• Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
  • Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

Hourly rate - 'rule of thumb'

Collapse
X
  •  
  • Filter
  • Time
  • Show
Clear All
new posts

    Hourly rate - 'rule of thumb'

    Although hourly rates are obviously always subject to market forces, I understand from a few sites that a widely used guide as to what you can reasonably expect to charge is as follows:

    Suggested hourly rate = 'Equivalent' perm salary / 1000

    This looks simple enough but my question is, what exactly is meant by 'perm salary'? To explain what I mean by this question, I can say that in perm employment I would typically get about 80K annual base salary plus a regular annual bonus of about 12K plus a regular car allowance of about 8K, thus totalling about 100K.

    So my question is, is my suggested hourly rate = 80K / 1000 = 80 / hr, or is it 100K / 1000 = 100 / hr?

    An answer on this will be much appreciated. I'm new on here so please be gentle with me! Also please forgive me if this question has been asked umpteen times before!

    Thanks in advance.

    #2
    It's a rule of thumb designed to show what your hourly rate should be to make it worthwhile contracting. How you apply it is up to you, however the higher the salary, the bigger the divisor.
    Down with racism. Long live miscegenation!

    Comment


      #3
      It gives, very roughly the same resultant net pay into your bank account. As you will appreciate there are a lot of assumptions so its only a start point.
      Blog? What blog...?

      Comment


        #4
        The rule of thumb is that it’s /1000 of the perm salary.
        You don’t get bonuses as a contractor, you don’t get a car allowance.
        So if your permanent job pays you 80k a year plus a 12k bonus plus an 8k car allowance, then your permanent job salary is 100k a year.
        It’s not about what the contractor rate is, but what your current package is. And maybe “package” would be a better word than salary.
        Does your permie job have the company paying health care, and a big wad into your pension? Do you have gym membership and other perks? Do you get a lot of paid holidays? Do you take many sick days a year?
        …Maybe we ain’t that young anymore

        Comment


          #5
          Thanks folks for the replies. WTFH has answered the question exactly and points are noted about pension, holidays etc. Looks like 100 / hr or even 110 will be in the right ball park.

          Comment


            #6
            It's a load of cobblers too.

            Rates and salaries vary significantly by area, experience and skillset. It's far more a finger in the wind that a rule of thumb.

            For a Canary Wharf tech role, you'd be looking at 450-600 per day for something specialist but not front office. Equivalent salary would very much depend if you went in at AVP, VP or Director level and could therefore be anything from 60-140k pa.
            The greatest trick the devil ever pulled was convincing the world that he didn't exist

            Comment


              #7
              Originally posted by LondonManc View Post
              It's a load of cobblers too.

              Rates and salaries vary significantly by area, experience and skillset. It's far more a finger in the wind that a rule of thumb.

              For a Canary Wharf tech role, you'd be looking at 450-600 per day for something specialist but not front office. Equivalent salary would very much depend if you went in at AVP, VP or Director level and could therefore be anything from 60-140k pa.
              So it's not a load of cobblers then...?

              It is, however, a very simplistic gross approximation intended to answer the permie question of how much should I charge, when we all know the real answer is "as much as you can given your limited market appeal and bargaining power". If you're worried about loss of income, don't go contracting in the first place.
              Blog? What blog...?

              Comment


                #8
                Originally posted by malvolio View Post
                So it's not a load of cobblers then...?

                It is, however, a very simplistic gross approximation intended to answer the permie question of how much should I charge, when we all know the real answer is "as much as you can given your limited market appeal and bargaining power". If you're worried about loss of income, don't go contracting in the first place.
                Of course it is. It's very much an "it depends" type of answer.

                My going rate would be 500-600/day in London and perm of 90-110k, while in Manchester it would be 350-450/day and 50-65k perm, with those being base salaries rather than package.
                The greatest trick the devil ever pulled was convincing the world that he didn't exist

                Comment


                  #9
                  Originally posted by LondonManc View Post
                  Of course it is. It's very much an "it depends" type of answer.

                  My going rate would be 500-600/day in London and perm of 90-110k, while in Manchester it would be 350-450/day and 50-65k perm, with those being base salaries rather than package.
                  And work through all the various overheads and deductions for both types of role and look at the end figure that you actually get to keep?


                  The idea is to indicate "return roughly the same net pay" to a newbie, no more no less. And, on average, across the whole market, it works as advertised.
                  Blog? What blog...?

                  Comment


                    #10
                    Just thinking back on this thread.

                    Please note that this rule of thumb is to give you an idea of what hourly rate as a contractor is roughly equivalent to an annual salary.

                    This has absolutely nothing to do with what hourly rate you might be worth as a contractor.
                    The rate you get as a contractor is based on experience, quality, going rate, competition and luck.

                    You might say that the equivalent to your current package is £110 an hour, but then discover by searching on job boards that most of the jobs you are qualified for are paying £60 an hour. That's because that's the going rate.
                    I would suspect that there are far more contractors on here who are invoicing at < £50 per hour than there are invoicing at > £120 per hour, and those that are getting the top figures will have been working in their area for quite some time with a good client portfolio.

                    Or, to put it another way, if you have a permanent job, are earning the kind of money you've talked about and are interested in high earnings, stick with your permanent job. Your hourly rate contracting is only your hourly rate when you are working. When you take a holiday or are on the bench looking for work, your hourly rate is £0, which is the equivalent of an annual salary of £0.
                    …Maybe we ain’t that young anymore

                    Comment

                    Working...
                    X