top of page
  • Writer's pictureUmbrella Search

Daily rates vs. hourly rates for contractors explained

One of the decisions contractors must make in their careers is whether they will charge hourly or daily hire rates. After all, this will impact how much you will earn as a contractor and whether you will be paid for additional overtime.

That's why it's essential to understand each option before deciding which is best for you.

To help determine whether hourly rates vs. daily rates will be better for you, Umbrella Search has put together this handy guide outlining the advantages and drawbacks of each option so that you can make the right decision.

Option 1: Daily rates

The first way contractors can charge their time is at a daily rate.

Here, contractors will be paid for the number of days they work on the contract rather than hours worked.

This is usually the better option for contractors that charge higher rates of £400 or more daily. For this reason, a daily rate is usually more suited to more experienced contractors or those with on-demand specialist skills who can charge higher fees.


What is an umbrella company?

Advantages of a daily rate

So what are the advantages of charging a daily rate?

The main benefit of charging a daily rate is that it often allows contractors to charge a higher fee than if they were working with an hourly rate. This is great news for contractors meaning they earn more and will take home more at the end of the month.

Another advantage to a daily rate is that some clients will prefer this way of paying the contractor as it allows them to grasp better their outgoings and budget for the project at hand. Therefore it may play to your advantage when competing for contracts.

Downsides of a daily rate

Although charging a daily rate can be an excellent option for contractors, there are also drawbacks to this option.

The main disadvantage to an hourly rate is that, as the client is paying the contractor by the day, they may expect them to work extra hours without paying them more for the additional hours worked.

For this reason, this isn't always the best option for contractors that don't work unpaid overtime.

Option 2: Hourly rate

The other option for contractors is to charge their time by the hour. Just as it sounds, this refers to the contractor charging the client per hour rather than by day.

This usually works out as the best option for contractors that will charge around the £40 mark per hour or less.

Again, as with the daily rate option, an hourly rate has both advantages and drawbacks.

First, let's look at the benefits.

Benefits of an hourly rate

The main benefit of contractors charging an hourly rate is that they will be paid for the additional hours worked if they work overtime. This can stop clients from expecting the contractor to work extra unpaid hours as they may expect from a contractor on a daily rate.

For hourly rate contractors, if the client requires extra hours worked, the contractor will usually need to gain the approval and sign off of a manager.

Drawbacks of an hourly rate

On the other hand, the drawbacks of charging an hourly rate are that it can be more of a risk to the client to take on contractors on hourly rates. This is because if additional work is required, the client will need to go over budget and pay the contractor more than initially expected, which can lead to issues with finances.

Option 3: Fixed fee

Although many contractors will only consider an hourly rate vs. a daily rate, a third option is to charge a fixed fee.

Just as it sounds, the contractor will charge a fixed price to the client for carrying out the project.

Although this is a good option, it can also be difficult for contractors to accurately predict how much time a project will take and, therefore, how much the contractor should be charging.

For this reason, the fixed fee option can be problematic regarding budgeting and finances.

Hourly rate vs. daily rate: which is best for me?

Having read our guide, you will now know the key differences, advantages, and drawbacks of charging an hourly rate vs. a daily rate and can make a well-informed decision on which is best for you.

Generally, if you are an experienced contractor who can charge higher fees of around £400 or more per day for your time, you will find that a daily rate will be better. It is worth noting that this may lead to you working some additional unpaid hours if overtime on the project is required, however.

On the other hand, if you charge around £40 or less per hour, an hourly rate will likely be the better option for you. It's just worth considering that this may be more of a risk to the client to take you on as they may not wish to fork out additional cash if overtime is required.

Let Umbrella Search help with the following steps

Now you know how much you will charge for your time as a contractor. You must find an umbrella company that suits you and your circumstances.

Thankfully, Umbrella Search is here to make this easy. After all, finding an umbrella company doesn't have to be a hassle. We work closely with contractors to understand their requirements and carry out a rigorous audit process, meaning you can have confidence that our team will match you with the best umbrella company for your needs.

To see how we can help you today and to take the first step to boost your contracting career, get in touch with Umbrella Search and join the thousands of contractors who have already benefited from our service.



bottom of page