qualifying earnings under auto-enrolment), holiday pay and any benefits such as healthcare, a car allowance or training.
A useful rule of thumb is to add 15% to 25% to base salary for on-costs, depending on your benefits package. Even with those costs included, a permanent engineer is usually cheaper than a contractor on a comparable day rate once the engagement runs beyond a few months. Contractors, by contrast, cover their own holiday, sickness, pension and equipment, which is part of the reason day rates are higher.
Run the evaluator with your real salary bands, then add your on-cost percentage to the permanent side for a fully loaded comparison you can take to your finance director.
- Employer National Insurance contributions
- Workplace pension contributions
- Holiday pay and bank holidays
- Benefits, training and equipment
How IR35 Affects the Contractor vs Permanent Decision
IR35, also known as the off-payroll working rules, applies when a contractor works through their own limited company but the working relationship looks like employment. Since April 2021, medium and large private-sector clients have been responsible for deciding each contractor’s IR35 status and issuing a Status Determination Statement.
If a role is inside IR35, the fee payer must deduct income tax and National Insurance, and contractors often ask for a higher day rate to compensate. That can make contract engagements noticeably more expensive, and it adds administration and risk for the hiring business. For long-running roles that look and feel like employment, IR35 is one more reason to consider a permanent hire.
This page is general guidance rather than tax advice. For a specific engagement, speak to your accountant or use HMRC’s Check Employment Status for Tax (CEST) tool.
How to Convert a Contractor Into a Permanent Engineer
Sometimes the best permanent candidate is already working for you on contract. Converting a contractor can be a smooth move, but traditional agencies often charge a conversion or buyout fee, sometimes a full permanent placement fee. Bernoulli subscription clients pay no conversion fees, so you can move people onto payroll whenever it makes sense.
Start the conversation early. Many contractors value the day rate and flexibility, so be ready to explain the full package: salary, pension, holiday, training, progression and job security. A clear offer that shows the total value of employment, not just the headline salary, is far more likely to be accepted.
- Check the contract for conversion or buyout clauses
- Benchmark a fair permanent salary for the role
- Present the full package, not just salary
- Agree a start date that protects the project
Tips for Managing Contractor Spend
Whether you stay with contractors or move to permanent staff, these habits keep costs under control.
Review rates regularly
Check what you pay against the current market every quarter. Rates agreed in a busy period may no longer reflect demand.
Set clear end dates
Open-ended contracts tend to roll on. A defined end date forces a decision on whether the work is really temporary.
Know your IR35 position
Keep status determinations up to date for every engagement, especially when the scope of work changes.
Plan conversions early
If a contractor will be needed long term, plan a permanent offer before the next extension, not after.
Build a permanent core
Keep critical knowledge in a permanent team and use contractors for peaks, specialist tasks and cover.
Watch agency margins
Ask for the split between the contractor’s rate and the agency margin, so you know what you are really paying for.
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Contractor vs Perm: Your Questions Answered
Is it cheaper to hire a contractor or a permanent employee?
For short engagements, contractors are often better value because you only pay for the time you need. Once a role runs beyond six to nine months, a permanent hire is usually cheaper, even after on-costs. The evaluator shows the tipping point for your figures.
What is a typical contractor day rate for engineers?
Day rates vary by discipline, seniority, location and IR35 status. Many experienced UK engineers contract at a few hundred pounds a day, with specialists and leads charging more. Use the rates on your recent invoices for the most accurate result.
How do I compare a day rate with a salary?
Multiply the day rate by around 220 working days to get an annual equivalent, then compare it with salary plus employer on-costs. A £500 day rate equals roughly £110,000 a year.
What is IR35?
IR35 is the set of off-payroll working rules for contractors working through their own limited company. If the engagement looks like employment, it is inside IR35 and tax and National Insurance must be deducted at source. Medium and large private-sector clients decide the status.
What does it cost to employ someone permanently?
Add employer National Insurance, pension contributions, holiday pay and benefits to base salary. A common rule of thumb is 15% to 25% on top of salary.
Does Bernoulli charge contractor-to-perm conversion fees?
No. Subscription clients pay no conversion or buyout fees, so you can move a contractor onto payroll whenever it suits you.
Is the contractor vs perm evaluator free?
Yes. It is free, needs no sign-up and runs in your browser.
Can Bernoulli supply contractors as well as permanent engineers?
Yes. We recruit permanent, contract and temporary engineers. See our engineering recruitment services or book a free consultation.
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