Contract to freelance negotiations

[FreeWillyPorFavor]

Looking for some advice on moving from a contracted role to a freelance/consultant one.

My family is moving so I’ve just handed in my notice. My company have said that they’d love to keep me on the team remotely which would be great as I love the client and the job. They’d like me to freelance as I have specialist subject knowledge and quals that the client loves.

We’re chatting details next week but I can’t seem to get clear in my mind hours vs project pay so I’d love some advice.

The max I want to do is 20hrs pw worked at my convenience. The alternative is by project which makes more sense to me but I’m not sure how that might work as we track client time closely.

Ultimately I’d like to continue on the project but I’d also be fine walking away if we can’t get to a reasonable hourly rate. I only earn £28000 for 30hrs at the moment which doesn’t come out at an hourly rate I’d freelance for.

Any advice on how to approach the meeting and be kindly assertive would be very welcome - I can be a bit of a pushover!

I think what you are setting up is a form of consultancy but I think it is up to you to arrive at some hourly rate. Can you not check what the average is in your industry?

i would talk day rate rather than hourly rate. There are some useful formulas online to work this out.

You need to factor in you'll be taxed on what they pay you and won’t get holiday/sick pay/pension contributions etc. There’s savings and reduced liabilities for them too.

Depending on the project, it might be reasonable to work out how many days you will do for them and go from there. Or you could quote them a fixed fee for the whole job.

Don’t undersell yourself! Try and come up with two figures. The nice to have figure, and what you’d be happy to do it for so you can go down to a lower rate if they challenge. I’ve never been turned down on my nice-to-have.

It’s an ongoing marketing project with several strands so could be indefinite really. My thinking with hourly rather than a day rate is that it gives me the freedom to work when it suits me (and attend online meetings in another time zone) rather than be pinned down.

We’re moving to a new location so I don’t want to over commit before I know how things are going to go with the kids day to day.

Would you share your figure right off the bat or wait and see what they offer first?

There are a few ways you could approach this.

If you're going for an hourly rate, charge at least twice what your salaried hourly rate is. Yours is roughly £18 per hour, so I'd suggest charging £40 per hour. This allows for no sick pay, no holiday pay, no employers pension contributions etc. etc. so is nothing like double in the end. If you do this, you'll probably need to send over a weekly or monthly invoice with an hour by hour breakdown of the work you've done.

Or you could charge, say, £200 per week as a retainer and then a much lower hourly rate, e.g. £20 per hour for up to 20 hours per week. This might work better if you expect the work to fluctuate with lean periods of not much work at all, then you are at least guaranteed £200 per week. But if the work comes in at 20 hours per week every week, then it wouldn't be as good as the hourly rate option.

Or you could charge by the half day (4 hour blocks), but I don't think this has advantages over the other options, unless you end up freelancing for more than one client and you need to ringfence blocks of time.

I think that doing the work to your own schedule is normal for freelance, provided that it's reliable. They'll just need to word the contract appropriately to say something like "up to 20 hours per week with no fixed timings" [unless there would be meetings you'd need to attend, in which case make provision for those and the rest flexible]

I’ve got a freelance contract at the moment with a big corporate for two days a week but it’s pretty much up to me when I do the work, other than I make myself available for the odd meeting. I’m paid through an umbrella company and I submit a monthly timesheet. I can record time worked in quarter day blocks - so 0.25, 0.5, 0.75 or 1.0.

if they propose you are paid through an umbrella company make sure you understand all the deductions coming out of the rate.

Thanks, that’s so useful.@BatshitIsTheOnlyExplanationlooking at the numbers written down is really helpful.

They have suggested that I set up a ltd company and contract through that but I can’t quite determine the pros/cons other than the obvious of not being personally liable. I will also have to get an ICO certificate and insurance so I also need to factor that in.

@GhostOrchidI see what you mean now, quarter day blocks might also be a good way to do it as long as we agree what a ‘day’ is in advance.

You’ll have to prepare and submit annual accounts if you’re a Ltd company, whereas if you’re a sole trader it’s much simpler.

remember to start thinking about your costs as well and keep records, eg will you need to buy yourself a laptop and software or will your client provide you with this? Whatever you record as a business expense can be offset against tax.

What if they need you to travel to meetings or events. Who’s covering your travel &subsistence? Try and think through and negotiate it up front.

The hourly rate you get as an employed person is not the same as the hourly rate you need to ask as a self employed person!

If you’re self employed you need to cover holiday pay, sick pay, pension contributions etc.

Check whether you would be inside or outside IR35 and also look at the HMRC CEST tool first to make sure you are doing everything properly
As for rate you should break down your employed rate and then add around 25%

Good point re the IR35. I actually have 3/4 other freelance clients I’ve lined up so this wouldn’t be my only client.

I would also say don’t be afraid to lead your client. Often they haven’t really thought through how they want things to work and don’t really have the bandwidth to “manage” you so be proactive and think about how it could work for you (in terms of working pattern) and put it to them. You can offer to review things after 6 weeks or whatever. As your client is your (ex) employer you know them well so that should be easy as relationships are already established and there is mutual trust.

If a limited company, you need to research IR35 and negotiate a contract with them that would put you outside IR35 (there are specialists to do that). If you're caught by IR35, you need an even higher rate as you'll not only have to pay employee NIC, you'll also have to pay employer NIC out of your hourly rate, plus income tax, etc. So that adds at least 15% to your hourly rate ON TOP of whatever rate you need to compensate for loss of holiday pay, sick pay, and having to provide your own equipment, travelling, and of course your unbilled time on administration, accountancy fees, business insurance, etc. Never go down the limited company route without an accountant in place to explain how it works, your liabilities/responsibilities etc., and and IR35 consultant (the accountant may do that too but check they know what they're doing - lots don't!).

IR35 is "per client". You can be caught by one client, but outside IR35 for another. Having multiple clients "helps" avoid it but by no means eliminates you being caught for a contract if other factors point to IR35.

They came to you. They want you. That’s leverage. Don't forget it for a second.
Now, you’re entering a reframe game. You’re not just an employee anymore. You're an external asset. A specialist. A problem-solver they don't want to lose — but now on your terms.
Here’s the play:

Mindset: You’re not asking. You’re offering.

Go into that meeting knowing you’re not pleading for crumbs. You’re offering continued excellence at a premium, under a structure that benefits both sides. You're the high-end consultant now, not the salaried worker bee.

Hours vs. Project: Control the Clock, Control the Money.

If they track hours closely, then sure, quote an hourly rate — but not based on your old salary. Forget £28K. That's your anchor bias. Consultants don’t think like that. Think:

• Market value.
• Specialist premium.
• Availability cost.

Ballpark it: if you earned £28K for 30 hours a week, that’s around £18/hr. You need to at least double or triple that to account for:

• Lack of benefits.
• Tax.
• Flexibility premium.
• Opportunity cost.

I'd open at £50–£65/hr, depending on the field. Not apologetically either — confidently.
If you go project-based, even better.

• Quote by deliverable.
• Build in flex time, unexpected snags, consultation calls.
• Get 50% up front.

That way, they don’t nickel and dime you on hours. They pay for outcome, not your time.

How to Say It: Soft Power, Hard Numbers.

When you speak, be clear but warm. You’re doing them a favor by continuing to work with them. Example script:
"I’m excited to stay involved. Given the change in working arrangement and increased flexibility, I’d propose working on a freelance basis at [£X/hr] for up to 20 hours a week, or alternatively structuring it around specific project deliverables at a flat fee, depending on what's most convenient for you. I’m happy to be flexible to ensure continuity for the client."
Notice the flow: positive → confident terms → flexible appearance.
You anchor the price but stay open to collaboration.

Be Ready to Walk.

You have to mean it when you say you’re okay to walk.

Power comes from true optionality.

If they can’t meet a reasonable rate, you thank them, exit gracefully, and move on to higher ground. No hard feelings. Just business.
Final Tip: When they say, "That seems a little high...", smile, nod, and reply:
"That’s the rate to deliver the quality you’re used to. If budget is an issue, we can look at adjusting the scope slightly to match."
No discounting yourself. No defensive energy. Always offer less work for less money — never the same work for less money.
Summary:

• Own your value.
• Anchor your rate high.
• Present flexibility, not desperation.
• Be ready to walk.
• Smile while you take their money.

Play it cool. Play it kind. Play it sharp.

Excellent advice ⬆️

@Flytrap01that is massively useful- I’m struggling to move from an employee mindset to a consultant one. Your advice on reframing it is so helpful, as is moving away from anchoring the rate on my employed role rather my skills, familiarity with the project and relationship with the client.

I genuinely AM 100% happy to walk away as when I gave my notice in I didn’t anticipate them being open to offering me anything so we hadn’t factored that into our financial plan.

your welcome, all the best

Having more clients helps with compliance of course and its good from a financial security point of view but having more clients alone may not be enough