Is Contracting Actually Worth It? The Honest Maths for NZ Professionals

Is Contracting Actually Worth It? The Honest Maths

Every permanent professional has had the moment. A contractor mentions their day rate, you do the quick multiplication in your head, and the number is enormous. Suddenly your salary looks like a rounding error and you start wondering why you have not made the jump.

Slow down. That day rate is not the whole story, and the honest answer to whether contracting is worth it is: it depends, and you can only know once you do the real maths rather than the pub maths. Here is how to actually work it out.

The day rate is not what it looks like

The pub maths goes: $800 a day, times five days, times fifty-two weeks, equals $208,000. Next to a $130,000 salary that looks like a no-brainer.

It is wrong, because you do not bill fifty-two weeks. A permanent employee gets paid for their four weeks of annual leave, the public holidays, and their sick days. A contractor does not. If you are not working, you are not billing. So the real number of days you charge for in a year is a lot lower than 260.

Take out four weeks of leave, roughly a dozen public holidays, a few sick days you will inevitably need, and a bit of a buffer, and you are looking at somewhere around 220 billable days in a good year with no gaps. Suddenly $800 a day is $176,000, not $208,000. And that is before the gaps.

What you actually give up

The salary is not just the salary. Bundled into a permanent role is a stack of things that have real value and that you fund yourself the moment you go contracting:

Paid time off. Four weeks annual leave, around a dozen public holidays, and ten days sick leave a year, all paid. As a contractor, every day off is a day you do not earn.

Employer KiwiSaver. Your employer contributes a minimum of 3.5% of your pay on top of your salary. Contracting through your own company, that is gone unless you pay it yourself.

Job security and notice. A permanent role comes with a notice period and a redundancy process. A contract can end on the date in the contract, or sometimes earlier. There is no cushion.

The quiet extras. ACC sorted through payroll, training and conferences paid for, equipment provided, sometimes a bonus or health insurance. All of it becomes your problem and your cost.

None of this is a reason not to contract. It is just the part of the ledger the pub maths ignores.

What you gain

The other side is real too, and it is why plenty of people never go back:

The rate. Even after all the discounts above, in-demand contractors in New Zealand usually come out ahead on raw earnings, sometimes well ahead, because the market pays a premium for people who can land and deliver quickly with no onboarding runway.

Control. You choose the work, the clients, and increasingly the terms. When a programme or a manager is not for you, you finish the contract and move on rather than being stuck.

Variety and pace. You see more organisations, more problems, and more ways of doing things in three years of contracting than in a decade of one permanent seat. That builds a rare kind of pattern recognition, which is exactly what keeps your rate high.

Genuine business expenses. Run properly through your own company, real costs of doing business are deductible. Talk to an accountant about what counts, because the rules are specific, but it is a genuine part of the picture.

The honest maths, worked through

Here is an illustrative example. The numbers are round and made up to show the method, not a quote for your situation.

Say you are on a $130,000 salary. To simply match that gross income over 220 billable days, you would need about $590 a day. That sounds like the break-even point. It is not.

At $590 a day you are matching the salary but funding your own KiwiSaver, carrying all the risk, getting no paid leave, and having no security. You have taken on everything a contractor takes on for exactly the same money. That is a bad trade.

To genuinely be square with where you were, once you cover self-funded KiwiSaver, the lost paid leave, and a fair price for the added risk, you are realistically looking at more like $680 to $720 a day. That is the actual equivalent of your $130,000 salary. Anything below it and you are arguably going backwards.

Which means the real question is not "is $800 a day more than my salary." It is "is $800 a day enough above my roughly $700 equivalent to make the risk and the hassle worth it." At $800 you are clearly ahead. At $650 you are quietly behind. The headline number told you none of that.

This is a simplified illustration to show how to think about it. It is not financial advice, and it leaves out tax, GST and your personal circumstances. Talk to an accountant before making the call.

The bit the maths misses: the gaps

The single biggest risk in contracting is not the rate. It is the space between contracts.

A permanent salary lands every fortnight whether the work is flowing or not. A contractor only earns when they are on a contract. In a strong market for your skills the gaps are short. In a soft market, or if your skills cool off, they are not, and a couple of months on the bench can wipe out the premium you spent the year earning.

This is why the temperament and the timing matter as much as the maths. You need a cash buffer, ideally a few months of expenses, so a gap is an inconvenience rather than a crisis. And you need to be genuinely comfortable with income that moves around. Some people find that freeing. Others find it a constant low hum of stress that no day rate makes up for.

So, is it worth it?

For the right person at the right time, yes, often clearly so. If your skills are in demand, you have a buffer, and you are comfortable running your own show, contracting can pay more and give you more control than any permanent role.

For the wrong person or the wrong moment, no. If it is your only income with nothing behind you, if you are risk-averse by nature, or if you need the structure and progression of a permanent path, the higher rate will not compensate for the stress.

It is not better or worse than permanent work. It is a different deal, with a different balance of reward and risk. The mistake is judging it on the headline day rate alone. Do the honest maths, be honest about your temperament and your buffer, and the answer for you gets a lot clearer.

Find places both permanent and contract professionals across New Zealand, so we have no stake in which one you choose, only in it being the right fit. If you are weighing up the move and want to talk it through with someone who knows the current market and the going rates, get in touch.