How much more should a contract pay than a salary?

The usual guidance is 30% to 50% more, and the break-even figure above tells you what it means for your specific numbers rather than as a general rule.

Do contractors get PF or gratuity?

No. Both are employment benefits. You would need to replace them yourself through your own retirement saving, which is exactly what the annual costs field is for.

Is contract work worse for a career?

It is different rather than worse. You get breadth and rate, and you give up the deep ownership and internal progression that a permanent role can offer. Which one matters depends on where you are trying to get to.

Contract vs full-time comparison

A contract rate that looks far better than a salary often is not, once you subtract the months you are not billing and the benefits you no longer get.

The number that settles it is the break-even monthly rate: what a contract must pay before it beats the salary you are comparing it against.

The contract pays more

₹1,31,000

Break-even contract rate is ₹2,36,900 a month

Contract revenue: ₹25,00,000
Less: tax: - ₹3,19,800
Less: your own costs: - ₹2,00,000
Contract net: ₹19,80,200
Full-time CTC: ₹20,00,000
Less: tax: - ₹1,50,800
Salary net, including PF and gratuity: ₹18,49,200
Break-even contract rate: ₹2,36,900

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How this is worked out

Contract revenue is your monthly rate times the months you expect to actually bill.
Tax is applied on the full contract revenue, then your own costs are subtracted.
The salaried side keeps the employer PF and gratuity provision as real value, because both are money accruing to you.
The break-even rate is what the contract would need to pay each billed month to match the salary.

What this does not cover

Presumptive taxation under Section 44ADA can cut the tax on contract income substantially for eligible professions. This calculator does not assume it.
Contracts end with little notice. The months-billed figure is the single biggest lever here, and optimism is expensive.
A contractor gets no paid leave. Every day off is a day unbilled, and that is already inside the months-billed figure.

Questions people ask

How much more should a contract pay than a salary?: The usual guidance is 30% to 50% more, and the break-even figure above tells you what it means for your specific numbers rather than as a general rule.
Do contractors get PF or gratuity?: No. Both are employment benefits. You would need to replace them yourself through your own retirement saving, which is exactly what the annual costs field is for.
Is contract work worse for a career?: It is different rather than worse. You get breadth and rate, and you give up the deep ownership and internal progression that a permanent role can offer. Which one matters depends on where you are trying to get to.

Where these figures come from

Rates and rules on this page were last checked against the source on 31 August 2026. Tax law changes; check the source before you rely on a number for a decision.

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