can you help me figure out a daily rate so I don't get fleeced please

[cantaddtwoandtwo]

my old workplace has approached me to come back 2 days a week on a freelance basis and I'm having some trouble working out the rates I should expect so that I am at least as well off as when I was employed by them (job is pretty much the same).

When I was employed there my salary was £15326 for 2 days a week. If i divide that by 104, I get £147 gross per day. But on top of that salary I also got a non-contributary final salary pension worth about 15% of salary, so I am thinking the real daily rate is more like £170. And also 12 of those days plus bank holidays were paid leave and I also had usual possibility of sick leave and emergency leave.

They have just sent through a contract for me to look at for 1 oct 08 to 1 feb 09 where the amount I'd be paid is £4800. From all our conversations so far, it is understood that I will be working 2 days a week on this project, though the contract just specifies deliverables. (The project will be on-going for about 18 months so there will be more contracts to come so I don?t want to get this wrong for this one)

So how do I work out the daily rate - is it as simple as saying there are 17 weeks, 2 days a week so divide 4800 by 34? If I do that I get £141 per day - already this looks a bit like I am not getting enough even without the pension coming into it.

What I really can't get my head around is how I figure out the holidays? sure I can just look at that 4 month contract and imagine I'll work all the weeks but clearly I can't do that for the whole year. I will be employing a childminder who will be paid regardless of whether I am in work so I need to get this part right.

And there are some other costs with me being freelance - £600 annually for indemnity insurance they are insisting I hold, and £300 for an accountant.

Soooooo

Do I think along the lines of there are 104 possible working days and I?ll be on holiday for 12 of them so I need to earn my old salary + 15% for pension + that £900 for additional costs across 92 days? This gives a figure of £200 per day

And am I missing something huge - Should I put in some contingency in my thinking for sick etc?

Ring an agent, ask them roughly what you would get in the marketplace AND ask what you'd have to pay if you were an employer. It sounds LOW to me. Bear in mind also you don't get paid holiday or sickness so you need to factor that in. Plus your accounting costs, travel costs, etc etc.

gosh what a quick response. thanks for that. It's public service so I'm never going to make my fortune out of it sadly but I really, really don't want to look up in a few months to realise that I am losing money to go in to work...

It's a kind of journalism / content type job - probably closest would be an editor of an authoratative (did I make that word up?) website with lots of info and interactivity - where would I start to find out what that kind of job gets paid these days? And do agents cover that kind of stuff?

My hunch is that it would be more like £400 a day, but at the moment I'm keen to work out what is the lowest amount I could think about so it doesn't go below that.

Go and ask some one (there musyt be media agents) how much it would cost to hire someone like that. Then go back to your employer and say "I've asked, it'll cost you £xxxx a day to get someone. I would like to be paid £xxxx as this is the market rate"

why should they get you cheaper because they know you? They shouldn't! They know you and know you will do a good job, that's worth £xxx.

So, what are you trying to work out? What would be a 'reasonable market wage' or what would be the least you could survive on? Agree with www that you're currently doing the later.
Fwiw, my 'day rate' ain't nothing like the rate I'd get if I worked it out on my salary - it's much higher! Remember you're factoring in job insecurity, as well as illness etc

Your 170 per day sounds right to cover your basics, as I've worked out below. I'd go in high, you can always come down. Maybe add a bit on for travel time and fuel costs to work, and have that as your minimum daily rate.

per hour 18

Yearly 38,220 based on 2080 hrs/year
3,528 24 days hols
1,470 10 days sick
600 Insurance
300 Accountant
Total Yearly 44,118
Hourly 21
Daily Gross 170

Agree with WWW - it sounds low (though I don't know what you do) and it's not about doing those calculations, it's about what you are worth in the marketplace. I'd do exactly what WWW says.

I am freelance btw and have a daily rate - I never did any such calculation but having worked for my main client before going freelance I knew what other freelancers were paid and so based it on that (taking into account my own experience and value to the company).

yes we are talking about 2 different things.

For now what I really want to figure out is what the minimum daily rate would be to match the salary when I was an employee. Then I'll know the very bottom that I can even consider. If they can't meet that then I'd be better off seeing if I can go back as an employee.

I also want to be able to work up from that to then factor in the insecurity etc etc to get to a figure I would accept.

sorry some cross posting - all the freelancers must be distracting themselves from big deadlines tomorrow! thank you all.

I do think I'll need to give a ring round to see if I can get an idea of what people are actually charging too.

To be honest I was so gobsmacked by the low amount they offered I am feeling a bit confused at the moment. I am tending to think they made a mistake and think I'll just send a quick email pointing out that this only equates to £140 gross a day and is this what them meant. I'll need the equivalent salary hourly figure for when they respond cos they will need to exceed it quite a bit I think for all the reasons you've been pointing out.

Hi there - I have recently switched from a permanent post to freelance for the same local authority and after research I charge £400 as a basic day rate but this is the cheaper end of the market. My previous salary for fulltime was around £42k. My colleagues charge £500 for other organisations and they pay!! remember that you will have corporation tax at 20% plus PAYE for yourself, plus the insecurity. they egt the option to hire and fire and the flexibility - so it's a win win. Afterall they are asking you to do this so they must want it.

I would put modesty aside and after some research go in at a top wack. You never get another chance to work upwards. Unless you want to be really brave and charge them on a project by project basis according to what value you bring the organisation. If I do a large or important piece of work then my dayrate is not the only factor in the charging - value to organisation is.

to work out a comparable day rate factoring in holidays I would divide 15326 by the actual number of working days you did - not 104. ie if, when you were employed you got 12 days paid leave, plus, say, 6 bank holidays then your day rate was £178 (15326/86) plus the value of your pension

to work out your day day rate from the feelance contract then yes, it is as simple as total lump sum payment divided by expected number of days it will take.

£140 sounds very low compared to your previous salary - are they new to doing this?

Hatwoman - they are not at all new to doing this - that's why I'm pretty sure they've made a mistake. But saying that, there won't be lots of spare cash sloshing round so they won't go overly high either. But I think the rate should be more like £350 upwards.

laurasmiles - first I've heard of orporation tax - I was just assuming that I would need to do NI and PAYE. I'll look this up thanks. And you are right, they have specifically come to me to do this and said there's no-one suitable internally so I do have some cards in my hand.

just read other posts - and agree. my first bit should read that your day rate was £178 (15326/86) plus the value of your pension, plus the value of job security, not paying an accountant, and the other things listed in the other posts. which are hard to work out.

I've just gone freelance and I started my sums like you - just to give me a very rough idea. my day rate on my first job is getting on for twice what I reckon my basic day rate was when employed - basic meaning taking into account holidays but not anything else - so £350 sounds a lot more like it. in fact that's very much in line with what I'm getting - and my salary was similar too. I do happen to know though that my previous employers don't pay anything like £350.

thaks hatwoman for reassurance that it's not easy to figure it out. I was beginning to think I was going slightly mad earlier and wondering why anyone would want me to work for them.

Does anyone know anywhere there is info on what the expenses I need to take into account will be? So far I am thinking

for me
PAYE (corporation tax?)
NI
indemnity insurance they want me to have
accountant
usual transport / lunches / clothes
computer / printer consumables

for nanny
pay
tax
her NI
employer's NI
kitty for outings

When i worked at an agency where we charged clients on the basis of time we used a rough calculation of 180% of salary. So if we paid our employee £100 per day (and we didn't get fancy here = just salary divided by 52 x 5 if they were full time) and then added 80% so charged them out at £180 per day. This took into account all the extra costs of employing someone (sick pay, desk and chair etc).

It is MUCH cheaper and less risky for them to use you as a freelancer than employ you - if they are regular freelance users they will know this and if it was better for them to employ you they would have offered you a job!

will you be working from home? will you have other clients?

for the time being I'll be doing the 2 days for them and there are a few other small jobs that are in the pipeline for other clients.

I am hoping that I won't need to spend much time marketing as this 2 day a week thing should last til Summer 2010 and I'll pick up the odd few days through existing contacts. There will probably be more work with this main client after this project, all going well! TBH for the next 2 years that's proabably all I can cope with.

For this main job it will be a mixture of mostly working at their offices, going offsite to interview other people in their offices, and a small bit of working in Starbucks from home so I am not anticipating needing to get planning permission or new insurance for my home if that's what you were asking about

You can go via an umbrella company who will do all your invoicing/PAYE and so on, I use Parasol I think you should stop thinking about your previous annual salary - it doesn't come into it when you're freelance, as freelance pay is generally much higher, you're being paid more in return for:

no holiday or sick pay
flexibility
short notice period
low overhead costs for the employer of employing you as they don't have the cost of payroll/admin/pension/benefits associated with a perm employee. As a rough rule salary costs are usually either x'd by 1.5 or 2 to get actual cost of employing someone. So for a £30k salary a business might expect that it would cost £30k x 1.5 (or whatever they use) so £45k. If you're a contractor they don't have to factor that in
the ability to use you when they need you and not when they don't

You are going in MUCH too low! Get market rate and position yourself there. Confidence is everything, good luck, let us know how you get on!

I have clients who write web and email content - they charge between £250 and £500 per day (bigger client at the top end, smaller one - who sometimes works for bigger client - at bottom end of that range). From talking to them, £250 per day is a "just getting by" level of income; £500 per day is a "doing quite nicely" level.
Freelancers do tend to be paid per project, so it's up to you to work out how many hours over what timescale you think it will take, and decide if the total amount is acceptable, rather than thinking so much of an annual salary or minimum daily rate. However, I charge an annual fee paid over 12 months - that way I get paid every month, my clients don't have a lump sum bill at the year end, plus they feel they can have advice on tap - happy client = happy me

sorry offline for a few days but thank you all SO much for your great advice - made me much more determined to be a bit hard hearted about it all.

I went back and queried if she really meant it to be a daily rate of about £140 and she said no, she'd meant it to be £200 but had assumed I'd be on hols for half of Dec, but it should also have been £5600 as she'd made an addition mistake...

Armed with all the thinking i'd managed to do through here I wrote a short email to say that at that level I couldn't break even with my costs and would have to turn it down.

She's just offered £350 per day and I'm going to think about it this evening and do a good spreadsheet to check my outgoings before I accept. I'm pretty sure I will make a bit of money at that level and will also avoid all the appraisal / line mangement crud responsibilities of being an employee so it is looking tempting.

Thank you all SO much

well done for the "would have to turn it down"! I'll have to try that myself - my next piece of work could well be for my former employers and I have a feeling they offer something like £200 which is pants. My non-market "problem" is that since going freelance I've cut out all the childcare and manage (just) by juggling with dh and working school hours and evenings - when I was employed I literally spent all my wages on childcare so any amount of money feels like "profit"

tomorrow I am going on a (free) course run by Business Link entitled 'how to charge what you're worth'. If I get any useful info I will post it here!

I'm starting to charge per project based on how many days I feel I will need to do.

Sometimes this works in my favour but other times not (so one thing I'm doing at the moment I completely underestimated how many revisions they would want to make - next time I will charge for stages and add in extra fees for revisions after 2 I think). So with these people I am really fed up and unmotivated as I feel I'm giving them 'free' work now, so resentful

hatwoman I am lucky enough that it is a choice to go back to work as we are breaking even without some salary from me atm, but only just so I certainly can't afford to lose any money so it was fairly easy to 'turn it down' - though I was quietly sobbing inside that I wouldn't, after all, be escaping from the domestic bliss 2 days a week after 3 years stuck at home.

overthemill that course sounds interesting - I don't think I've heard of business link so I'm off now to google and see what else they do