How do I determine a fair contract rate?

**mudskipper** · 30 September 2011, 07:08

Originally posted by JustANewbie View Post

Hi, I am new to contracting. I recently went for an interview and due to certain circumstance have been asked if I will contract for 6 months until they are in a position to offer me a permanent position. The permanent position is not guaranteed.

We are yet to discuss rates, and I am not too sure how to handle the conversation. We did discuss a ball park figure for the permanent position. I don't want to up the rate just because it is contract, but I also don't want to earn less. I am not yet sure whether to go the umbrella or LTD company route, but I imagine that doesn't really effect this rate decision. I would like this to develop into a permanent job, and don't in any way feel they are trying to take advantage or anything like that. Any ideas anyone? Would you simply work out the required annual rate, divide by the number of working weeks to work out a daily rate? Or do I need to add on extra to cover any expenses I am not thinking about? I think the benefits I would lose is pension, sick leave and annual leave. Thanks in advance for any advice.

Higher! Higher!

Remember you have to pay both employers and employees NI unless you're outside IR35, but if you're going brolly (which seems sensible if it's just 6 months) you'll be caught by IR35. Can't remember how much employers is, but it's a fair whack. If you don't go brolly, you'll need to factor in accountancy etc.

Also, the fact that you're not guaranteed work, you can be dropped at no or little notice.

The ballpark that's oftened bandied about is hourly rate = annual salary / 1000. So a 45K permie job would be around £340 a day. It's probably a good starting point.

**jmo21** · 30 September 2011, 08:38

I'd be very wary to be honest.

It sounds like either they want a small amount of work done on the cheap, or it's a probation period and if you're not good enough you'll be out the door.

**JustANewbie** · 30 September 2011, 08:55

Originally posted by k2p2 View Post

Higher! Higher!

Remember you have to pay both employers and employees NI unless you're outside IR35, but if you're going brolly (which seems sensible if it's just 6 months) you'll be caught by IR35. Can't remember how much employers is, but it's a fair whack. If you don't go brolly, you'll need to factor in accountancy etc.

Also, the fact that you're not guaranteed work, you can be dropped at no or little notice.

The ballpark that's oftened bandied about is hourly rate = annual salary / 1000. So a 45K permie job would be around £340 a day. It's probably a good starting point.

Thanks so much. That is very helpful.

**JustANewbie** · 30 September 2011, 08:56

Originally posted by jmo21 View Post

I'd be very wary to be honest.

It sounds like either they want a small amount of work done on the cheap, or it's a probation period and if you're not good enough you'll be out the door.

Thanks, but I don't think this is the case. The original probation period for a permanent position was going to be 6 months anyway, and I don't even know what contracting rate they thinking yet. I am just trying to prepare myself for that conversation. I appreciate the warning though.

How do I determine a fair contract rate?