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Helpful tips for freelancers and contractors


How much should I charge as a contractor?

Most freelancers use either day rates (charging by time spent) or quote a project fee for an agreed outcome (value pricing). There are advantages and disadvantages to both approaches depending on your role, level of experience and how tightly the project is defined.

Fountain pen writing the word 'pricing'

Day rates

Day rates are useful if you are providing a temporary extra pair of hands to an organisation.

You will need to establish whether the contract puts you inside or outside IR35 as this will directly affect your take home pay. You should do some research to establish an appropriate rate for your level of expertise and sector knowledge. Your daily rate should, as a minimum, cover your previous salary plus benefits and pension contributions, with an uplift to reflect the extra risks from contracting (no SSP, no holiday pay, you may not work every day etc) and any agency fees taken. There is a useful conversion tool here from Contractor Calculator.

If you price too high, you may lessen the opportunities you are interviewed for. Price too low and people may assume you don’t have the expertise.

If you feel a contract may extend, ensure a rate review is written into the contract at the 6 or 12 month review, not just verbally agreed. There is nothing worse than being underpaid.

Value pricing

A more experienced freelancer may charge a project fee for agreed outcomes or results.

In order to determine the value the client will gain from the project, you'll need to ask a few questions upfront: What does the client want to achieve? Why do they need to carry out this project now? What have they tried so far? What worked and what didn’t? What risks are there if the client gets this wrong?

You need to establish the client’s budget and to be able to give an estimated range of cost based on similar work that you have carried out elsewhere.

"Clients are not paying you for the time it takes you to carry out the work but for the experience you have gained that enables you to resolve their issue." (John Niland, IPSE National Freelancers Day 2020)

Remember to establish the resources available to you up front and in writing – access to information and data, key stakeholders, sharing of data, payment terms (consider staged payments).

Be prepared to deal with objections – clients may initially reject a project quote as too expensive. You need to understand what they are worried about. Perhaps show them what might happen if they don’t go ahead – ‘real world’ examples will help to focus their minds.

There will always be other contractors prepared to charge less but you need to justify why you are worth the price you are charging.

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