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.

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