How to work out daily contract rate?

[MrXxxx]

Hi Everyone,

thought this might be a useful thread; not sure its in the right place but hopefully people such as @Frank Hovis et al and others 'in the know' will see it and comment/advise:

Up until now I have only ever been PAYE. I now have an offer of some daily contract work and need to work out a sensible daily rate i.e realistic so I have credibility when negotiating, not too low so that I am 'selling myself too short', but not silly so that I don't get the work; this said, I am not desperate for the work/money...but it would be nice:-). Unfortunately my field is not the normal building or IT field, so cannot do a websearch on these, but do have a PAYE annual salary range for what I do.

My thoughts are along the following lines, and so it would be useful to get some feedback i.e. have I missed anything?

1. PAYE salary divided by 230 working days PLUS

2. Employers NI contributions [15.05%] PLUS

3. Employers compulsory pension contribution [3%] PLUS

4. Sick pay entitlement ? say 2%? PLUS

1.8% of 230 working days (source https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/sicknessabsenceinthelabourmarket/2020)

TO 2.5% of 230 working days (5.75 days per annum - source https://www.myhrtoolkit.com/blog/average-employee-sick-days-2020 )

TO 3% of 230 working days (6.9 days - source https://www.dphlegal.com/how-many-sick-days-are-considered-legally-acceptable/)

5. WFH overheads ? [no idea]

6. 'Allowance' for contract length/days per week; currently offered at 3 months.

 

So at a barest minimum it should be PAYE daily rate PLUS 20.05%...comments/thoughts?

 

Finally, can anyone give me a quick 'run-down' on IR35 and its implications advantages/disadvantages...I have read a little but it didn't really make much sense.

Edited April 14 by MrXxxx

[Frank Hovis]

I think current contractors are going to be able to answer this better than me as it's not something with which I've ever dealt.

@ccc is fairly clued up on this stuff

[ccc]

3 hours ago, MrXxxx said:

Hi Everyone,

thought this might be a useful thread; not sure its in the right place but hopefully people such as @Frank Hovis et al and others 'in the know' will see it and comment/advise:

Up until now I have only ever been PAYE. I now have an offer of some daily contract work and need to work out a sensible daily rate i.e realistic so I have credibility when negotiating, not too low so that I am 'selling myself too short', but not silly so that I don't get the work; this said, I am not desperate for the work/money...but it would be nice:-). Unfortunately my field is not the normal building or IT field, so cannot do a websearch on these, but do have a PAYE annual salary range for what I do.

My thoughts are along the following lines, and so it would be useful to get some feedback i.e. have I missed anything?

1. PAYE salary divided by 230 working days PLUS

2. Employers NI contributions [15.05%] PLUS

3. Employers compulsory pension contribution [3%] PLUS

4. Sick pay entitlement ? say 2%? PLUS

1.8% of 230 working days (source https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/sicknessabsenceinthelabourmarket/2020)

TO 2.5% of 230 working days (5.75 days per annum - source https://www.myhrtoolkit.com/blog/average-employee-sick-days-2020 )

TO 3% of 230 working days (6.9 days - source https://www.dphlegal.com/how-many-sick-days-are-considered-legally-acceptable/)

5. WFH overheads ? [no idea]

6. 'Allowance' for contract length/days per week; currently offered at 3 months.

 

So at a barest minimum it should be PAYE daily rate PLUS 20.05%...comments/thoughts?

 

Finally, can anyone give me a quick 'run-down' on IR35 and its implications advantages/disadvantages...I have read a little but it didn't really make much sense.

 

2 hours ago, Frank Hovis said:

I think current contractors are going to be able to answer this better than me as it's not something with which I've ever dealt.

@ccc is fairly clued up on this stuff

To put it simply inside IR35 is more or less in tax terms being an employee. So treat the income as such. 

I'm no tax expert though but that's fairly close as I understand. 

[mh9000]

Very rough rule of thumb could be salary/1000 for hourly contract rate, then stick on around 30% to count for IR35 if applicable/"inside".

 

[Carl Fimble]

Overheads- everything!!!

 

[eek]

On 14/04/2022 at 15:00, ccc said:

 

To put it simply inside IR35 is more or less in tax terms being an employee. So treat the income as such. 

I'm no tax expert though but that's fairly close as I understand. 

It's worse than being an employee as you also need to factor in Employer NI (now 15.55%) and Holiday pay which is another 12%.

So you need 30% on top of a salary before you begin and that's before you factor in the extra money you want for them being able to drop you at zero notice. 

[A_P]

It is great position to start from that you do not need the work. However are planning to try and extend the relationship or endeavour to get more contracts after this one?

I wouldn't hesitate to triple or quadruple your PAYE daily rate as a starting point. Then keep raising with any new contracts until you get a no.

We have a fairly fluid rate. Depends if we would like to build an on-going relationship. Or will it just be a one time thing. If we know it will be difficult client etc. Rarely ever get a no but then set clear terms. Additionally, we find most prefer a fixed cost even though it will be considerably higher than taking an hourly/daily rate.

[nirvana]

On 14/04/2022 at 12:38, MrXxxx said:

Finally, can anyone give me a quick 'run-down' on IR35 and its implications advantages/disadvantages..

IR35 fukked off a lot of IT guys....

I think years ago I read that the hourly rate was equivalent to an annual salary x1000 ie if u were on £50/hour same as about a permie on £50k..........but I think it's a load o shite personally ie if you're on say £50/hr and you can work like a 60 hour week for a while and pay fuk all tax you're onto a right earner! I used to be a contractor back in the days when I had mates using offshore tax vehicles based in the Isle of Man, of course I was far too righteous and believing of the govments good will to use such stuff myself.......what a fukkin naive arsehole I turned out to be! 

Edited April 24 by nirvana