How to determine contract rate

[bmwmike]

Hi all

Bit of an odd one.. wife was home maker for 5 years and about 3 months ago went back to work. The job whilst paying well was a bit of a step down in many ways but gave it a go. Anyway, approaching end of probation period she's decided to move on as it's not for her. She wants to go contracting. The current employer have said they want to retain her on a contract basis rather than lose her completely. That works for wife as she gets flexibility and can work for other companies so gets variety too. Works all round in fact.

How to determine hourly or daily rate? I was thinking current rate plus about 30%.. does that sound about right?

Many thanks
Mike

Edited by bmwmike on Thursday 26th January 20:21

[daemon]

bmwmike said:

How to determine hourly or daily rate? I was thinking current rate plus about 30%.. does that sound about right?

Bearing in mind that extra percentage has to fund downtime, holidays, sickness, NI contributions, advertising, funding of equipment (if required), paying an accountant, travel expenses, to name but a few off the top of my head, she would need to be getting a lot more than that.

I'd have thought the day rate for any sort of contracting should be at least double the permanent staff pay.

I get an easy x2 what i'd earn as a FTE as an IT contractor.

Have a look at the likes of jobserve for some idea of rates for a similar role as shes doing.

[MitchT]

daemon said:

I get an easy x2 what i'd earn as a FTE as an IT contractor.

Similarly, freelance going rate for what I do is a little more than double what I was being paid when I was doing it on PAYE. Again, funding downtime and covering your own equipment, software, etc. soon makes the numbers less spectacular than they sound.

[anomie]

The way I did it was to find out how much I was actually costing my company...this includes things likes employer tax contributions, holiday pay, pension, health care, and less certain things like potential sick pay. When I calculated for these things I also calculated for the fact that I wouldn't be in the bonus pot, I wouldn't be accruing benefits based on time as an employee, no redundancy payout or notice period....these were dis-benefits to me and beneficial to my employer. The baseline I used was my actual cost to the company and to this I added a bit for things that are not as quantifiable but have value. In my industry I didn't have the option to look at what other contractors got paid for same job but that can also be helpful.

[bmwmike]

Thanks all, great replies

Based on the industry I'm not sure she would be able to charge double, as I think for things like IT the overall jobs market is also a factor.

I am thinking along the lines of a 75% premium as a starting point and see what the employer (sorry.. customer ) says.

Her hourly rate at present is 16.35 I think based on a 40hr week at 34k pa. Does £28ph sound about right to break even with her FTE cost after holiday, sick, and employer NI etc?

Thanks
Mike

Edited by bmwmike on Thursday 26th January 22:54

[anomie]

bmwmike said:

Thanks all, great replies

Based on the industry I'm not sure she would be able to charge double, as I think for things like IT the overall jobs market is also a factor.

I am thinking along the lines of a 75% premium as a starting point and see what the employer (sorry.. customer ) says.

Her hourly rate at present is 16.35 I think based on a 40hr week at 34k pa. Does £28ph sound about right to break even with her FTE cost after holiday, sick, and employer NI etc?

Thanks
Mike

Edited by bmwmike on Thursday 26th January 22:54

This should help: http://www.thesalarycalculator.co.uk/salary.php

Is the current hourly of 16.35 after or before her tax contributions because you have to account for that. You also have to account for the fact that you will have to take time (and probably hire an accountant) to handle tax matters. If you are going self-employed you may also have to or want to set up a Ltd company and that will have costs. Make sure what you charge accounts for all benefits you will no longer have as a permanent employee (including but not limited to greater job security) as well as the costs to her of facilitating self-employment. The case can be made to the company that they are not paying much more than they were because of things like no sick pay or holiday pay or tax or pension obligations.

[FredClogs]

She wants to go contracting but doesn't know what her skills are worth in the market place... Hmmm...

Best way is to go to a couple of the large recruiters in her industry and see what the going rates are, they will lie, usually by about 10 - 15% that's there cut.

Depending on what her skills are and the length of the project and any other factors I'd say usually at least a 75% up lift if not double.

[MOBB]

I'm a finance contractor, and like for like roles I am getting approx 75% more than for an employed role

Edited by MOBB on Friday 27th January 19:08

[bmwmike]

Thanks all

16.90 or thereabouts before tax. 34k salary. Unfortunately got talked into accepting same hourly rate on contract which obviously puts her worse off as no holiday or notice period or sick pay etc. Still, does provide flexibility.. or that's the plan.. as she looks for other work.

Onwards and all that.

BTW this is the commercial interior design and working with architects industry.

[CaptainSlow]

MOBB said:

I'm a finance contractor, and like for like roles I am getting approx 75% more than for an employed role

Edited by MOBB on Friday 27th January 19:08

Can I ask your specialism and day rate?

[anonymous-user]

bmwmike said:

Thanks all

16.90 or thereabouts before tax. 34k salary. Unfortunately got talked into accepting same hourly rate on contract which obviously puts her worse off as no holiday or notice period or sick pay etc. Still, does provide flexibility.. or that's the plan.. as she looks for other work.

Onwards and all that.

BTW this is the commercial interior design and working with architects industry.

Why would she do that?
Seems barmy

[Steve H]

If she hasn't committed to that it's time to renegotiate or just stay on staff.

[bmwmike]

Agree entirely.

I think the boss shot down the first mention of a new hourly rate citing that they'd spent money training her and made her feel guilty. In reality this was the sum cost of one night in a hotel and a day learning their specific software.

Not worth staying on staff as she is leaving for a reason.. the boss is a micromanager and very aggressive. I was surprised she was going back at all but I think it's just odd days until she gets a first proper contract elsewhere, and keeps things ticking over whilst affording flexibility to walk at no notice (she was about to come off probation and notice period would go to a month from one week).

This thread has been really useful though so thanks again. I think her rate is somewhere between 22 and 26ph and could depend on contract length and type of work.

[MOBB]

CaptainSlow said:

MOBB said:

I'm a finance contractor, and like for like roles I am getting approx 75% more than for an employed role

Edited by MOBB on Friday 27th January 19:08

Can I ask your specialism and day rate?

General fixer of messy accounts, systems and process improvement, that sort of thing. Practice and industry background, strong in most aspects, not really an expert in anything as such. ACCA In 2000. And advanced excel.

Currently covering for an SME FC that was sacked after 28 years in post, no handover, nothing documented so reverse engineering everything

Day rate £400 per day

[CaptainSlow]

OK thanks, depending on where you are in the country I guess that would be a £50-£65k role so your day rate is quite good.

[MOBB]

I'm currently in Corby so about right

I aim for £300 plus depending on what kind of role I fancy next, this one is very tricky so paid well

[anonymous-user]

bmwmike said:

Thanks all

16.90 or thereabouts before tax. 34k salary. Unfortunately got talked into accepting same hourly rate on contract which obviously puts her worse off as no holiday or notice period or sick pay etc. Still, does provide flexibility.. or that's the plan.. as she looks for other work.

Onwards and all that.

BTW this is the commercial interior design and working with architects industry.

If she is planning on going through a ltd company she will be a lot worse off, employers and employees NI to pay and almost certainly within IR35 as going self employed immediately contracted to a former employer will be seen as a key indicator.

[bmwmike]

Can she get away with not doing a Ltd and just pay whatever tax etc due at end of year via self assessment? I am main income so this is just secondary (though v useful) income.

As a sole trader ad hoc work in this gig economy how do folks manage that?

[anonymous-user]

Sole trader or (legit) umbrella would be the way forward if no Ltd co. Stay away from any offshore umbrellas co's who offer 90% take home etc. If it sounds too good to be true then it is.

Her companies taking the Piss though. To be a decent self managed contractor (that clients take seriously) you have to have the mindset for it. It's not in the slightest bit similar to being an employee. Some people are made to do it, most are not.