How to Work out an IT Contractors Daily Date
By ComputerJobs.ie
Sep 12, 2006, 18:45

One of the most common questions we get asked here at www.ComputerJobs.ie is how do you work out a contractors daily rate.

This is an area that always gets tempers frayed and one without guidelines so we suggest to those that are starting out not to be too greedy and use below as a simple rule of thumb.  Once you have a few years experience at negotiating, it gets easier to separate the wheat from the chaff!!

Example.  A .NET developer with 7 years commercial experience and degree will probably command a permanent salary of 60K.  If we add 33% to this (due to the uncertain nature of contracting, contractors are usually in and out within 3-6 months, hence always looking for their next contract).  This will give an annual salary of just under 80K, this is deemed his/her reward for contracting.

The annual salary is then divided by 230 which is the available “billable” days in the year to work, excluding holidays (14 - 20), days sick (5-10) and bank holidays (4) as well as 104 weekend’s days bring the total of 365 days in the year.

So if you divide 80K by 230 you get 347 which is his / her daily rate or rounded to 350 per day.  

The recruitment company will then usually add a margin of between 15-20% for their services in both finding the candidate and pay rolling them, ie, paying the contractor and waiting to be paid by the client.  So the client will then expect to pay between 400-420 per day for a senior .NET developer.

However, there are always different factors which must be considered as the above formula does not always apply. 

High demand for specific skills can add a premium of anywhere between 15-25% on to a contractors rate. In the case above, the going rate for someone at this level is probably closer to 450 per day currently.

Specific industry experience such as billing within telco or online banking can also add an extra premium.

Using a consulting house / software house involved in managing an IT project can mean the rate paid by the client will usually be double / treble the contractor’s rate, in this scenario, between 800-1200 per day.

For more information, visit www.ComputerJobs.ie - “Contractors Corner”.