Working out an hourly rate

[MulhuddartDrive]

I'm completely rubbish at working out these things so wanted to double check... If I want an annualised salary of eg £50k, to work out the hourly rate it is 50000 divided by 52 weeks of the year divided by 35 hours per week (£27.47). Right?

That doesn’t include any time off.

You need to factor in the extra NI you'll have to pay, compared with a salaried income, not to mention consumables etc.

Your rate should be higher to account for the fact you won't get holiday pay & sick pay. Also no employers pension contributions.

Do you have any overheads?

Thanks, forgot about those. I'll amend accordingly.

You’re assuming 100% productivity and no overheads.

Figure out your costs and add them to the 50k. Let’s say you have 10k in Costs. I’d then assume say 40 days a year leave/sick/bank holidays and say a 70% productivity rate.

That puts you in the £55 per hour bracket.

Is that viable in your industry?

I can assume a less than 100% productivity rate??

It's an odd situation, but i need to bill hourly for 3 months before starting as a proper employee and I don't want to screw up the sums either way. I'll take all the notes into consideration, thanks.

Of course you can't be productive 100% of the time! What about admin? Unless you plan to pay an assistant out of your salary, you're going to need to schedule slots in your diary for invoicing, banking etc. Not to mention actually checking your work before you submit it, producing quotes etc.

Billing by the hour should be calculated on about 48 or even only 47 weeks a year.

I’ve worked as a project manager for years. Senior engineers with decades of experience and admins running around after them can manage around 80% productivity. You’ll be in a new role and freelancing. 70% is a strong assumption.

I usually take the base salary, add 25% to cover the costs borne by the employer, such as pension contributions, benefits, employers NIC, training, equipment, etc, then divide it by the best guess at the number of working days in a normal year (i.e. take off at least 28 days holiday, another week or so for sick days, a few days for training, etc), then divided by the best guess at the number of working hours in a day.

So, say £50k becomes £62.5 divided by 225 working days is £278 per day, divided by, say 7 hours per day is £40 per hour. That assumes you can do all your own admin within the working day (i.e. at your desk).