(this is off the top of my head, probably some glaring errors; it’s intended to give a general idea rather than be authoritative. How do YOU calculate your hourly rate for contracts?)
It seems there’s an increasing number of people around who have no prior experience of this, and are taking their first steps into freelance/contracting while doing iPhone dev in particular.
There are also an increasing number of clients offering impossibly low daily rates. I’m sure some of these are sharks taking advantage of first-time contractors, BUT … I know from personal experience that some are merely naive. Sometimes, it’s just that they are themselves ignorant of the realities of contracting.
So, to help first-time contractors, and to help clients trying to work out why they’re having trouble getting decent people on their seemingly “sensible” budget, here’s some quick thoughts on the standard practice on contract pricing.
By the way, to answer the titular question: Bad ones – about £250 / $350 a day; good ones – about £750-£1250 / (guess, but I haven’t asked any USA guys recently: circa $1200-$1500?) a day; Really really bad ones who have no idea what they’re doing and are probably teaching themselves programming as they go, on *your* budget – about £200 / $200 a day.
(note: the weak (disappointing, but bearable) and the worst (total waste of your time and money) are duking it out on price at the bottom end of the scale, that’s no coincidence. That’s all they can sell themselves on)
1. Salary is not remuneration
By law, in the UK and throughout Europe, companies *must* provide employees with cash and benefits above and beyond their salary. Whatever your official salary, the govt mandates that your employer pays you X% more than that (X varies from place to place and situation to situation).
X is made up of, among other things: “employer” tax, “employer” pension payments, sick pay, holiday pay (typically around 10% of base salary!), local govt taxes, various kinds of mandatory insurance, etc.
Some people get company bonuses as well, often from 1% to 20%.
Of course, at most companies, you also get a whole load of stuff “for free”. The rule of thumb at many companies is that *every* employee costs approx 10% on top of their base salary – and that any bonuses, benefits, etc, are extra on top.
Finding work is an unpaid activity
Contractors are required to spend some number of hours every month looking for their next contract. This can start simple – trawling websites – but even when a good match is found, the contractor has to take UNPAID time off work to speak to recruiters/hiring managers, attend interviews, etc.
Assuming everything goes perfectly and it takes you 2-3 days of preparation, search, interviewing, bidding, viewing specs, etc, and you work 2-3 month contracts on average, this is 5% of your working time.
If just one project gets cancelled / doesnt come through, that is immediately doubled. Any slowness on the part of recruiters again increases the cost to the contractor.
The numbers above are off the top of my head, and are far from complete. When you add it all up, and average over time, the rule of thumb for experienced contractors is that your hourly contract-rate should be at minimum 2 times your hourly employee salary, and as much as 3 times.
This is getting pretty long for an LI post, and I’m sure there’s a lot wrong with it, but hopefully it’s enough to give people an idea of the realities of the situation.