Contractor advice

Elliott.T123

DullGreyGuy said:

mosaicsquares said:

I'm in a very similar situation as the freelancer to the above, and have put up with the low hourly rate because I was being trained up. Now, a year on, my skills are better than anyone else's in this 4 person company. I want to make a solid case in writing for a proper freelance rate to my 'non - employer'.

 How do I calculate what freelance hourly rate I should be on, including % for holiday pay, %pension, %Ni etc and perhaps travel to work site - non of which I get at the moment. I'm currently on £14 per hour and would like to know what rate I should be on if I added all the extras on. I've never worked for such low pay as a freelancer and it really irritates me, hence I've dropped to 2 days a week.

I also want to make sure I'm at the minimum living wage at least for my own peace of mind even though I'm not legally entitled to it as a freelancer. Is there a calculation?

There is no set formula and it does somewhat depend on if you are on an hour rate or a day rate. 

When I made the move the target was to take your annually salary and make 100th as your day rate. So if you were on £60,000 you'd aim at £600/day. It was an optimistic target back then and these days day rates have proportionally decreased relative to salaries. 

It does also depend on how niche your skills are... I have unintentionally found a small niche to sit in, I rarely see perm roles advertised to my niche and so id be applying for a more general role with a salary to reflect that. As a freelancer there are many more wanting my niche skills for 9-27 months and as there is less competition rates are higher. 

To add to this, contract duration is also a factor.

I often get contractors saying to me my rate for a 2 year contract would be £500/day but for a 2/3/4/5/6 month contract would be £600/day.

There really area huge range of factors to consider but the short version is you should definitely be making more than an equivalent perm person would be making doing the same role.

DullGreyGuy

Elliott.T123 said:

DullGreyGuy said:

mosaicsquares said:

I'm in a very similar situation as the freelancer to the above, and have put up with the low hourly rate because I was being trained up. Now, a year on, my skills are better than anyone else's in this 4 person company. I want to make a solid case in writing for a proper freelance rate to my 'non - employer'.

 How do I calculate what freelance hourly rate I should be on, including % for holiday pay, %pension, %Ni etc and perhaps travel to work site - non of which I get at the moment. I'm currently on £14 per hour and would like to know what rate I should be on if I added all the extras on. I've never worked for such low pay as a freelancer and it really irritates me, hence I've dropped to 2 days a week.

I also want to make sure I'm at the minimum living wage at least for my own peace of mind even though I'm not legally entitled to it as a freelancer. Is there a calculation?

There is no set formula and it does somewhat depend on if you are on an hour rate or a day rate. 

When I made the move the target was to take your annually salary and make 100th as your day rate. So if you were on £60,000 you'd aim at £600/day. It was an optimistic target back then and these days day rates have proportionally decreased relative to salaries. 

It does also depend on how niche your skills are... I have unintentionally found a small niche to sit in, I rarely see perm roles advertised to my niche and so id be applying for a more general role with a salary to reflect that. As a freelancer there are many more wanting my niche skills for 9-27 months and as there is less competition rates are higher. 

To add to this, contract duration is also a factor.

I often get contractors saying to me my rate for a 2 year contract would be £500/day but for a 2/3/4/5/6 month contract would be £600/day.

There really area huge range of factors to consider but the short version is you should definitely be making more than an equivalent perm person would be making doing the same role.

From a purely personal perspective, I've used duration as a decision point on which offer to accept but dont generally use it for day rate setting... ultimately any contract is only as long as your notice period and you could find you're served your notice after a month on a 2 year contract because the piece of work is pulled or they have a change of strategy and decide they want a perm etc. Certainly I wouldn't give up £100/day for a longer initial contract. 

Grumpy_chap

DullGreyGuy said:

When I made the move the target was to take your annually salary and make 100th as your day rate. So if you were on £60,000 you'd aim at £600/day.

I am glad to see that you have that metric / target.  It is one I have used as a relationship estimator for hourly / day rates compared to salary equivalent.  It stands up well to being calculated and demonstrated as well.  

I have found employers often reluctant to accept the comparator, even when set out as a clear calculated conversion.  They can't argue substantially with the calculations, but do seem to struggle to understand.  It does not help when end clients have calculated unrealistic charge rates for their internal staff - in the past year I have seen an end client with internal charge rate £40 per hour for Managing QS, £22.50 / hr for Project Manager and £1 per hour for "Technician"  

As for rate and contract duration - I do work on a higher rate basis if the duration is shorter as I have to consider that there may be a void period on the end of the contract.  I also have work I do on fixed cost, so that has to be higher to account for risk (extra time required).  I do for one specific Client where they like the product / service I offer and use it on a proper consultancy basis to trouble shoot crisis events - that is typically a fortnight's work at short (no) notice where the value gained is high to the client and my rate has to reflect the disruption to whatever baseline contract I am on at the time.

DullGreyGuy

Grumpy_chap said:
As for rate and contract duration - I do work on a higher rate basis if the duration is shorter as I have to consider that there may be a void period on the end of the contract.  

I've never intentionally taken on a 2-3 month job, I guess if I were to then I would load my day rate. I wouldn't discount my day rate for a 2 year contract from my standard rate for a 6 month contract. 

Grumpy_chap said:
I have found employers often reluctant to accept the comparator, even when set out as a clear calculated conversion. 

Have to say its never been a discussion for me, I've only ever applied for roles advertised as for a contractor and if someone is wanting someone for £300 a day I simply dont apply rather than trying to argue them up to my rate. Sometimes there are adverts that are close that my skills are a strong match to and then may apply but state my day rate is X. 

Been lucky with colleagues too generally that they dont protest, I know other contractors who've had permies making snide comments about earnings and some have tried to explain the fully loaded cost for an employee is much more than the salary etc etc but seems a thankless exercise to me. 

Grumpy_chap said:
unrealistic charge rates for their internal staff - in the past year I have seen an end client with internal charge rate £40 per hour for Managing QS, £22.50 / hr for Project Manager and £1 per hour for "Technician"    

Working for a large banking group there was always skulduggery going on but normally overcharging for central services. The IT cost for moving a laptop to a new site was about 125% more than the cost of just ordering a new laptop to the new site, if you raised it with IT they'd point out there was a decommissioning fee for the old laptop but still didnt add up and our Head Of was very certain they wouldn't be paying it.  

In one year the central services function became a profit centre as fees charged so outstripped the costs they were incurring. That lead to a rebalancing of charges but still as a cost centre owner it was painful having to pay £50 for a new toner when I could buy one from Amazon for £35 but knew that Purchasing received a £20 kickback but didnt pass it back. 

Grumpy_chap

DullGreyGuy said:

Grumpy_chap said:
As for rate and contract duration - I do work on a higher rate basis if the duration is shorter as I have to consider that there may be a void period on the end of the contract.  

I've never intentionally taken on a 2-3 month job, I guess if I were to then I would load my day rate. I wouldn't discount my day rate for a 2 year contract from my standard rate for a 6 month contract. 

Agreed - standard rate for a sensible contract duration.
Increase the rate for short duration.
It sometimes works favourably - I am currently working for a client that only gives 1 month contracts, so my rate is loaded accordingly.  This is my twelfth successive one-month contract...
The biggest down-side is my reluctance to take a holiday when the foreseeable is a void at the end of the month - I guess one month that will come to pass.

DullGreyGuy

Grumpy_chap said:
The biggest down-side is my reluctance to take a holiday when the foreseeable is a void at the end of the month - I guess one month that will come to pass.

I have the general contractor reluctance to take holiday as in my head I think of those 10 days that I'm not earning and makes even a cheap trip very expensive. Plus there is often the forced 2-3 week holiday/furlough around Xmas and even as a permie I was bad at taking holidays.