Working out your day rate is harder than you might think. After a quick straw poll in the office, we realised that when we first started contracting our first day rates were generally made up on the spot, and in some cases dictated by contracts that were available at the time.
One of the biggest problems a freelancer has when starting out is working out what a fair price is for their services. There are lots of variables to consider – so let’s look at a few:
What you would earn as a permanent employee
This is the obvious starting point – work out what you would want to earn if you were employed permanently. Indeed, if you’re just moving from a permanent role to being a freelancer then that’s an easy place to start off.
Take into account the lack of benefits and security
As a permanent employee, you will often have healthcare or other benefits included in your remuneration package. You are also generally more secure that a freelancer, who by nature can be used or dropped instantly.
There are no bonuses as a freelancer
No matter how good you are, clients generally won’t pay you a performance bonus if you’re a freelancer – there’s no incentive to do so, after all, being good at what you do is why they hired you in the first place. Take that into account and build the equivalent of your expected bonus into your day rate.
You pay your own holiday pay
Not every country mandates paid holidays for employees, but most companies do offer some form of paid holiday. Freelancers and contractors need to build holiday pay into their rates so that they can afford to take a holiday – burn out is no good for anyone.
Unplanned days off happen
Sometimes you have no option but to take a day off if you’re sick or the unexpected happens. You need to build that into your rates too.
You won’t spend all of your time on billable work
This is one of the biggest mistakes freelancers who are just starting out make – under-estimating how many hours they will spend doing non-billable work.
Making it easier
As a quick Friday project, we put together WhatIsMyDayRate.com – just enter your desired annual salary and it will take into account all of the above hidden costs of freelancing. Give it a go and let us know what you think!
Employee Benefits Value: https://bizfluent.com/info-7921175-employee-benefits-percentage-salary.html
Billable vs Non Billable Work: https://paydirtapp.com/blog/billable-vs-non-billable-hours-learning-to-make-better-estimates/