When it comes to contractor rates, contractors can charge their time either by the hour or the day.
Whether you choose hourly rates or daily rates will depend on the industry you work in and the amount you charge for your time.
To help contractors decide between hourly rates vs daily rates, Umbrella Search has put together this handy guide.
What is a daily rate and when should contractors use it?
There are a lot of factors to consider when it comes to getting paid as a contractor, so firstly we will look at daily rates.
As the name suggests, with this option, contractors are paid by the day.
This is usually the better option for contractors that have the skills and experience to charge a higher rate, typically of around £400 or more per day.
What about hourly rates?
The other way that contractors can charge their time is by the hour.
Rather than charging by the day, here, contractors charge their time by the hour, so if you work 40 hours in a week, you'd bill the client for these 40 hours.
This is usually the best option for contractors that will charge around £40 or less per hour.
The third option: a fixed price
There is also another option to consider that is less common – charging a fixed price.
Here, the contractor will charge the client a fixed fee for carrying out the work.
Although this may work in some scenarios when the contractor has a sound grasp of how much work will need to be carried out, it can be difficult for contractors to judge how much time they will end up spending on the contract. This can therefore lead to contractors charging too little for their time if the project takes longer than anticipated, resulting in the contractor being out of pocket.
For this reason, most contractors stick to either a daily rate or hourly rate, so which one should you choose?
Daily rate vs hourly rate: which is best for me?
Both the daily rate and hourly rate options have their advantages and drawbacks, and which one will be best for you will depend on factors such as your contractor experience and pay expectations.
When weighing up your options, it's useful to take a look at the pros and cons of each.
Pay and overtime
One of the greatest benefits of charging a daily rate is that it means that the contractor can usually charge a higher fee than if they were charging their time by the hour. This obviously means that you will take home more money each month, which is a great benefit to this route.
However, although a daily rate means the contractor can usually charge more for their time, it's worth considering that you won't be paid extra if you end up working overtime. This is one of the key cons of a daily rate as it means contractors can end up working extra hours should they need to meet a target or deadline and not get paid for their time.
Contractors that charge time by the hour, however, are entitled to claim overtime worked and will be paid for the additional hours spent on the project, which is widely considered a huge benefit to this option.
It's worth considering that a daily rate can be preferred by the client, as it allows them to get a good idea of their budget and finances from the very start.
Some clients may therefore choose a contractor for the job that charges a daily rate over one charging an hourly rate which is worth considering when aiming to secure contract work.
This means that when it comes to an hourly rate, clients can consider this way of paying the contractor as more risky due to the fact that if additional work is required, they will need to pay the contractor more than initially thought. This can lead to problems with the client's budgeting and finances and can sometimes lead clients to opting to work with daily rate contractors instead.
Finally, when making the decision, you will need to determine your contractor rates and how much you wish to charge. After all, this will help you evaluate whether it is better to charge your time by the day or hour.
For example, if you are relatively new to the industry or niche you work in, you might consider charging on the lower side of the scale for your time until you have built up your experience and expertise. Here, it will be better to charge by the hour.
Once you have become an expert in your field and have built up a proven track record of previous contracts and clients, you can then charge more for your time (£400+) and a daily rate will be the better option.
It is also important to remember that the amount you charge will need to also cover your tax and National Insurance contributions, so whether you charge by the day or hour, your fee will need to include this.
Now you have decided whether charging your time by the day or the hour is best for you, you may be considering using the services of an umbrella company, to make contracting that little bit easier.
If that's the case, Umbrella Search is here to help.
Let Umbrella Search help you find the best umbrella company
At Umbrella Search, our friendly team works closely with contractors to help them find an umbrella company that's just right for their needs. Whatever your priorities when it comes to contracting, whether that's help with things like childcare credits or being savvy about your pension, we will help you find an umbrella company that's the perfect fit for you.
We know that finding an umbrella company can be time-consuming, which is why our team of professionals is here to carry out the hard work and due diligence for you, allowing you to make the right and informed decision.
What's more, we only ever work with and recommend umbrella providers we know we can trust, so you know you're choosing a reputable company you can rely on.
To kick start the process of finding the best umbrella company for your needs, simply tell us a little bit about yourself and we'll be in touch with the best options.