The leap to go from a permanent, full-time work to contracting is a big one and often one of the most stressful bits is trying to work out just how much to charge as a contractor. It’s important for you to quote the correct market rate as if you go too high, you could miss out on contracts, whereas if you go to low, you could miss out on valuable income or make those hiring believe you’re less skilled than you actually are.
In this guide we provide advice on how to work out your daily rate to provide you with a good starting point for your first contract role.
How do I work out my daily rate?
Here’s our top tips for working out how much you should charge as a contractor:
Research the current market rate
It can be difficult to work out the current market rate from job adverts for contract positions as they rarely say how much they’ll pay and will often just say “the market rate”. But there are other avenues you can go down to try and work this out. Do your research around the internet, look for things such as market surveys as these will provide useful information on rates for certain jobs. However, where these are good guidelines to follow, be wary as they often won’t take into account things like skill and experience levels.
Ask other contractors
One of our top tips for working out your day rate is to just simply ask other contractors in your industry. This is one of the best ways to try and determine your market position and it’s even better if you can find someone with a similar skill set and experience level to you.
Use your full-time salary as a starting point
Contracting usually pays more than a permanent, full-time position, but you can still use this as a starting point. Start with your permanent salary, add on benefits such as healthcare, pension, insurance, etc and this will give you a ‘complete package figure’ of how much you’d need to make for the entire year.
Another way to do it is to use this basic calculation: (your annual salary + 30%) / 220.
The added 30% will account for any lost benefits such as holiday or sick pay and the 220 is the average number of days you’ll work in a year when you’re contracting (taking into account sick days, holiday and time in between contracts).
That’s our advice on working how much you should charge as a contractor! We hope that this has given you some valuable information on working out a starting point for your first contracting role.
Remember that this is just intended as a rough guide and numerous factors will influence the current market rate including location, industry, skill set and experience.
Looking for more tax advice and self-employed guidance? Learn what to include in an invoice, next.
