Rates of Pay for IT Contractors

(3 minutes to read)

There are many reasons why someone might decide to become an IT contractor, with the financial rewards being top of the list for many.

But as an IT contractor, how do you know what to charge? Should you work at a daily or hourly rate?

We take a look at rates of pay for IT contractors and what to consider when setting your fees.

Contractor rates of pay

As mentioned previously, many people decide to become self-employed due to the fact that a contractor can often command much higher rates compared to their permanent counterparts.

And, when you consider that a contractor is not entitled to certain benefits such as holiday and sick pay, this only seems fair.

There’s also the fact that a contractor has usually dedicated themselves to a particular skill, which means that it is likely that they are both highly skilled and experienced in their field.

To read more about the benefits of contracting, read our Permanent vs Contracting page.

Daily, hourly or fixed rate?

When it comes to rates of pay, you need to think about whether you want to charge a daily, hourly or fixed rate.

This might change with each project, or you might have a client that has a preference, but ultimately you need to ensure that you’re getting paid a fair wage for your work.

There are advantages and disadvantages to each method:

Daily rate
A daily rate can be the easier option for both the contractor and the client in the sense that the contractor will have a better idea of how much they’ll be earning for a project and the client will also know how much they’ll be spending, which will help them from a budgeting point of view.

A contractor can also often charge more when it comes to a daily rate compared to an hourly one.

However, it’s worth being aware that if the client asks for additional work to be done within those days, which could essentially be seen as ‘over-time’, the contractor could miss out financially.

Hourly rate
An hourly rate can benefit a contractor if a project takes longer than expected, but it can become an issue should a client limit the number of hours that a contractor works on a project in order to cut their costs.

Fixed rate
A fixed rate means that you know exactly how much you’ll be earning for a project, however, when setting this rate, you have to really think about how long a project will take, as you could find it takes longer than expected meaning you’re potentially being underpaid.

So how much should I charge?

There are many factors to consider when setting your rates of pay, for example, the amount of experience you have, not only in your field but with the number of businesses you’ve worked with.

There’s location to look at, for example, London rates are much higher due to the cost of living being greater in this area.

How in demand are your skills? How much are other IT contractors in your field charging?

These are all questions to ask yourself when considering your rates of pay.

A recent report (2023), compiled by Technojobs, looking at current top IT contractor jobs and the average daily rates might help to give you some idea of what others in your field are charging:

  • Applications support engineer – average daily rate is £550
  • Cybersecurity consultant – £550
  • Data analyst – £400
  • Embedded software engineer – £500
  • DevOps engineer – £580
  • IT support – £170
  • Risk manager – £650
  • Design engineer – £500
  • Business analyst – £490
  • Cloud engineer – £500

Read our Accountancy Services for IT Contractors for information on what we can offer you as a contractor working in the technology sector.

If you’d like to sign up or need any further information, please give us a call on 01442 795 100 or you can email sophie.lewis@dolanaccountancy.com. There’s also the option to contact us via live chat.

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Why Dolan Accountancy?

With over 25 years experience in contractor accountancy helping thousands of contractors, freelancers and the self employed, Dolan Accountancy has the specialist skills, reputation and credibility you can trust. Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £105 + VAT per month. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost. We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours.
  • Free use of Contractor Umbrella – With IR35 Legislation changes we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella.
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams.
  • Free Access to FreeAgent – The founder behind the multi award winning FreeAgent platform was one of Simon’s first clients, therefore it only seems fitting that we offer all of our clients access to FreeAgent, free of charge.
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year.
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status.
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative.
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.