Should contractors choose hourly or daily rates?

Hourly rates vs daily rates: What should you choose?

What are your contractor rates?

Before deciding between hourly rate vs daily rate, contractors need to first determine how much they will charge for their time in order to see which option will be best for them.

Whether you are new to contracting, or have been contracting for a while and are reviewing your rates, you will need to do your research. After all, contractor rates vary from industry to industry and will also depend on the skill level and expertise of the contractor themselves.

To help determine how much you should charge in contractor fees, you should start by looking at what similar contractors in your industry charge. This will give you a rough idea of rates in your specific sector.

It is also useful to research permanent salary points. After all, many contractor positions have permanent role equivalents, so finding out the salaries for these roles will give you a good starting point when it comes to looking at how much you can charge.

Having decided on your contractor rates, you will next be able to look at whether a daily rate or hourly rate is the better option for you. After all, on average, contractors with higher rates that work out around £400 per day or £50 per hour will charge by the day as they will earn more than charging by the hour.

Next, we will look at the pros and cons of both an hourly rate and a daily rate so you can rest assured you’re making the right decision.

Daily rates

With daily rates, contractors are paid for the number of days worked, rather than the number of hours worked.

As we have already mentioned, this is usually the option taken by contractors who charge higher rates, usually around £400+ per working day.

There are several advantages to charging your time by the day.

Firstly, it means that the contractor can charge a higher fee than if they were charging by the hour. This means more money going into your pocket at the end of the month.

What’s more, for the client, this is usually a good way for them to gain a grasp of their finances and budgets.

However, on the other hand, there are some drawbacks to this route. After all, some clients may take advantage of this way of paying the contractor, expecting the contractor to work longer hours since they are paying no more for this time.

This is always worth considering for contractors that don’t wish to work lots of hours overtime.

Hourly rates

The other way that contractors can charge their time is by the hour.

As it sounds, this is when the contractor is paid a fixed sum per hour they work. This is the most popular route for contractors that earn £40 or below per hour.

Again, there are advantages and drawbacks to this route.

One of the main benefits of charging by the hour is that it can stop the client expecting the contractor to work long hours frequently as they are being paid for every hour worked. If the client does want the contractor to work overtime they will therefore need to require the approval of a manager.

However, the downside of this option is that it can be more risky for the client to take on a contractor charging an hourly rate as this can lead to costs building up if extra work is needed. That’s why many clients will place a cap on the number of hours the contractor can work.

The third option: fixed fee

It is also worth noting that there is a third way that contractors can charge their time. This is charging a fixed price.

Here, the contractor will quote a fixed price to the client for carrying out the project.

Although this can sometimes be a good option, it can also often be difficult to accurately predict how much time a project will take and therefore how much to quote. For this reason, this can be a problematic option for contractors.

Hourly rate vs daily rate: What is the best option?

Now you know the key differences between hourly rate vs daily rate, and the benefits and drawbacks of each option, you can work out which is best for you.

Usually, contractors charging higher fees of around £400 per day will find that charging a daily rate is better. However, this is personal preference and it is worth remembering that this does leave the client open to asking the contractor to work extra hours when required for no extra cost.

If you will charge around the £40 mark or below per hour, however, you will find that an hourly rate in the better option. However, this can be seen as more of a risk by the client who doesn’t want to pay for more hours than expected if the contract requires it.

Let Umbrella Supermarket help

Now you know how you will charge your time as a contractor, the next step is to find the best umbrella company to work with.

With Umbrella Supermarket’s contractor calculator we make this quick and easy to do.

Simply input your details as we will show you a list of the best suited umbrella companies for your needs, taking into account your contractor requirements and things like time home pay.

To see how we can help you find your perfect umbrella provider try it for yourself today.

Would you like more information on Should contractors choose hourly or daily rates??

Explore More Resources

using an umbrella company

Beginner’s Guide to Using an Umbrella Company

If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.

After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.

 

PAYE and Umbrella

Guide to PAYE vs. Umbrella

PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.

To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.

Holiday Pay for Umbrella Contractors

Complete Guide to Holiday Pay for Umbrella Contractors

One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.

To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.

umbrella company

When Shouldn’t You Use an Umbrella Company?

Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.

One way that contractors can work is through an umbrella company.

Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?

To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.

umbrellas

The truth about HMRC approved Umbrella Companies

There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.

After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.

However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.

To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.

umbrella company costs

How Much are Umbrella Company Costs?

If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.

To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.

 

Choose Between PAYE or Umbrella

How to Choose Between PAYE or Umbrella

Every contractor faces the decision between PAYE or umbrella, but how do you know which is the best option for you?

After all, PAYE and umbrella both have key differences, meaning contractors should do their research to find the best path for them.

Thankfully, Umbrella Supermarket is here to help. In this guide, we take a look at PAYE vs. umbrella, explaining what you should know before making the all-important decision.

public sector private sector contractors

How to choose between public sector vs. private sector for contractors

Every contractor must make the decision about whether to work in the public sector vs private sector.

Operating in the public or private sector can have a big impact on the contractor’s career, including on what types of contracts they will work on, who they will work with to whether they will fall under IR35.

This is especially true since changes to IR35 legislation were rolled out in April this year which have had a significant impact on private sector contractors.

If you are debating between contracting in the public sector vs private sector, Umbrella Supermarket are here to help. In this guide, we outline the key differences between the public and private sectors and what effects this will have on contractors.

contractor options

Complete Guide to Contractor Options

Contracting has become an increasingly popular way of working in recent years. If you have decided that the time is right to begin your contracting career, one of the first questions you will ask yourself is how you will operate.

How they operate is one of the main decisions contractors must take which will have a big impact on your day-to-day contracting life.

After all, there are a number of ways you can work, including through an umbrella company or by being self-employed.

In this guide we look at umbrella company contracting vs self-employed contracting and the main advantages and disadvantages of each, to help you make the right decision.

 

Statutory payments

Statutory payments for contractors explained

Contractors can choose to work on a self-employed basis through their own limited company, or through an umbrella company as an employee of the provider.

Thousands of contractors choose the umbrella route. After all, there is a range of benefits to operating under an umbrella company, including receiving statutory rights.

If you are considering becoming an umbrella contractor in 2021 and want to know more about statutory payments for umbrella contractors, Umbrella Supermarket has put together this handy guide outlining everything there is to know.

comparing umbrella companies

What To Look Out For When Comparing Umbrella Companies

Working through an umbrella company has become an increasingly popular option for contractors in the UK.

An umbrella company makes contracting easy and hassle-free for contractors, saving them headaches on everything from tax, payroll, insurance to dreaded IR35.

However, with are so many umbrella companies out there, choosing the perfect one for you is no easy task.

To help, Umbrella Supermarket have put together this handy on what to consider when comparing umbrella companies, so you can find the best one in 2021.

umbrella company

How Does an Umbrella Company Work?

In light of recent IR35 reforms that came into force in April 2021, many limited company contractors are now thinking about making the move to Umbrella.

However, understandably, many will want to know more about umbrella companies and how they work before taking the leap.

To help these contractors decide whether Umbrella is the best move for them, Umbrella Supermarket have put together this ultimate guide on everything there is to know about umbrella companies in 2021.