Advice on Setting your Contract Rates

The world of contracting is becoming increasingly more popular among workers of all ages and backgrounds across the UK.

There are so many benefits that come with being self-employed, with many people being so drawn to the sector due to the increased flexibility that could offer you a much better work / life balance compared to permanent workers.

Other benefits of contracting includes:

• Having a lot more freedom and control over your career, such as being able to work whenever you want and choosing to take holiday days as little or as often as you wish (although, just remember that you won’t get paid for this time off!)
• Being able to claim back so many expenses that are made for the running of your business, which can then reduce your tax bill at the end of the tax year. Examples include: travel, accountancy fees, advertising or marketing costs, your company’s commercial rent, heating and lighting and office items, such as computers and stationery.
• Having the opportunity to gain a wealth of skills and experience by working with a number of clients in various environments.

Of course with most things in life, there are a few downsides to contracting but this is mainly things such as having more responsibility than your permanent counterparts with increased paperwork and having to fill out tax forms correctly and on time – but as long as you have a good contractor accountant, this shouldn’t be an issue.

It is also important to remember that as a contractor, you are solely responsible for your own success – which means having the motivation to get out there and find yourself work on a regular basis, making sure that you are organised enough to find a new contract when you know that one is coming to an end.

And, once you find that work, knowing how much you want to charge…

Advice on setting your contractor rates

As mentioned previously, there are numerous benefits that you will find as a self-employed worker, one of them being that you will have the opportunity to charge clients a daily or hourly rate much higher than a permanent employee working in the same role.

There are many reasons as to why this is. Firstly, as someone who has dedicated themselves to a particular skill, it means it is likely that you are highly skilled in your field – there’s also the fact that you won’t be entitled to holiday and sick pay (saving a business additional costs that they have to spend on their own staff).

So, how do you even go about knowing how much to charge your clients?

Here are a few tips on how to set your rates of pay:

Work out your minimum rate

As mentioned, the fact that a contractor won’t receive employee benefits should be something to consider when working out how much you should be charging.

There is also the fact that you need to have a certain amount to cover costs, both personal and from a business point of view.

For example, you need to look at your living costs (food, rent / mortgage, bills etc), as well as how much you will need in order to operate as a business (rent, paying suppliers, National Insurance Contributions etc)

This should help you to calculate a ballpoint figure of the minimum amount that you want to receive.

Once you have this annual amount, you can work out a rough estimate by dividing it by the total number of hours of work you plan to do over the year (accounting for holiday and potential sick days).

Do your research

It can be really useful to do research on the market to find out how much your particular role usually earns. We suggest looking at a job board such as IT Jobs.

There are online calculators that can calculate approximately how much you should charge, but this should only be a guide, as there are many factors that these types of calculators don’t take into consideration.

Jobs boards are also a great source for getting an idea of how much employers are offering for certain tasks.

Another way to get an idea of how much you should be charging is to look to other contractors working within the same role – social media site LinkedIn is a great one for joining chats that are solely to do with your industry. Although it’s probably not the best idea to outright ask someone how much they charge, you could ask questions related to a job opportunity to find out if others think that the amount being asked to complete the project is a good sum or not in their opinion.

Find out what your skills are worth

There is another factor to take into consideration when it comes to setting your rates and that is what you have to offer as an individual.

Your skills and experience will play a part in the amount that you can charge, as well as the supply and demand for your particular skill set.

There will often be times where a sector will face skills shortages, which will therefore open up new opportunities for contractors who will be able to use their highly sought after skills and knowledge to fill the gap. This also puts you in a great position when it comes to negotiating your rates.