When you are contracting there are different types of charge period
like weekly or monthly and different types of rate such as daily or
hourly. This article describes the various differences and advises on the
advantages and disadvantages of them.
Types of Charge Periods
You will be asked to invoice based on a set period which will typically be one
of the following:
-
Each week
-
Each month (e.g. 20 Jan to 20 Feb, etc)
-
Each calendar month (e.g. Jan, Feb, etc)
The charge period makes little or no difference except that for a new
contract you will have to wait a little longer before you get paid if it is a
monthly payment period.
Types of Charge Rate
When you are contracting there are two main types of payment:
[Whilst it is possible to get fixed price work, this is rare and a different
market to the T&M (Time and Materials) market.]
The Daily Rate
You are paid for the number of days you work. This type of rate tends to be
favoured by clients in the finance sector and also tends to be for those on the
higher rates (around £400+ per day).
From the clients point of view they get a better grip on their budgets
since they can ask you to work extra hours sometimes to hit a
deadline without finances spiralling out of control as they would if you were
on an hourly rate. You would then typically get the hours back another day when
work was not so busy and leave the office early.
BEWARE! There are some clients who take advantage of the daily rate and you can
end up being expected to work 50+ hours a week, and weekends, which
incidentally does not pay double time in the contracting world. This is typical
in large financial institutions where huge managerial politics are at play.
Often a manager makes a tight commitment without consulting his staff then puts
the screws on the staff to make it happen. If this makes you unhappy then it is
down to you to politely inform the manager of what you consider to be a
reasonable working arrangement. This could result in you parting company but
then you might think life is too short to be stuck at work all the time.
You could try the phrase '..bad planning on your part does not represent an
emergency on mine...' if you want to be marched out the door by a stressed
angry boss!
The intention is not to paint a bad picture of daily rates. It all depends
on the client and the boss. The advice is to make enquiries before you
accept the contract. But, do so in a way that does not make you look like you
are not prepared to work hard. Most contractors should be prepared to put in
the occasional long day or week to get something finished
provided it is not all the time.
The Hourly Rate
The hourly rate is better than the daily rate. The client and the
contractor knows exactly where they stand
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You are paid for the number of hours you work. This type of rate is
more common than the daily rate and is normally for rates below £40 an hour.
It can be a risky game for the client to play unless they put a cap on the
number of hours. Some dubious contractors quote a low rate then put in 60 hour
weeks of face time to make more money. Clients need to be aware of contractors
with no lives!
Suffice to say, most clients who pay hourly rates do put a cap on the number of
hours between 35 and 40. Overtime requires sanctioning from a manager.
Compared to some of the excessive working on daily rates the amount of
overtime on daily rates is much lower indeed. Most managers do not wish to ask
their boss for more money to complete a piece of work due to bad planning by
them. Hence it rarely happens. On occasions you might be asked to do overtime
but then claw the hours back another day - this avoids the overtime going down
on record.
The hourly rate is better than the daily rate. The client and the
contractor knows exactly where they stand.
Updated Monday, March 19, 2007, [Originally published Tuesday, May 25, 2004]
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