A day rate and an hourly rate can bring in exactly the same money, or very different amounts, depending on how long your days really are and how the client counts them. The short version: work out your hourly rate first, because it's the foundation of every other price, then decide how to quote it.
Start with the rate you actually need
Whichever way you quote, the number has to cover your take-home goal, tax, business costs, time off and the hours nobody pays for. Our hourly rate calculator works this out. In its example, Alex wants $60,000 a year after tax, with $6,000 of costs, 25% tax, 4 weeks off, 40-hour weeks and 70% billable time:
Notice the 70%: Alex works 40 hours a week but only bills 28 of them. Pricing from all 40 would leave Alex short every year.
When a day rate suits
- Work done on the client's site or schedule, where you're booked for whole days and can't sell the rest of the day to anyone else.
- Longer contracts, where clients budget by the day or week. In the UK, contractors often quote day rates.
- Days that run long. A day rate pays the same whether the day is 7 or 9 hours, which suits you if your days are usually short and the client if they're long. Agree what a "day" means before you start.
When an hourly rate suits
- Small or unpredictable jobs, such as a few hours of fixes, where a full day's charge would put the client off.
- Work that often grows. You're paid for every extra hour, so scope creep costs the client, not you.
- Clients who want detail. Some prefer a timesheet showing exactly where the hours went. Our timesheet calculator adds them up.
Converting without losing money
The safe way is to convert using the hours in your working day, and to keep the result in line with what you need per billable hour.
The trap is agreeing a day rate based on 8 hours and then working 9. Over a 200-day year, one extra unpaid hour a day is 200 hours, about $12,800 of work at Alex's rate, given away.
Day rates and gaps between contracts
Contractors who work by the day also need to price in the weeks between contracts. Our contractor day rate calculator does this. In its UK example, Priya wants £60,000 after tax, with £5,000 of costs, 30% tax, 33 days off and 4 weeks between contracts:
With no gaps she could charge £399.62 a day, so the 4 weeks between contracts add about £39 to every day she works.
A third option: price the project
For work with a clear brief, a fixed project price can earn more than either rate, because you're paid for the result, not the time. Estimate the hours, multiply by your hourly rate, and add a safety buffer for things that take longer than planned. Our project pricing calculator does the sums, and shows your effective hourly rate if the job runs over.
Quick checklist before you quote
- Know your minimum hourly rate from your own numbers, not someone else's.
- Agree what a day means (hours, and whether travel and lunch count) if you quote by the day.
- Say whether the price includes tax such as VAT, GST or sales tax.
- Put it in writing, with payment terms. Our quote generator makes a PDF quote.