Are you charging a competitive rate that will set you apart from other contractors?
In order to reap the financial rewards of contracting in the long term, you need to ensure that you price yourself competitively. While a strong contractor CV will be an important factor in securing a good contract with good pay, the market will also play its part in determining the acceptable rate for your services.
If you are still considering contracting or have recently started contracting, one of your most pressing questions will be “How much can I make as a contractor?”. Unfortunately there’s no simple answer. This is dependent on many variables, however the most crucial are the industry you work in, and the services you provide.
In this article we take a look at some of the resources available that will help you determine competitive rates in your market. Don’t forget, if you use the services of a recruitment agency, they will be able to help you negotiate a good market rate.
Tools to find a competitive rate: comparison sites
Knowing the market you are in will ultimately help you to set a competitive rate, yet there are multiple factors that can determine how much you can charge, from location to experience, and even simply your job title.
The following comparison sites will provide a good starting point to get you on your way to establishing a competitive rate.
Payscale.com – a salary comparison site across all fields
This comparison site takes into account not only your profession but also your location, so if you are providing services in a specific location you can narrow the average down to that area. This is particularly helpful when pricing yourself competitively in locations across the UK.
Monster.co.uk – all industries under one roof
Much like Payscale.com, Monster.co.uk allows you to view how professionals in various fields are remunerated, but in real time with real contracts. Where Payscale.co.uk is a survey of income, Monster.co.uk gives an insight into the real-time market price.
An additional benefit to using this website is that you can determine the market demand for your skills by looking at the number of contracts available.
Itjobswatch.co.uk – IT specialists in the UK
Specialised for the IT sector, this comparison site also includes location information with year-on-year comparisons. If you work in IT, this site can really help you hone in on what to charge.
It’s important to remember that the majority of salary comparison sites are not tailored to contractors. You’ll therefore need to factor in the additional costs of being a contractor when working out how much you’ll charge. Examples of these are sick leave, holidays, bonuses, self-employed rates for national insurance contributions, outsourcing costs, marketing budgets, accountancy services, pension contributions and professional subscriptions. Remember, these costs will vary depending on whether you use a limited company or umbrella company.
Hourly/Daily rates vs Package rates
Contractors often provide various services and you may find yourself wanting to accept contracts that are as short as a couple of days, as these can be more lucrative per day than ones that last months on end.
However, it is important to remain flexible and adapt your rate according to the task, the longevity of the project, the future value of the client and ultimately the value you can bring to the project.
Whereas a short-term contract might be priced per hour or per day, longer-term contracts sometimes have the opportunity to be priced as a package. Package rates are in essence, a price for completing the project regardless of the hours or days worked. However, you must be careful to ensure you don’t underestimate the time it takes to complete the project.
Packaging will also allow you to outsource parts of the project to other professionals. The costs of outsourcing should also be included in your minimum rate calculation.
Rates for niche markets
Niche markets can be lucrative for contractors as specialised skills are rare and therefore hold a higher value. With less competition comes the opportunity for higher rates but the disadvantage could be that the contract opportunities are more sparse.
As the market changes over time you may find that your niche becomes more mainstream and rates actually decrease over time. As an example, think about the web development world and how it has changed over the last 10 years and has now boomed into the mainstream.
In order to protect your day rate, it’s important to maintain a degree of specialisation that’s constantly ahead of your peers. Regular research should therefore be undertaken to keep up with market rates, demand and supply in order to make sure your skillset is relevant and sought after.
If you want to make the most out of your contracting career, increase the value of your work and set fair and competitive rates for projects, then the sites listed above are a good place to start. If you need a little more help, your recruitment agency or the team at ContractingWISE can help.