assignment rate vs contract rate

IT Contracting - Limited, Umbrella and IR35 Guides for Contractors

IT Contractor Essentials

Umbrella companies – ‘gross contract rate’, ‘umbrella rate’, ‘assignment rate’ – what’s the difference?

By: James Leckie | Last updated: January 27, 2020

I’m confused about the different rates I’m being quoted – what’s the difference?

The biggest issue we have in the industry at the moment is that people are not quite sure what umbrella companies are quoting them. Are you being quoted a contract rate, gross figures, your taxable salary, or a day rate?

This issue has come about with the looming introduction of the IR35 changes to the private sector. The legislation states that employment costs (i.e. Employers NI & Apprenticeship Levy ) cannot be passed down the chain to the contractor – that is the simple bit.

However, this is when confusing terminology comes into play.

The legislation states that if the end client deems a contractor to be inside IR35 (or the intermediary closest to the personal service company), then all employment costs must be deducted at source and the net figure paid directly to the PSC.

At this point, we could state that the rate provided is an inside IR35 Rate; this is in essence a “taxable salary” and would only be subject to Employees’ NI and PAYE tax (again deducted by the agency or end-client).

What is the Assignment / Umbrella rate?

What we are seeing is that many contractors are being quoted an “umbrella rate”, or “assignment rate” which is, and always has been the Gross (Contract) Rate.

If you are quoted an umbrella or assignment rate then this is deemed to meet all employment costs before the taxable salary is arrived at.

To add to the confusion – as you are an employee of an umbrella company, you cannot be a disguised employee and IR35 doesn’t even come into play.

Why should I be paying Employers’ NICs if I use an umbrella company?

An umbrella company is an employer and, as with any other UK employer, they have a legal obligation to pay employers’ national insurance contributions to HMRC. The umbrella company employs you under an over-arching contract of employment and enters into a business-to-business contract with the recruitment agency or client.

An invoice is raised by the umbrella for the hours / days you work; this is then issued to the agency/client. Payment is made to the umbrella for the value of the invoice and they then pay the employer’s national insurance contributions from the contract amount received.

The umbrella will usually retain a margin from that contract rate for processing the payments. The balance is your taxable salary; this is then subject to deductions for income tax and employee’s national insurance as with standard employment.

This model is the same for all compliant umbrella companies, as we all have to comply with the regulations, which surround PAYE. Find out more in our dedicated article on umbrella companies and employers’ NI .

What have some unscrupulous umbrella providers been doing?

Umbrella companies have been in existence since the removal of Managed Service Companies (MSCs) and compliant firms have always primarily operated in the same manner.

An umbrella company was seen as an alternative to running a limited company for many, however as IR35 has evolved, contractors are now having to face the fact that some agencies / end clients will determine their status to the contrary of the manner in which they worked previously.

This all comes down to what facts the contractors are being told, which requires an understanding on the agency’s part and that of the umbrella.

Post-April, if a contractor is looking at a role which is via an umbrella then the figure quoted by the agency should be the Gross Contract Rate .

If they are quoting an inside IR35 rate then this could be misconstrued and would be argued that this should be the taxable salary with the agency/end client covering all employment costs.

In reality, an umbrella company only has one pot of money coming into the business from which all costs have to be met.

What should I look out for on a KID from April?

Post April, this should be made a lot clearer to the contractors. The introduction of the Key Information Documents means that all figures must be clearly disclosed to the contractor before any contractual arrangements are signed and sealed.

It is the agency’s responsibility to provide this to every contractor under the Good Work Review.

Until the 6 th April deadline, there is no requirement for this to be done However it could prove to be useful for those looking to be proactive and assist the contractors with making a decision on whether to accept or even consider an assignment.

The biggest issue at present is for those contractors whose assignments span this April threshold. We are seeing many contractors having their contracts terminated by the end of the March, and transferred inside IR35 by the client / agency.

If the assignment continues in exactly the same manner as before, then it could be argued that the contractors should be quoted a taxable salary which shows the agency / end client accounting for employment costs, in line with IR35 legislation.

Or if they are being forced down the umbrella route, then in theory the rate should be uplifted to cover these additional costs from the gross contract rate.

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Apr 16, 2023

Understanding the Difference Between Assignment Rate and Gross Rate of Pay

As a contractor, it's important to understand the different rates of pay that you may encounter when working on assignments. Two of the most common rates are the assignment rate and the gross rate of pay. While these rates may sound similar, they actually refer to different aspects of your pay, and it's important to understand the difference between them.

What is an Assignment Rate?

An assignment rate is the amount of money that a client or agency agrees to pay you for a specific assignment or project. This rate is usually agreed upon before you start work, and it may be negotiable depending on the nature of the project, your experience, and other factors.

The assignment rate typically includes all the costs associated with your work, including your salary, any expenses you incur, and any other fees that are part of your contract. It's important to note that the assignment rate is not the same as your take-home pay, as you may have to pay taxes and other expenses out of your earnings.

What is Gross Rate of Pay?

The gross rate of pay is the total amount of money that you earn before any deductions are made, such as income tax and national insurance contributions. This rate includes all the money that you earn from your work, including your basic salary, any bonuses, and any overtime or other additional pay that you receive.

The gross rate of pay is important because it determines the amount of tax and other deductions that you will have to pay on your earnings. It's important to note that the gross rate of pay is not the same as your assignment rate, as your assignment rate may include other costs and fees that are not included in your gross rate of pay.

What's the Difference Between Assignment Rate and Gross Rate of Pay?

The main difference between assignment rate and gross rate of pay is that the assignment rate is the amount that you are paid for a specific assignment or project, while the gross rate of pay is the total amount that you earn before any deductions are made.

The assignment rate is often negotiable, and it may include a range of costs and fees that are associated with your work. On the other hand, the gross rate of pay is determined by your contract and your earnings, and it does not include any other costs or fees.

It's important to understand the difference between these rates so that you can accurately calculate your take-home pay and plan your finances accordingly. By understanding how these rates work, you can ensure that you are being paid fairly for your work, and that you are meeting all of your tax and other financial obligations.

In conclusion, as a contractor, it's important to understand the difference between assignment rate and gross rate of pay. The assignment rate is the amount that you are paid for a specific assignment or project, while the gross rate of pay is the total amount that you earn before any deductions are made. By understanding how these rates work and how they impact your earnings, you can ensure that you are being paid fairly and that you are meeting all of your financial obligations as a contractor.

What is the difference between your assignment rate and gross rate of pay?

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The difference between a contractor’s assignment rate and gross rate of pay is an area that often causes a lot of confusion – especially if you are new to contracting. Continue reading to discover the difference and why the two pay rates are displayed on your payslip.

What is the assignment rate?

The assignment rate is made up of the actual wages payable to you (your gross pay), the recruitment agency’s and the umbrella company’s fees (or margin), and the employment costs. As employers, umbrella companies are legally required to pay employment taxes on any income paid to their employees. However, as umbrella companies only charge a small margin (typically between £15-30 per week) and have no financial gain from your work, they would be operating at a loss if they paid it themselves. Therefore, the assignment rate paid to the umbrella company by the recruitment agency or end client is different from the rate you are due to be paid, as it includes additional employment costs for the umbrella company. The employment costs include:

Employer National Insurance Contributions
Employer Workplace Pension Contributions
Holiday Pay
Administration costs (e.g. the margin, which are sometimes charged separately to you by the umbrella company)

Please visit the government’s website for more information about how you will be paid when working via an umbrella company.

What is the gross rate of pay?

The gross rate of pay (also sometimes referred to as the contract rate) is the actual wages payable to you (before tax deductions) by the umbrella company for the work you have completed. The umbrella company will deduct Income Tax and Employee National Insurance Contributions through their PAYE system and pay these to HMRC. Other deductions, such as workplace pension contributions and student loan repayments (if applicable), will also be taken. The remaining amount is your net pay, and this is the amount that will be paid to you.

How to understand deductions to your pay

It is possible to see a breakdown of the deductions that will be made to your pay before you register with an umbrella company. You will also receive a payslip for each payment made to you by the umbrella company.

Key Information Document

A Key Information Document (KID) will be provided to you by your recruitment agency before you accept an assignment. The KID is intended to improve the transparency of the information supplied to temporary workers, particularly regarding pay and the deductions that will be made. The KID provides an overview of the fees and deductions concerning the assignment rate and contract rate (gross rate of pay) and how this affects your net pay. The KID will outline what the recruitment agency will pay your umbrella company and what your umbrella company will pay you.

When the umbrella company pays you, you will receive a payslip with each payment listing the deductions that have been made to your gross pay. It is a legal requirement for your payslip to show the following:

Your gross rate of pay before and after deductions
The amount deducted for each tax deduction – for example, the amount of Employee National Insurance Contributions and Income Tax , which will change depending on the hours you work each week/month
The number of hours/days you have worked

The assignment rate paid to the umbrella company and the deductions for the employment costs will also be listed in a separate section to show the umbrella company is making the correct employer tax deductions.

Contact us today for a free and impartial take home pay illustration

If you have any questions regarding the tax deductions made to your pay. In that case , our expert Sales Consultants can explain everything you need to know to ensure you understand how you get paid when working via an umbrella company. Please call us on 01707 871622 or request a callback for a time that suits you. We look forward to speaking with you!

How much could you take home with an Umbrella Company?

About churchill knight.

Founded by an IT Contractor in 1998, Churchill Knight has become one of the most respected contractor accountants in the UK. We’ve helped over 20,000 contractors with their accountancy requirements. As well as our accountancy services, we also have an industry-leading PAYE umbrella company and dedicated in-house personal tax department . Whichever service you choose, you can move forward with complete peace of mind. We are proud of the reputation we’ve built over the years, and our FCSA accreditation proves how committed we are to compliance within our sector. Keep reading…

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The Churchill Knight blog is regularly updated with helpful content for contractors and freelancers – especially articles that answer the most frequently asked questions about umbrella companies! Please pop back shortly to see the latest articles written by Andrew Trodden (Marketing Manager) and Clare Denison (Marketing Executive).

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What is an Assignment Rate? Plus other umbrella pay questions

The difference between an assignment rate and worker’s gross pay is one of the most common causes of confusion amongst workers who are new to umbrella employment.

When you contract via a PAYE umbrella company, you are an employee of the umbrella company, and the umbrella company is your employer. All employers must pay employer’s National Insurance Contributions (NICs) on payments made to their employees. This cannot be deducted from worker’s pay and it is therefore built into the assignment rate.

The assignment rate includes employment costs such as employer’s National Insurance, holiday pay, apprenticeship levy, and pensions contributions. Such costs should always be factored into the assignment rate quoted by the agency because, as employers, umbrellas are legally obliged to pay them.

Why is there a difference between a worker’s assignment rate and gross pay?

As with employer’s NICs, the money to cover any employment costs, including wages, all comes from the rate charged by the umbrella company to the agency or end client.

Umbrella companies must also allow for:

12.07% Holiday Pay (this can be advanced to you each week, or accrued)
0.5% Apprenticeship Levy (when umbrella’s total payroll reaches a certain level)
3.0% Employer Pension contribution (this is paid into the workers workplace pension)

This is why an assignment rate is usually much higher when a worker contracts through an umbrella company, as it needs to cover all of these costs.

If a worker was to be employed directly by the agency or end client, his or her PAYE assignment rate would just cover your wages, and the agency or end hirer would pay the other employment costs.

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Fleets Explained

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Fleets Explained: How do freight rates work?

In for-hire trucking, shippers pay carriers to move freight. This payment is generally a per-mile rate with a fuel surcharge.

Freight rates are the primary source of income in for-hire trucking and a major indicator of the industry's health.

Rates are the products of countless market conditions. Different trucking segments have slightly different rates, particularly between spot and contract freight.

See also: Fleets Explained: What are the trucking segments?

This is part of FleetOwner's Fleets Explained, a Trucking 101 series to break down aspects of the trucking and fleet management industries. You can read more from the series, launched in May 2024, at fleetowner.com/fleets-explained . To submit topic ideas, clarifications, and corrections, email [email protected] .

What are spot rates?

The word spot is a general financial term for a short or immediate timeframe, similar to the phrase “on the spot.” In trucking, a spot rate is the cost of quickly moving specific freight or a load. Spot rates are the short-term counterparts of longer-term contract rates.

Fleets and brokers/shippers agree on a spot rate to haul specific immediate freight, which can be called spot freight or a spot market load. The environment surrounding these transactions is the spot market.

The spot market mostly takes place on load boards. Load boards are platforms that allow shippers/brokers to post spot freight they need to be hauled and enable carriers to bid on those postings.

According to RTS , major spot load boards include DAT One , Truckstop , 123Loadboard , and Direct Freight .

How do spot rates work?

According to Penske Logistics , spot rate quotes reflect real-time market conditions: how much it costs to ship cargo on the spot. Broadly, cost is a function of the freight market’s supply and demand. More specifically, however, rates vary based on numerous factors, including the type of freight, the weight of the shipment, the length of the route, fuel costs, available drivers, the weather, and the shipper’s sense of urgency.

These market conditions affect individual shipper and carrier behaviors, which in turn affect rates. If a shipper posts a spot load on a board for an appropriate rate, a carrier might quickly accept the load.

When the load-to-truck ratio rises, for example, a load posting for the original rate is less likely to be accepted by a carrier. The shipper would need to pay a higher rate to get their spot freight hauled quickly.

What are contract rates?

Contract rates come from long-term contracts between shippers and carriers. The negotiated rate is, to some degree, fixed for the duration of the contract; this is in contrast to the real-time changes seen in spot rates.

According to Translogistics , contract freight is less flexible than spot freight—but is more predictable. In exchange for this assured business and predictability, contract rates tend to be slightly lower than spot rates. Contracts also often come with additional requirements, such as tracking, insurance, and specialized cargo handling.

Long-term contracts are generally negotiated discretely between shippers/brokers and carriers without the assistance of a load board marketplace.

How do contract rates work?

Though contract rates are not as immediate as spot rates, they are still determined by the same factors that influence supply and demand. Long-term contractual agreements lend these rates a rigidness that insulates shippers and carriers from market volatility.

Throughout the contract term, the rate will tend to reflect market conditions from the time of contract negotiation rather than real-time conditions.

“It’s an artifact of buying forward versus buying now,” Ken Adamo, chief of analytics for DAT Freight & Analytics , told FleetOwner.

“That lead-lag relationship can be as short as a couple months; sometimes it could be a little stubborn and be four to six months. A lot of it has to do with how long the contracting cycle is,” Adamo explained. “We’ve seen during COVID the contracting cycle shortened considerably. As things have normalized in a post-pandemic world, that contracting cycle has lengthened.”

How do trucking segments affect rates?

Rates behave differently among different trucking segments, particularly between cargo and equipment types.

For example, flatbed loads tend to have higher rates than refrigerated loads , while refrigerated loads tend to have higher rates than dry van. This same trend is reflected in load-to-truck ratios : The flatbed segment generally has the highest ratio of the three, while dry van has the lowest.

These rates vary because each segment has unique market conditions. The risks and labor required to haul each type of cargo are a major factor.

Dry van freight can haul various general goods within a fixed-size container. Refrigerated goods require great care to ensure their trailer maintains a controlled environment and fixed temperature, lest the food or chemicals being hauled go bad. Flatbed cargo often carries large freight that cannot fit in a dry van. This freight needs to be secured with locking devices and may also be oversized.

The rate for hazardous cargo and any freight requiring specialized care is typically higher than for general goods. Specialized care and regulatory compliance add to the cost of hauling the goods, and the freight may also be limited in what routes it can take.

How do business cycles affect freight rates?

One important factor for freight rates—and the trucking industry generally—is the economic cycle, or business cycle.

Business cycles are broad patterns of expansion and contraction within a given market. A cycle can take place with any datapoint, in any market, under any reasonable timeframe (generally, to the scale of months and years). Britannica Money describes these cycles as "the recurrent boom-and-bust phases that markets and economies typically exhibit."

These cycles affect rates in several ways. The industries that produce haulable goods—like manufacturing, construction, retail, agriculture—experience their own cycles of boom and bust. The markets for the haulable goods themselves, such as the avocado market, experience their own cycles. Trucking has its cycles, and the entire U.S. economy has its cycles.

If the avocado market is in a boom phase, refrigerated loads out of California will be in high demand and rates will likely rise. If construction is in a bust, flatbed load rates will suffer.

As an example, take a look at DAT's average linehaul rate for dry van loads across nine years, from January 2015 to August 2024.

Looking at the chart above, it looks like DAT's measure of dry van freight rates experienced about three major boom-and-bust cycles since 2015. Rates peaked around January 2015, mid-2018, and January 2022. Rates fell to their cyclical troughs around mid-2016, January 2020, and from mid-2023 through mid-2024.

These cycles are built by the same factors of supply and demand as those affecting individual rates. An excess of available carriers brings rates down—excess capacity is one major factor contributing to the latest trough in this nine-year rate chart.

How does your fleet earn its freight rates? Are you curious to see how other readers would answer? Try out this survey below.

Jeremy Wolfe | Editor

Editor Jeremy Wolfe joined the FleetOwner team in February 2024. He graduated from the University of Wisconsin-Stevens Point with majors in English and Philosophy. He previously served as Editor for Endeavor Business Media's Water Group publications .

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Here’s How To Set Your Contract Staffing Rates

Contract Labor Searches

The best strategy is to first ask the company to provide a range of hourly bill rates when you are taking the contract job order. The logic behind this strategy ties directly to the experience, education, skill set and availability of the candidate/contractor. The largest single component of the bill rate is how much you are going to have to pay the contractor on an hourly basis. Once you work through the process and have come up with the proposed bill rate to offer the company, you will know you are in the ballpark if you have the range.

Essentially, the hourly bill rate to a company includes the following:

Hourly Pay Rate + Tax Burden + G&A (Back-Office) + Recruiter Share = Hourly Bill Rate

Contractor Pay Rate

Since the starting point is really based on what you have to pay the contractor, it is easy for a recruiter to come up with an hourly pay rate, and then use an average multiplier as a guideline for the hourly bill rate to the company. (We will talk about multipliers in a minute.)

If you are working with an experienced contractor, he/she can often tell you what they want to earn per hour, and you can determine if that is reasonable based on their education, experience, skill set, etc.

If the candidate is relatively new to contract staffing, there is a quick way to come up with an hourly pay rate. Simply take their desired (or previous) annual salary and divide it by 2,080, which is the number of working hours per year. This will give you a starting point for the hourly pay rate.

For example: $95,000/year divided by 2,080/hours = $45.67/hr.

Keep in mind there are a couple of things that can have an impact on the hourly pay rate. For example:

Length of the assignment: Shorter contract periods can increase the rate.
Time between assignments: If the contractor is currently unemployed, the pay rate is more negotiable.
Location compared to home: If the work location is close to home, the rate is more negotiable.
Status of the company: If it is a great company, the candidate may be willing to take a lower rate to get their foot in the door.
Opportunity to travel: If a contractor has a desire to travel, and per diem is included, the rate is more negotiable.
Skill set: If a contractor’s skill set is in high demand, the contractor can push for a higher hourly pay rate.

Multipliers (Mark-Up)

Once you have an hourly pay rate for the contractor, you can use an average multiplier to calculate the hourly bill rate for the company. The location of the contract assignment can affect what multiplier you use. If you are placing someone in New York the multiplier would be higher than Michigan. Multipliers usually range between 1.5 and 1.8, but they can go much higher for healthcare professionals and hard-to-fill positions.

Our tracking shows that the current average multiplier for technical and professional contract staffing throughout the United States is 1.60. For the past 10 years it has ranged from an average of 1.51 to 1.67. (Excluding healthcare contract placements.)

Note : The multiplier is defined as the quotient of the company bill rate divided by the employee pay rate. A simple example of a 1.5 multiplier would be a scenario where the bill rate is $60 per hour and the pay rate is $40 per hour. The common term for multiplier is also “mark-up.”

Company Bill Rate

Once you have the multiplier, simply multiply it by the contractor’s pay rate to determine the bill rate to the company. For example:

$45.67/hr pay rate x 1.60 = $73.07/hr bill rate

The goal is to get the bill rate as high as you can and the pay rate as low as you can. Then you have the greatest margin between the two, and that translates directly to more recruiter profit. Top Echelon Contracting actually provides each recruiter with a customized “quote” to make the negotiation process easier. The quote has a matrix which includes $20 Bill Rate Spread and a $10 Pay Rate Spread, and at each point of the matrix the recruiter profit is documented.

Tax Burden & G&A

Please remember that there is a tax burden for every W-2 employee. State and federal taxes, workers compensation, benefits, etc., come out of the margin. (The margin is the difference between the bill rate and pay rate.) These costs vary by state and job classification.

Additionally the G&A is the general and administrative costs that are normally handled by the back-office. These costs traditionally cover the legal, financial, and administrative duties tied to contract employees.

Recruiter Profit

In the example above, if you had a programmer who was working in Ohio for a $45.67/hr pay rate and the bill rate was $73.07/hr, the recruiter profit after the tax burden and G&A would be $13.23 per hour. If you calculate that out for an average nine month assignment, that would be $20,599 for one contractor; someone you could place again on another assignment.

There is definitely money in contract staffing, and once you learn the basics of rate negotiations, you’ve got the hardest part of contract staffing handled. You already know how to find candidates to match job orders. So the rest is easy.

Photo courtesy of BigStockPhotos.com

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How to Calculate Contract Bill Rates

By FoxHire Team Posted on 09/26/2023

Determining how much to charge clients for contract staffing services extends beyond a contractor’s wages. For some recruiters, setting a contract bill rate can be a challenge. There are many things to think about like the state of the market, your competition, your margin, and how much your contractor is going to be making. But once you know what goes into it, learning how to calculate the bill rate isn’t difficult. It could be even easier using an instant quote tool like FoxHire’s but we can get to that later!

What is a bill rate?

What does billing mean in recruitment? Your bill rate is how much you charge your client when you place a contract worker at their company. This is usually thought of as an hourly or a weekly rate.

Your bill rate should cover the contract worker’s wage (hourly pay rate), taxes and insurance, administrative expenses, and leave room for a decent profit margin for your staffing firm.

Bill rate vs. pay rate

Unlike a bill rate, the pay rate only applies to the contract worker’s wage (hourly or weekly rate). Pay rate is how much you pay the contract worker. It does not include other costs of employing the worker like taxes and insurance, or your recruiter fees (profit).

Calculating contract bill rates

Determining your bill rate might seem intimidating, but it doesn’t have to be. First, let’s look at what makes up the hourly bill rate:

Hourly Bill Rate = Hourly Pay Rate + Tax Burden + G&A (aka Back-Office) + Recruiter Profit

Try using the following three-step process to select a fair and profitable bill rate.

1. Get a bill rate range from client

What is your client’s hiring budget? Having a rough idea of what your client is willing to pay shows you if you are in the same ballpark as you work through the rest of this process. They could give you this budget in the form of a hourly dollar amount, like “$50 per hour”. They may also give you a budget in the form of a markup, or the percentage of the pay rate you are allowed to “tack on” the top to make a profit. This may sound something like, “We are willing to do a 56% markup on contract roles like this”. Either way, this will give you a starting point to begin your calculation.

2. Determine the contract worker’s pay rate

The largest part of the contract bill rate is what the contract worker will be paid on an hourly basis. Therefore, the pay rate is a good starting point when calculating a proposed bill rate.

You can ask an experienced contract worker what their expected pay rate is. You can usually determine whether that is reasonable based on their education, experience, skill set, etc.

If your candidate is new to contracting, figure out how much someone in a similar position earns. You can find competitive salary ranges by looking at the United States Bureau of Labor Statistics . Once you have a salary, you can convert salary wages to an hourly pay rate. To do so, divide the salary by the average number of working hours per year, which is 2,080. This does not take overtime into consideration.

Keep in mind that other factors affect a worker’s hourly pay rate, including:

Assignment length: Short-term contracts generally demand higher pay rates
Conversion potential: The pay rate can be closer to a direct salary if the position is likely to convert
Benefits: The pay rate might be lower if the worker receives generous benefits like health insurance and retirement plans

3. Apply a multiplier (mark-up)

Once you have determined the hourly pay rate, you can use an average multiplier to calculate the company’s bill rate. As of May 2021, the current average multiplier is 1.56 (or 56%). Multipliers vary based on factors like location and industry.

When you decide on the mark-up, multiply it by the contract worker’s hourly pay rate to come up with the proposed bill rate.

Let’s say you want to pay a contract worker $45.00 per hour. Use the average multiplier of 1.56 to find your bill rate:

$45.00 (Hourly Pay Rate) X 1.56 (Multiplier) = $70.20 (Bill Rate)

You would bill your client $70.20 per hour.

This video from our President, Colin LaBeau explains:

What does the mark-up cover?

The margin between the pay rate and the bill rate covers the tax burden, general and administrative costs, and your recruiter profit.

Because you are the contractor’s W-2 employer of record, you are responsible for handling taxes and insurance . You are responsible for withholding income, Social Security, and Medicare taxes from the worker’s wages. And, as the employer, you must also contribute Social Security and Medicare taxes. Plus, you must obtain workers’ compensation insurance. These costs in your bill rate markup.

General and administrative costs can add up, too. These costs are associated with the legal, financial, and administrative duties of placing contract workers.

The remainder of the margin after the tax burden and G&A is your recruiter profit . Obviously, the wider the margin between the contractor pay rate and the company bill rate, the more profit there will be.

Calculating all the rates and handling taxes and workers’ compensation are all part of the contract staffing model and fall into “back-office” duties. Plus, there are often more duties associated with offering benefits.

How to avoid the back-office duties

If you’re like most recruiters, you’ll want to know how to avoid the stress associated with becoming a contractor worker’s W-2 employer of record. An easy solution is to let FoxHire take care of the back-office tasks for you!

Our contract staffing back-office solution will help you with rate calculations, and handle all the legal, financial and administrative responsibilities so you can focus on recruitment. Use the FoxHire customizable contractor rate calculator to see how much your profits would be using our premium or express services.

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Umbrella Companies

Umbrella or PAYE: what is the difference?

‘Umbrella or PAYE: what is the difference?’ It’s a fair question, a good question even, but first we ought to ask a more fundamental one, writes Lucy Smith, managing director of Clarity Umbrella . And that is this:

What is PAYE?

Pay As You Earn (PAYE) is HMRC’S system to collect Income Tax and National Insurance from employment.

Under umbrella or agency, you are deemed an “employee” predominantly for tax purposes and as such, all taxes and National Insurance will be deducted at source by the company you are employed through (the umbrella or agency).

When it comes to contractors, those who have inside IR35 contracts are deemed to look like “employees” and so need to be paid via PAYE .

Ordinarily, a permanent employee is usually given a taxable salary (i.e. the figure given if you were offered a full-time annual salary), and this is then subject to PAYE and Employee NI. However this is where umbrella and agency PAYE differ.

Typically two option on inside IR35 contracts

When contractors take on an assignment via a recruitment agency that falls inside IR35, they may give you the opportunity to be paid in one of two different ways;

Via an Umbrella Company; or
Via Recruitment Agency PAYE.

So how do you know which route to go down? Well, this depends on a number of variables, but let’s start by understanding the similarity and then the difference, so you can make an informed decision as to whether it’s agency or brolly for your next assignment.

Under both umbrella and PAYE, you are employed and as a result, will pay full PAYE taxes. However, an agency is likely to offer you two different rates, or at least an agency should do!

Assignment rate, employment costs, and taxable salary

For umbrella, the “assignment rate” that is given to you is technically the invoice rate that is issued to the agency, from which employment costs have to be met. By ‘employment costs,’ we mean Employer National Insurance (NI), Apprenticeship Levy, and the umbrella company’s margin. These are deducted from the monies received before arriving at the taxable salary (i.e. the amount you would see if you were offered a permanent role). The uplift from the standard PAYE rate is deemed to cover these additional costs you would not usually see.

Agency PAYE, explained

You should therefore expect to see a lower rate offered if you opt to go down the Recruitment Agency PAYE route, as the agency have already taken the employment costs into consideration, before arriving at the offered rate.

Under agency PAYE, you are taken onto the agency payroll, and they would ensure deductions are taken for PAYE and NI contributions before issuing you with a payslip. The rate you are given would be deemed your taxable salary and would be similar to what you would see if you were in standard employment.

What umbrella take-home pay looks like

So, let’s take a look at what this actually means, starting with the umbrella option. On a day rate of £500.00 per day with an umbrella, the weekly figure (assuming as standard tax code) would look as follows:

Invoice / Assignment Rate: £2,500.00 – Umbrella PAYE Figures (£500 per day for 5 days a week)

EMPLOYMENT COSTS:

Employers NI: £277.58

Apprenticeship Levy: £10.93

Umbrella Margin: £25.00

TAXABLE SALARY: £2,186.49 (£437.29 per day) – Agency PAYE Figures

PAYE: £632.79

Employees NI: £111.39

NET PAY: £1,442.31

In simple terms, an umbrella rate of £500 per day is the equivalent of £437 per day PAYE, so if the agency is offering anything less than that PAYE, you would be better off working umbrella.

Holiday day and pensions via umbrella and agency

The other things to consider when faced with Umbrella or PAYE, are things like holiday pay and pensions. Most agencies are likely to allocate holiday pay from the rate, and may hold this back -- whereas umbrellas usually offer the option for retained or advanced holiday pay (rolled-up holiday pay), whichever suits you best.

With pensions, a lot of the agencies will only cover ‘auto enrolment’ pension, with no flexibility. The umbrella option is likely to be able to give you the option to opt in without deferment, the ability to make additional contributions, with many operating a ‘salary sacrifice’ scheme to allow both tax and National Insurance savings at source through the payroll. Some even allow the option to continue to make contributions to existing personal pensions (such as SIPPs), rather than having yet another scheme.

Feeling charitable?

Finally, consider that some umbrella companies also allow Give As You Earn or Charitable Giving options via salary sacrifice. That’s something that agencies would not generally have the ability to facilitate.

So be sure when you are offered a rate to look at what the rate covers, and if in doubt ask the umbrella company to confirm what the equivalent PAYE would be on the rate you have been offered.

Written by Lucy Smith

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Work with Josh

Negotiating job offers

“What if they lowball my salary when I move from contractor to full-time?”

by Josh Doody

Joe recently asked me a great question:

“I’ve been a contractor for 10 months and am being hired full time to backfill for someone who is retiring. I’m currently getting paid top dollar as a contractor—$80k. The range of pay for this full-time job is $50k–70k and this company tends to make pretty low offers. I’m concerned they’re going to offer me something like $55k, which feels like a lowball offer. What do I do?”

I’m not a lawyer or a labor expert. This isn’t legal advice. This is meant as a quick primer in case you’re in a pinch and need to compare a contractor position to a full-time position.

Moving from a contractor position to full-time may come with a totally new set of benefits and very different salary for doing exactly the same work. So how do you determine how much you should expect to make when moving from contractor to full-time employee or vice versa?

There are two main things you can do to make it easier to compare a contractor position to a full-time one.

1. Hourly versus salary

If you’re paid hourly as a contractor, you may need to convert that hourly pay into a salary so you can compare to a full-time salary. Here’s how I do that:

Take your hourly rate and multiply it by 2,080, which is the number of hours in a year if you work 40 hours a week for 52 weeks.

Or if you need to convert a salary into an hourly wage, you can divide the salary by 2,080.

That way, you can compare the salary for each role to each other role.

2. 1099 versus W-2

In the US, there are basically two types of employment: 1099 and W-2. When you’re a 1099 employee, that means you basically work for yourself. When you’re a W-2 employee, you work for someone else.

Why does this matter?

The employer is responsible for a lot of the cost of employing someone. If you’re a 1099 worker—you work for yourself—then you are the employer and you’re responsible for those costs and employment benefits. If you’re a W-2 worker, then you work for someone else, and they are probably responsible for those costs and employment benefits.

What sorts of costs and benefits?

Taxes are the big expense. If you work for yourself, you’re on the hook for all of your taxes. W-2 employers cover much of your tax burden before you get paid, so you may not even be aware that they’re covering such a big cost. The tax burden is often a big shock for folks who decide to go independent as a freelancer or contractor.

As a 1099 worker, you will have to buy your own health insurance, and that can be very expensive. You’ll also have to buy all of your own equipment like a computer, desk and office chair, and cell phone. And you won’t get a 401k match, and “paid vacation” doesn’t really exist for 1099 workers—if you don’t work, you don’t get paid.

Comparing contractor to full-time positions

So how do you compare two positions when one is a contractor position and one is full-time.

Get both opportunities into the same units for wages—you can choose either hourly or salaried. That way, you can compare the wages directly.

Determine whether the contractor position is a 1099 position or W-2 position so you can compare their wages.

If it’s a W-2 contract position, then you can basically compare the full-time and contractor positions directly because the employer is paying the same costs as they would if you worked for them full-time.

If your contractor position is 1099, then you’ll need to account for all of those additional costs that you’re responsible for as your own employer. In that case, a quick-and-dirty rule of thumb is you should add 50% to a W-2 wage to find its comparable 1099 wage.

Back to our example

In the example above, Joe needed to compare a contractor role paying $80k to a full-time role paying something like $55k.

He’s already using common “salary” units, so we can skip that first step.

But deciding whether a $55k offer would be a lowball offer requires knowing whether the contractor role is W-2 or 1099. Turns out his contractor role is a 1099 role, so we can’t compare those two salaries directly: One is W-2 and one is 1099.

If we add 50% to $55k—the W-2 wage he thinks they might offer—we get $82,500, and that’s a little bit more than his current 1099 wage of $80k.

Since his employer is covering some of his taxes and likely matching retirement contributions and offering paid vacation, he may take home a little more money as a W-2 worker making $55k than as a 1099 contractor making $80k.

Keep this handy for the next time you move from contractor to full-time or vice versa—it could make a tough decision much easier.

You've changed jobs before and felt like you were leaving money on the table. You never have to feel that way again.

Salary Negotiation Mastery

You’ve earned a solid job offer, now let’s make sure you get paid exactly what you deserve.

Negotiating a job offer soon? I'll help!

I'm Josh Doody, a professional salary negotiation coach who helps High Earners negotiate their job offers. On average, High Earners improve their first-year compensation by $47,273 with my help.

Apply for a free 15-minute intro call to learn how I can help.

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Proven salary negotiation strategies and tactics to negotiate the best possible compensation and get paid what you're worth.

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You felt like you left money on the table when you changed jobs in the past. You never have to feel that way again.

In this free 5-email series, I will show you how to conquer that feeling for good.

Consulting Fees Guide: How Much To Charge For Consulting (3 Formulas & Examples)

What should you charge for your consulting fees?

How can you raise your consulting rates — and get clients to accept higher fees?

Whether you’re a new consultant or you’ve been in the game for years, pricing your consulting services is one of the most challenging aspects.

After spending over 2 decades helping consultants raise their fees by 30%-400% +, we’ve got the data on what works — and what doesn’t.

This guide will not only help you figure out how much to charge for your consulting services…

…it will help you raise your fees (if you want to).

Let’s dive into our first consulting fee formula, which is an easy option for beginners.

QUICK LINKS:

The Hourly Method

The project-based method, the value-based method.

Consulting Fees Key Findings
Past Study Comparison

Consulting Pricing Strategies

Consulting fees positioning & mindset, consulting business financials, consulting projects & clients, consulting demographics, how to set your consulting fees (consulting fees calculator), consulting fees action plan.

The Hourly Formula is when you charge by the hour for your consulting services.

You set an hourly rate, track your hours, and then bill your client by the hour.

This simple, easy method is great for beginners who are working on their first few consulting projects.

However, if you’ve developed deep expertise in your field, we recommend you DON’T use the hourly billing method .

So, how do you actually come up with your hourly price?

The Hourly Method Formula For Setting Your Hourly Rate

Step 1. Open up Google and search for the average salary for your position. Write that number down.

Example: “senior marketing manager average salary” = $98K.

Step 2. Enter the average salary in a salary to hourly converter .

For work hours per week, enter “20.”

As a beginner consultant, you’re typically not working 40-hour weeks.

You’ll spend just as much time winning projects as you do delivering them.

For work weeks per year, enter “48” (or however many weeks you want to work, subtracting the number of weeks you want to take off).

(You can also use our Consulting Fees Calculator if you have a target income in mind )

Step 3. Round your new hourly rate up or down in $25 dollar increments.

Example: A salary of $98,000 equates to a monthly pay of $8167, weekly pay of $2042, and an hourly wage of $102.

$102 = $100 per hour.

This is your starting hourly fee.

If you feel like it is too low, raise it. But don’t lower your fee.

Consultants are notorious for undercharging — especially when they charge by the hour.

Every time you successfully complete a project, increase your hourly rate by $25.

Eventually, you’ll get to the point where charging by the hour is no longer the best method for you or your clients.

One of the issues with the hourly method is that your client feels uncertainty around how much they’ll end up paying you. And uncertainty around a project will stop your client from moving forward.

Using the project-based method will eliminate this uncertainty.

The project-based method is a strong pricing method for beginner and intermediate consultants. It’s a bit more complex than the hourly method. But it removes a lot of the uncertainty around hourly billing. Your client knows what they pay upfront.

Here’s how you set your consulting fees using the project-based method.

The Project-Based Formula For Setting Your Consulting Fees

Step 1: Create a list of deliverables for the project.

Think about everything your client gets as a result of this project — the “inputs.”

Example: Branding Consulting Project

Design themes research
Competing design analysis
Presentation of results
4 logo options
1 design theme applied to business card and print materials
Complete website redesign with new brand identity
Application of new identity to 3 web ads and 3 print ads

Step 2: Estimate how long each deliverable will take.

This is where your past experience comes into play.

Use an app like Toggl to track your time spent on each deliverable. If you don’t know the exact number, estimate. Add an extra hour or two just to be on the safe side.

Design themes research – 6 hours
Competing design analysis – 4 hours
Presentation of results – 3 hours
4 logo options – 5 hours
1 design theme applied to business card and print materials – 3 hours
Complete website redesign with new brand identity – 6 hours
Application of new identity to 3 web ads and 3 print ads -3 hours

Step 3: Add up all the hours, and times that by your hourly fee.

Example: 30 hours X $100 = $3000

Step 4: Times the total by 1.5.

Projects take longer than you think.

You also have to factor in your time spent marketing, making revisions, etc.

Example: $3000 X 1.5 = $4500 total for the project.

After you get the total, adjust the fee to a number you would feel good about work.

If you don’t feel like you are being compensated fairly for the value you’re providing, you won’t do your best work.

If you are a more experienced consultant with 2-5+ years of experience, we recommend switching to a higher-leverage pricing model like value-based pricing.

Value-based pricing is when you price your services based on the tangible and intangible value you create for your client.

That means you’re not charging for your time. You’re not evening charging for your deliverables.

You are charging based on what your client cares about the most = the results and outcomes you’ll create for them.

Using the value-based method is just as much art as it is science.

You’ll have to improve your sales skills, accounting skills, project management skills, and more.

But there is no better method for raising your rates and creating more value.

Here’s how you set your consulting fees using the value-based method.

The Value-Based Method For Setting Your Consulting Fee

Step 1: Have the “Value Conversation” with your client.

The value conversation is where you ask questions to your client to uncover where they want to be — and agree on the value of a successful project.

Example: You’re a marketing consultant speaking with your prospect, Acme Financial Services.

During the value conversation, you learn that they want to win 3 new clients per month.

Each client is worth $500 per month to their business.

Step 2: Write The Intangible Value

Now you have some numbers to work with.

But before you start using those numbers, write the intangible value for the client.

The intangible value is the project’s emotional and subjective factors that influence the buyer’s decision.

Example: You ask the client “what would a successful outcome do for you personally?”

They tell you that they wouldn’t have to stress about payroll and could enjoy working on things they really enjoyed.

Safety, comfort, peace of mind, ego, and prestige are all examples of powerful intangible benefits.

If you get stuck on the next step calculating the tangible value, ask the client more about the intangible value. Tangible value is often hidden deeper in intangible value.

Example: Stressing about payroll takes up at least 1-hour of the CEO’s time. That’s hundreds of dollars per day wasted stressing.

Step 3: Calculate The Tangible Value

You know that each client is worth $500 per month to your prospect.

And they want to win 3 clients per month.

Now, you can calculate the tangible value.

The tangible value is the quantifiable value your offer provides.

For example, if you help Acme Financial Services win 3 new clients per month, you’ll help them generate:

$18K in monthly recurring revenue.
$117K in total revenue after a year.

Ask the prospect if $117K in revenue would mean the project was a success. They will agree because you are using their numbers.

Step 4: Use The ROI Formula

The ROI Formula: Intangible + Tangible + Annual = Value-Based Price

Intangible: Emotional and subjective factors that influence the buyer’s decision.

For example, completing the project will make the CEO’s life much easier — she wants to focus more on running the business rather than stressing about payroll.

Tangible: The quantifiable value your offer provides.

For example, helping your client generate 3 clients per month will generate $18K in monthly recurring revenue.

Annual: The year-over-year (YOY) tangible benefits.

For example, if your service helps your client increase their revenue by 5% — and that will continue for 2+ years — you can factor the YOY growth into your price.

With every value-based price, you want to create a 3-10x ROI for your client. Remember, you are charging based on the ROI you will create.

For example, since the successful completion of your project would result in $117K in new revenue for your client, you can calculate different ROI levels.

5% of $117K: $6K
10% of $117K: $12K
20% of $117K: $24K

You’ll use the numbers in the final step.

Step 5: Offer 3 Pricing Options

Give your client 3 options in your proposal, and allow them to choose their level of risk.

Option 1 – Lowest Price: The minimum service offering or features your buyer needs to reach a successful outcome.
Option 2 – Middle Price: All the services or features from Option 1, plus additional services that add more value — and increase the level of certainty.
Option 3- Highest Price: Imagine that your client had no budget, and wanted the result as fast as possible. Include everything from your low option, middle option, and added value if they are willing to invest significantly more.

Example: You’re ready to present your pricing options to your prospective client Acme Financial Services.

Option 3 – $24K

Brand positioning overhaul
Website messaging audit
Direct outreach sequence
Website marketing strategy
LinkedIn content + outreach plan
Search engine optimization
Lead-magnet development & implementation

Option 2 — $12K

Website content strategy

Option 1 — $6000

These prices aren’t random. They are based on the levels of ROI calculated in step 4.

Notice how we lead with Option 3, the highest-priced option.

This helps you leverage the anchoring bias: the first price they see determines how they perceived the rest of your prices.

Option 2 and Option 1 will look more attractive and affordable in comparison to Option 3.

Finally, it’s best if you present your 3 options over a call.

That way, you can answer objections if and when they come up.

Instead of “pitching” your client, you’re collaborating with the client on different ways to help them achieve their goals.

Value-based pricing will raise your consulting fees and provide more value to your clients.

But, as you can see, it takes an experienced consultant to make it work.

For an in-depth look at value-based pricing, take a look at our article: Guide to Value-Based Pricing for Consultants: 10 Experts Share Their Fee Strategies .

And if you’re looking for hands-on coaching to implement value-based pricing in your consulting business, check out our Clarity Coaching Program .

Learn More About Clarity Coaching

Consulting Fees Study (2023)

Do you feel stuck at lower rates while other consultants command premium consulting fees?

That ends today.

Our new survey reveals exactly what high-earning consultants are charging and how you can set fees confidently to amplify your revenue.

In this must-read report, you’ll discover the pricing secrets of the industry’s top earners.

Learn what consultants across every niche are charging per project, how they structure retainer deals , and what’s holding you back from earning more.

Arm yourself with previously undisclosed data on real-world consulting fees. Gain the knowledge, confidence, and proven strategies to raise your rates significantly. Stop leaving money on the table and start commanding the fees you deserve.

Keep reading to access these exclusive insights and take your income to new heights.

The first step to making your best year ever is within this report.

Before we dive in it’s important to note that none of this is financial or legal advice. We’ve summarized key takeaways from the almost 1000 consultants who participated in this survey.

Summary of Our Key Findings on Consulting Fees

We’ll get started with some of our key findings from this year’s study.

79% of consultants are actively looking to increase their fees .
39% of consultants have never tried value-based pricing because they don’t know how .
Productized consulting services are becoming more popular — 44% of consultants offer a productized service . In our previous study, only 30% of consultants had a productized offer.
25% of consultants will lower their fees in order to win clients .
88% of consultants do not list their fees on their consulting website .
58% of consultants work with 6 or fewer clients per year .
38% of consultants are earning $10K+ per month .
The #1 reason holding consultants back from raising their fees is fear of losing clients .
Strategy consultants tend to have more retainer-based consulting income than management consultants. Twice as many strategy consultants have the majority of their income from retainer services over management consultants .
Consultants who primarily use value-based pricing have a higher average project value than those who use hourly fees . 39% of consultants using hourly fees have an average project value of $10K+, whereas 51% of consultants using value-based fees have an average project value of $10K+.
Consultants earning $45K+ per month have a much higher average consulting engagement value , with over 50% of them putting their average consulting engagement value at $50K+.
Consultants who have specialist expertise in their industry command higher fees and earn more than consultants who aren’t specialized.

Past Consulting Fees Comparison

This is our 4th time doing the Consulting Fees study.

To see the past year’s results, click on one of the links below:

2019 Consulting Fees Study
2018 Consulting Fees Study
2017 Consulting Fees Study

What’s changed over the past 4 years on the topic of consulting fees? Here are some of the trends we’re noticing based on the data.

More women are getting into entrepreneurial consulting . In 2019, the gender split of survey respondents was 75% male, 25% female. In 2023, the split was 61% male, 37% female.
Project-based rates remain the most used pricing model. In 2023, hourly fees are used more than value-based pricing, but in 2019, value-based pricing was more prominent.
At least a 1/3 of consultants have never used value pricing because they don’t know how to use it — and this has remained consistent over the years.
Management consulting and strategy consulting make up over 40% of survey respondents consistently over the years.
4/5 of consultants are actively looking to increase their consulting fees — and this number has stayed consistent throughout the years.

There are many different ways to price your various consulting offers .

We asked consultants about their pricing strategies. The results might surprise you.

How Consultants Set Their Fees

Here’s how consultants set their fees:

30% used a project-based rate.
29% use an hourly rate.
16% use a monthly retainer.
15% use value pricing.
10% use a daily rate.

One of the highest ROI moves you can make is switching to value-based fees .

Here are some more interesting findings about this data:

Nearly 60% of consultants use a pricing strategy we DON’T recommend: project rate (based on hours) and hourly.
For consultants who are making $10K-$45K per month, they are more likely to use monthly retainers and value-based pricing than those making $2K-$5K per month.
Male consultants use daily rates and monthly retainers more than female consultants.

How Many Consultants Have Used Value-Based Pricing

Value pricing is a hot topic in the consulting world, and for good reason.

It’s one of the best ways for consultants to create leverage — and increase their earnings without working more.

However, it’s not an easy strategy to implement.

39% of consultants have never used value pricing because they don’t know how.
31% of consultants use value pricing on some of their projects.
18% of consultants use value pricing on most of their projects.
12% of consultants have never used value pricing because they are satisfied with their current pricing structure.

Here’s a more in-depth look at the data around value pricing:

For consultants whose average project is between $20K-$50K, 55% have used value pricing. For consultants whose average project is between $500-$2000, only 37% have tried value pricing.
Men and women use value pricing at virtually the same rate. 2% more men have tried it versus women.
Consultants who are specialists in their industry and make it known in their marketing are far more likely to use value pricing. 57% of them used value pricing versus only 29% of consultants who aren’t specialists.

How Many Consultants Do Performance Deals

Performance deals are when you are paid based on the performance and outcome you have created during the project. This is typically above an agreed-upon baseline.

EXAMPLE : Your client is currently making $100K per month. You help take them to $200K per month. With a performance deal, you’re charging a percentage based on the extra value you’re creating. So, if you and the client agree on 10% of the extra value, then you’d be earning $10K per month on the project — in addition to your base pay.

So, how many consultants use the pay-for-performance pricing strategy?

58% of consultants do not use it, but are open to it.
21% of consultants do not use it, and are not open to it.
15% of consultants do use it, and it’s worked out well for both them and their client.
6% of consultants have used it, but it didn’t work out very well.

Here’s a segment-based look at the data for performance deals:

Many more men have tried performance deals than women (25% versus 12%). However, for both genders, the majority have them have never tried a performance-based deal.
Consultants aren’t more likely to have done a performance deal if they’re 60 years old versus 30-40 years old.
Performance deals are much more popular in Asia, where 36% of consultants have tried them. That percentage is 15% in North America.

How Many Consultants Have Retainer-Based Work

One of the best ways to build more predictable revenue into your consulting business is to use monthly retainers .

With a monthly retainer, you’re working with (and billing) your client on a monthly basis. It’s recurring revenue.

Recurring revenue provides predictability and security. Why? Because you know how much revenue you have coming in each month.

Here’s the data on how many consultants use monthly retainers:

41% of consultants don’t have any retainer-based clients but would like to.
37% of consultants have some work that is retainer-based.
17% of consultants said that the majority of their income is retainer-based.
5% of consultants do not offer monthly retainers and aren’t interested in them.

Here’s how comparing segments provides more insight into consulting retainers:

Consultants with more retainer work tend to make more per month. 21% of consultants making $10K-$45K per month say that the majority of their work ins retainer-based compared -— a percentage twice as high compared to those making $2K-$5K per month.
Strategy consultants are more likely than management consultants to utilize monthly retainers.
Men are more likely than women to offer monthly retainers.
The older and more experienced the consultant, the more likely they offer monthly retainers.

How Many Consultants Offer Productized Services

Productized consulting is when you strip one of your offers down to its essentials. They’re fixed (non-changing) in terms of both scope and price.

They’re another fantastic way to create greater leverage in your consulting business.

How many consultants offer productized consulting services?

46% of consultants don’t offer productized consulting but are interested in it.
44% of consultants do offer productized consulting.
10% of consultants don’t offer productized consulting and don’t plan to.

Here’s a further look at the data around productized consulting:

Consultants who are specialists are more than twice as likely to offer productized consulting versus non-specialists.
There was no correlation between offering productized consulting and earning more income per month.
Women are slightly more likely to offer productized consulting than men, with 46% of them offering productized services (compared to 42% for men).
Years of experience correlated with the likeliness of the consultant offering productized services.

Pricing comes down to your confidence.

We asked consultants about their pricing mindset: how they think about their fees and pricing.

Do Consultants Lower Their Fees To Get Clients?

We don’t ever recommend lowering your fees to win consulting business. Doing so sends the wrong signals to the client about your value, and what you can do for their business.

However, 47% of consultants have lowered their fees in the past to win business, but don’t do it anymore.
28% of consultants haven’t and would never lower their fees to win clients.
25% of consultants do this often to win business.

Here’s a deeper look at the type of consultants to lower their fees…

There is virtually no difference between male and female consultants when it comes to who lowers their fees to get clients.
Consultants who charge more per project and who earn more per month are less likely to lower their fees in order to get clients.
Consultants who are specialists are less likely to lower their fees to get new clients compared to consultants who aren’t specialists.

Do Consultants Offer Discounts?

How many consultants offer discounts for specific clients or projects?

47% of consultants don’t offer any discounts.
26% of consultants offer a 10-25% discount to specific clients.
20% of consultants offer a 5-10% discount to specific clients.
4% of consultants offer a 25-50% discount to specific clients.
2% of consultants offer a 50%+ discount to specific clients.

After segmenting the data and taking a deeper look, we also found that…

Consultants who earn more are less likely to offer discounts. Of those earning $10K+ per month, 58% don’t offer discounts. Of those earning $2K-$5K per month, 55% do offer discounts.
Over 60% of consultants in Asia offer some form of discount. In North America over 50% of consultants don’t offer any form of discount.
Consultants with more years of experience are less likely to offer discounts for their services.
Female consultants are slightly more likely to offer discounts for their services.

How Many Consultants Are Specialists

Specialization is a key pricing factor in consulting.

Clients are often willing to pay a premium fee for consultants who’ve demonstrated expertise in their industry.

How many consultants have this specialty expertise?

66% of consultants are specialists and make it clear in their marketing.
23% of consultants are specialists, but don’t make it clear in their marketing.
9% of consultants are not specialists, but are looking to specialize their firm.
3% of consultants are not specialists and are not looking to specialize their firm.

Here’s a deeper look at the segmented data when it comes to specialization:

Specialists tend to charge more for their average consulting engagement. Of the consultants who charge between $20K-$50K for their average project, 81% of them are specialists.
There is virtually no difference between men and women with regard to their specialization. However, male consultants are a bit more likely to be clear about their specialization in their marketing than women.

How Many Consultants Want To Raise Their Fees

As you might expect, the majority of consultants (79%) want to increase their fees.

And 21% of consultants are not actively looking to increase their fees.

Do Consultants List Their Fees On Their Website?

When it comes to whether or not consultants list their pricing on their website , the preference is clear.

88% of consultants don’t list their fees on their website.
8% of consultants list a range of their pricing on their website.
And 4% of consultants list their exact pricing on their website.

Here’s a deeper look at the data around listing fees on your consulting website:

Less experienced consultants are more likely to list their fees on their website. 15% of consultants with 1-3 years of experience list their pricing on their website. That percentage is 8% for consultants with 15+ years of experience.
93% of consultants who charge $20K-$50K for their average engagement do not list their fees on their website.
Women are slightly more likely than men to list their consulting fees on their consulting websites.

When Do Consultants First Mention Price With Clients?

Consultants bring up their fees at different stages of the pipeline .

46% of consultants first talk about pricing during the proposal stage.
26% of consultants first talk about pricing during the first call.
25% of consultants first talk about pricing before sending their proposal.
3% of consultants first talk about pricing before the first call with a client.

Here’s an inside look at the data around mentioning price with clients:

Consultants with a higher average project engagement value ($20K-$50K) are more likely to first discuss price during the proposal. 59% of them first bring up the price at this point.
Women are slightly more likely to bring up pricing earlier in the sales process than men.
More senior consultants (60+) tend to bring up prices later in the process than younger consultants (30-40).

Have Consultants Ever Lost Business Due To Pricing?

Most consultants (64%) have lost business due to pricing their services too high for the client.
35% of consultants have never lost business due to their fees.
And 2% of consultants have lost business due to their pricing being too low.

Upon further inspection, we’ve found some interesting data around this question:

Specialists are slightly more likely to have been rejected due to high pricing, with 67% of them experiencing this (compared to 55% of non-specialists).
There is virtually no difference between men and women on this factor (2% more women have lost business due to their pricing being too high).
Consultants who charge more per project ($20K-$50K) have only been rejected due to high pricing 9% more than consultants who only charge $500-$2K per project.

What Consultants Charge Per Hour

What are consultants charging per hour for delivering consulting work?

39% of consultants charge between $100-$250 per hour.
25% don’t use hourly fees.
19% charge between $250-$500 per hour.
12% charge less than $100 per hour.
4% charge between $500-$1000 per hour.
And 0.5% charge $1000+ per hour.

So, how does segmentation affect this consulting fees data?

Specialist consultants have a higher hourly rate than non-specialists. 28% of specialists charge $250+ per hour. Only 7% of non-specialists charge $250+ per hour.
Male consultants are slightly more likely (5%) than female consultants to not use hourly fees.
Of consultants making $2K-$5K per month, 64% of them are charging less than $250 per hour. For consultants making $10K-$45K per month, 37% of them are charging less than $250 per hour.

What’s Holding Consultants Back From Raising Their Fees

There are many different reasons why consultants aren’t raising their fees despite wishing to do so.

24% aren’t raising their fees because they are afraid of losing their clients.
21% aren’t raising their fees because they don’t know how to raise them effectively.
20% claim nothing is holding them back from raising their fees.
13% aren’t raising their fees because they feel like they need more experience.
12% aren’t raising their fees because they feel like they need to create better results for their clients.
9% aren’t raising their fees because they feel like they lack confidence.

Here’s a deeper look at the data around what’s holding consultants back from raising their fees.

The biggest thing stopping specialists from raising their fees is the fear of losing clients. The biggest thing stopping non-specialists from raising their fees is their perceived lack of experience.
The biggest thing holding women back from raising their fees is that they don’t know how to do it effectively (25% of them list this as their main reason). For men, the biggest thing holding them back from raising their fees is the fear of losing clients (24% list this as their #1 reason).

How much are consultants charging for their services? How much are they earning per year?

We asked our list of 45K+ consultants these questions for the latest insights into the financials of small consulting firms.

Average Consulting Project Value

Here’s how the numbers break down for the average consulting engagement value:

23%: $500-$2000 USD
16%: $2001-$5000 USD
15%: $20,001-$50,000
15%: $5001-$10,000 USD
14%: $10,001-$20,000
10%: $50,001-$100,000
7%: $100,000+ USD

Here’s how average consulting project value breaks down upon further analysis:

Consultants who are specialists have a much higher average consulting engagement value. 52% of specialists charge at least $10K+ per project. Only 18% of non-specialists charge at least $10K+ per consulting project.
Women tend to have a lower average consulting engagement value than men. The majority of female consultants charge under $10K per project. The majority of male consultants charge over $10K per project.
Consultants in North America tend to have a higher average consulting engagement value than consultants in Asia.

How Much Consultants Earn Per Month (USD)

Why should you start a consulting business ?

One of the reasons consultants start a consulting business is for the unlimited earning potential.

With the correct strategy and mindset, consultants can earn five/six figures — or even more — per month .

Here’s how much solo consultants and small consulting firms are earning per month:

32% of consultants earn $10K-$45K per month.
22% of consultants are earning less than $2K per month.
20% of consultants are earning $5K-$10K per month.
20% of consultants are earning $2K-$5K per month.
3% of consultants are earning $45K-$100K per month.
1% of consultants are earning $100K-$250K per month.
And 1% of consultants are earning $250K+ per month.

Here’s a deeper look at the data on how much consultants earn per month:

Consultants who are specialists earn more per month than those who are non-specialists. For non-specialists, 73% are making $5K per month or less. For specialists, 42% are making $10K+ per month.
Consultants whose average project value is $20K-$50K per project are earning are more per month than those whose average project value is $500-$2000. 66% of them are earning $10k+ per month compared to 6% of consultants whose average project is worth $500-$2000.
Age and experience in consulting are correlated to earning more per month.

Average Consulting Business Profit Margin

Consulting is known to be a high profit-margin business — and the data generally supports that:

34% of consultants enjoy a 70%+ profit margin.
14% of consultants have a 60% profit margin.
14% of consultants have a profit margin of 20% or lower.
14% of consultants have a profit margin of 50%.
13% of consultants have a profit margin of 30%.
And 10% of consultants have a profit margin of 40%.

Here’s a further analysis of the profit margin in consulting:

Consultants who are specialists tend to have a higher profit margin. 54% of specialists have a profit margin of 70% or more. For non-specialists, only 35% of them have a profit margin of 70% or more.
Consultants who typically charge $20K-$50K per project tend to have a higher profit margin than those charging less. 56% of consultants who charge $20K-$50K per project have a profit margin of 60%+.
Male consultants typically have a slightly higher average profit margin than female consultants. 39% of male consultants have a profit margin of 70%+ compared to 28% of female consultants.

Will Consultants Raise Their Fees Next Year?

In 2024, 55% of consultants plan to raise their fees.
45% aren’t sure whether or not they’ll raise their fees.
And 1 respondent plans to lower their fees.

Here’s a deeper look at the data on who plans to raise their fees:

There was virtually no difference between Men and Women on this question.
Consultants who are charging and earning less than higher-earning consultants are more likely to be planning to charge more.
63% of consultants aged 30-40 are planning to raise their fees compared to 47% of consultants aged 60+.

How Much Consultants Plan To Raise Their Fees By

For the consultants who plan to raise their fees in 2024, here’s how much they plan to raise their fees by:

33% plan to raise their fees by 10%
29% plan to raise their fees by 20%
16% plan to raise their fees by 30% or more.

Here’s more insight into this question and how the data breaks down:

Men are more likely to plan for higher fee raises (20%+) than women.
Consultants in Asia are more likely to be planning for higher fee increases (20%+).

For the first time, we asked consultants about their projects, clients, and how these factors play into their pricing.

Average Consulting Project Length

How long do entrepreneurial consultants spend on their projects?

30% of consultants spend 1-3 months on their average project.
25% of consultants spend 3-6 months on their average project.
20% of consultants spend 6-12 months on their average project.
12% spend 12 months or longer, and 12 % also spend less than 1 month on their average project.

Here’s how the segmented data looks in terms of average consulting project length:

Consultants earning $10K-$45K per month tend to work more on 3-6 month projects and 6-12 month projects compared to consultants making $2K-$5K per month. For consultants making $10K-$45K per month, 78% of their projects are 3 months or longer (compared to 45% of consultants making $2K-$5K per month).
There is a correlation between the length of consulting projects and how much consultants charge for said projects. The longer the project, the more consultants tend to charge.
Consultants in North America tend to work on longer projects (3 months or longer) compared to consultants in Asia.

How Many Consultants Are Staffed On Projects

How many consultants do firm owners staff on their projects?

51% of consultants work on client projects themselves.
44% of consulting firm owners put 2-6 consultants on their average client project.
3% of consulting firm owners put 6-10 consultants on their average client project.
2% of consulting firm owners put 10+ consultants on their average client project.

Here’s a further look at this particular survey question and data:

In North America, 56% of consultants typically work on client projects independently on their own. In Asia, 67% of consultants typically have 2-6 people work on their client projects. Consultants in Asia are more likely to have additional people staffed on client projects.
Female consultants are more likely to work on client projects independently (61% of them). For male consultants, that number is 45% -—with 49% of them having 2 or more people working on client projects.
Age and experience in consulting are correlated with having more people involved in client projects.

Average Company Size That Consultants Work With

How many employees do a consultant’s clients typically have?

37% of their clients have 10-100 employees.
30% of their clients have less than 10 employees.
16% of their clients have 100-500 employees.
10% of their clients have 1000+ employees.
And 7% of their clients have 500-1000 employees.

Here’s a deeper look at how this data breaks down:

Consultants who charge more ($20K-$50K) for their average project tend to work with bigger companies (10+ employees).
Consultants who earn more per month ($10K – $45K+) tend to work with companies with more employees.
There is a small correlation between a consultant’s age and experience and working with companies that have more employees.

We always ask our list of consultants to tell us about other aspects of their business. This helps us break down the numbers even more.

Here is the demographic data from our list of 45K+ independent consultants and small consulting firm owners.

Average Level Of Experience Consultants Have

How much experience do consulting business owners have consulting?

24% have 15+ years of experience.
19% have 1-3 years of experience.
5-10% have 5-10 years of experience.
15% have 3-5 years of experience.
14% have less than 1 year of experience.
11% have 10-15 years of experience.

Types Of Consultants

There are many types of consultants . Here are the types of consultants in this study:

Management consultant 25%
Strategy consultant 17%
Operations consultant 9%
IT/Tech consultant 8%
Marketing consultant 7%
HR consultant 5%
Non-profit consultant 4%
Financial advisory consultant 3%
Sales consultant 3%
Data consultant 2%
Design/branding consultant 1%

How Many Clients Consultants Work With Per Year

You don’t have to work with a ton of clients per year to run a highly profitable consulting business.

31% of consultants work with 3-6 clients per year.
27% of consultants work with 1-3 clients per year.
25% of consultants work with 6-12 clients per year.
10% of consultants work with 10-20 clients per year.
4% of consultants work with 20-40 clients per year.
3% of consultants work with 40+ clients per year.

And here’s a deeper look at this particular question:

58% of consultants who charge between $20K-$50K for their average project work with between 3-12 clients per year.
42% of non-specialists work with between 1-3 clients per year. That percentage is only 24% for specialist consultants.
Strategy consultants work with slightly more clients per year than management consultants.
There is virtually no difference between male and female consultants with regard to how many clients they work with.

Do Consultants Work With Employees Or Contractors

If you want to scale your consulting business , hiring employees or contractors can be a great way to do that.

46% of consultants hire contractors but don’t employ anyone full-time.
39% of consultants don’t use contractors or have employees.
14% of consultants have full-time employees.

Here’s an inside look at how the segments play into this data:

47% of female consultants do not work with any contractors or employees. For men, that percentage is 35%.
The more consultants earn per month and the higher their average project engagement value, the more likely they are to work with contractors or have employees.
Specialists are much more likely to employ full-time people than non-specialists. 16% of specialists employ people full-time compared to 6% of non-specialists.
Of consultants 60+ years of age, 11% employ people full-time. For consultants aged 30-40, 25% of them employ people full-time.

How Many Employees Consulting Firms Have

For the consultants who do have full-time employees, here’s how many employees they have:

1-3 employees (21.43%)
4-10 (7.28%)
11-25 (1.32%)
26-50 (1.19%)
100+ (0.53%)
51-100 (0.13%)

Average Age Of Consultants

You can be any age and start a consulting business.

The majority of consultants we polled (31%) are 50-60 years old.
27% are 40-50 years old.
26% are 60+ years old.
13% are 30-40 years old.
3% are 20-30 years old.

Consulting Gender Demographics

61% of consultants polled are male, and 37% are female.

1% preferred not to share or selected “Other.”

Here’s a deeper look at the consulting gender data and consulting fees:

Of consultants charging between $20K-$50K for their average project, 68% are men, and 32% are women.
Of consultants making $10K-$45K per month, 70% are men, and 29% are women.

Consulting Geography Demographics

Consultants all around the world took our fees survey.

Here’s where they are from:

North America – 62.89%
Western Europe – 12.37%
Asia – 7.63%
Africa – 6.97%
Australia/New Zealand – 5.79%
Eastern Europe – 2.37%
South America -1.97%

Want to know exactly how much you should be charging to reach your income goals?

For that, we developed a Consulting Fees Calculato r.

In 4 steps, you’ll learn your daily billable rate and your ideal hourly rate so that you can reach your target income.

It’s an invaluable tool to help you get clear on how much you should be charging your clients.

That said, we advise you to move towards greater leverage — away from billing based on your time. Here’s how you can do that:

Productized Services : Giving your services a fixed scope and price, creating a more efficient delivery.
Value-Based Fees : Pricing your services based on the value you might create for your client instead of the time you spend delivering.
Monthly Retainers : Recurring revenue where your client either pays for your work or pays for access to you.
ROI-Based Fees : Pricing your services based to capture a percentage of the earnings or savings you create for your client.
Equity : Working for shares in your client’s business instead of a fixed amount of money.

Here are three action items for you if you’re serious about raising your rates and increasing your revenue.

Elevate your mindset . If you’re uncomfortable with the idea of raising your rate or you would feel that your clients would leave you, then you need to work on your mindset before you think about your pricing. Read The Elite Consulting Mind — and take action on what you learn there.
Raise your hourly rate . Even though hourly rates aren’t ideal, they are often the foundation of your pricing strategy. And no one is going to give you the green light to raise them — you must do so yourself. What better time than now? Commit to raising your hourly rate by at least 10-20% by the first of January 2020.
Experiment with a leveraged form of pricing . Whether that be productized consulting, value-based pricing, or ROI-based pricing, charge a client using a method other than just your time. You’ll learn how much more revenue you can earn when you stop charging for your time and start charging what your clients really care about — the value you’re creating for their business.

Want Expert Help To Raise Your Consulting Fees?

No matter your level of experience, the Consulting Success® team can help you raise your consulting fees.

Our Momentum program is for newer consultants who want to follow a step-by-step system to predictably and reliably get to 6-figures per year or more.

Our Clarity program is for consultants committed to maximize their value and fees through personal coaching and strategy on more advanced pricing strategies, marketing systems to generate consistent leads — to grow and scale their business.

Whether you’re struggling to price your services based on value, want to build in more recurring revenue, or want to know how to structure an equity deal properly, our programs will help you increase your pricing with confidence.

That concludes the Consulting Fees Study.

What did you learn?

More importantly, how are you going to use this information to increase your value, raise your prices, and reach your target income?

Information without action won’t get you anywhere.

I challenge you to take what you’ve learned here to make your consulting business better.

We’d love to hear your thoughts about this study.

Leave a reply in the comments — and share your thoughts below!

32 thoughts on “ Consulting Fees Guide: How Much To Charge For Consulting (3 Formulas & Examples) ”

Wonderful survey! You’ve done a great job surveying such a large pool of consultants and sharing the results! I was curious if you’re willing to maybe show us a breakdown by industry? I’m operating in the IT/Tech consulting and I’m curious how the numbers look for that…Cheers!

Thanks Bogdan – appreciate the comment and support!. We will look into this and notify you with any updates.

very incisive,detailed information and very helpful .Thank you Micheal.Solid hard work and your generosity in sharing with us Micheal.God bless you!

Great work, yet again. Really impressed with your output. Would it be possible to get this as a .pdf please? I’d love to share it with my MBA students, but the current format doesn’t lend itself.

Much appreciated Joe. We don’t have a PDF available but why not provide the direct link to the study to all your students. They can access it on their phones, tablets or computers : )

The depth and quality of your content is unique. I’ve recently joined a specialist consultancy (small team 50+) part of an international consultancy and advisory organisation. I would love for some collaboration in the future, I’m only in 2 months so have to settle before I start recommending external support to the Senior Management Team, they have a great foundation to expand from.

Appreciate that Peter and congratulations on the new position, that’s exciting!

Very comprehensive study. It shows in detail what consultants all over the world are doing. Thanks, Michael!

Appreciate the feedback Earline. The team did a great job on the study and we’re looking forward to putting out the next one.

Hi Michael Thanks for the report. I was wondering how can we have access to the data sources. Thanks

Hamed, you’re very welcome. We aren’t providing access to the data currently. Wish you great success.

I am very happy to read the above information. It is really helpful for me, I learned many new things from your website. Big thanks to you all for everything and I am really very happy. Can you share which is the best placement consultancy in Pune

As I was reading your article I must say it was quite helpful. Most of the time small businesses go that far or stuck at some point because they don’t know what to do. As being the CEO of well-known business consulting firm Makateb. I appreciate the way you explained the cause of how they affect business. I also appreciate the way you delivered their remedies. Most people don’t know it and that’s why they had to stop in the middle. You did a great job by mentioning the major factors that became hurdles (most of the time). From Insufficient Funding to Failure to Seek Out-side Assistance, Talent Deficits to Destructive New Technology, all of these are major obstacles for business whether it’s a small one or reaching the heights of success. If a company overcome these obstacles, they’re more likely to grow. In the end, I just want to say you did a great job by sharing this article with people who are struggling with this.

Thanks for the good info. Interesting to see it all broken down like that.

You’re very welcome Jonathan, appreciate the comment.

Very insightful. Lots of hard work has been put into this and then shared very generously with everybody. Greatly appreciated. Thank you and God Bless.

Thank you Michael, appreciate your comment and glad it resonates with you.

An interesting read on consulting fees, it gives you something to think about.

Glad you found it interesting John and hope it helps. If you have other questions get in touch.

Very interesting and insightful piece of work. Greatly appreciated. By any chance you have also the comparison for consultancy rates between countries : e.g. US , India, Europe, China, Asia, Australia ?? Does the argument of going to LCC for a more cost effective rates still hold giving that Consulting firms are increasing their rates through various approaches and justification, even though there are clear differences in cost of living and GDP for each country?

Harrison, fees can certainly be different based on where you live. However, that doesn’t need to be a limiting factor. There are consultants living in countries considered less developed who are still able to charge and earn significant rates – especially if your clientele is global. We don’t have a country by country breakdown here.

I have appreciated your presentation of consultancy fees. This will help me to undertake a consultancy am about to begin

I sell equipment. It’s often to start-ups or people adding a brand new service to their business. I’m interested in encouraging some of my customers to be consultants for others. I think my new customers would benefit from more thorough help, and it would allow me to draw a line between what I offer and do not offer (i.e. I’m not a business consultant – but here are some options).

In a value-based model, how do you keep clients from sucking you dry? How do you put constraints along with the list of services? My customers tend to ask questions for a lingering 5 years and call and text all hours of the night and on weekends. Does being a consultant in the first place naturally discourage this? Do you charge hourly after the standard deliverables, or maybe include a specified number of support hours as a line item? Thanks! Great information here.

Hi Sam, great questions. Start by defining very clear responsibilities of what each part is required to do and what the expectations are. And when a client asks additional questions or for help that is outside the scope of the engagement offer to provide them with another proposal to help them with that separate work.

Michael, Thank you so much for sharing your knowledge! This has been an invaluable article because I am starting my own consulting company and had no idea how I was going to determine what I should charge for services. Thank you for giving me options and the information I need to succeed. Bless you, Tammy

Glad it helps Tammy!

I find it interesting when you said that consultants are earning a lot per month wherein they have increased some percentage from 2018 to 2019. And they might be named more now because it’s already 2023, so it must be helpful to do your research and compare rates from various companies and professionals to find those that you can afford if you are starting out in your business. For example, it might also be different when you hire experts in professional technology consulting for businesses compared to those helping entrepreneurs in other fields.

How did you arrive at these numbers? 500 per client = 1500/mo *12=18k per year revenue

You know that each client is worth $500 per month to your prospect. And they want to win 3 clients per month. Now, you can calculate the tangible value. The tangible value is the quantifiable value your offer provides. For example, if you help Acme Financial Services win 3 new clients per month, you’ll help them generate: $18K in monthly recurring revenue. $117K in total revenue after a year.

The $117K is the total sum of the revenue generated from months 1 through 12:

1500 3000 4500 6000 7500 9000 10500 12000 13500 15000 16500 18000 – 117000

I like that you talked about consulting companies that will charge by the hour, because it is a simple method that is perfect for those that are new to the industry. In my opinion, IT consulting services that do or offer those kinds of options will be perfect for the people who are also starting with their business. They would need their help int technological aspects, but they would need to stick to their budget to prevent them from overspending their capital on one area.

I’ve always felt the challenge with value-based fees is it assume the prospect has nowhere else to go or turn to. Sure, if you’re the only game in town you can estimate the value of the project and set your rate accordingly. But if you’re in a competitive environment it doesn’t work as well. People will be comparing what you offer against others – and while you can differentiate yourself to a certain amount – you can’t go multiples higher of what anyone else is charging. Pricing is ultimately a story and above a certain level you get into RFP territory. I think early on people need to decide which tier their playing in and find the right pricing to match.

Privacy Overview

Spot vs. contracted rates, what fits better when and where …

This is one of the top 10 questions I've encountered in my career in Market Intelligence for road transportation and it is not easy to answer. It usually begins with: “it depends on …” and is followed by numerous circumstances, countries and restrictions. However, at Transporeon, we might be able to provide you with more current information based on data related to this topic. This could assist you in making an informed decision or judgment, and shed light on this transport procurement puzzle.

The following map illustrates the countries where domestic transports rates were lower on the spot market (green) vs. the contracted market (red) during week 7 of 2024. To ensure comparability between spot and contracted prices, values are harmonized based on distance.

Spot prices vs. contracted prices for domestic road transportation

Source: Transporeon Market Insights, own illustration

In week 7, spot rates in France and Germany were over 7.5% below the contracted rates, while Czechia and Spain showed higher spot rates.. Apart from Spain, all major European economies were with spot rates below contracted levels. A situation which is also mirrored by international markets. During week 7, 54 country combinations ended up with spot rates below contracted rates, while the opposite was true for 38 combinations. The following chart is a sample from these corridors, reflecting the overall results.

Spot prices vs. contracted prices on selected country combinations

Single values such as those from France to Italy are extreme and unlikely to last for several weeks, but they very well illustrate the volatile situation on the spot market. On the other side, Italy to Poland shows volatility in the other direction, as price levels on this market are typically more uniform. The trend towards lower spot rates is a common seasonal behavior in the first quarter of a year, where lower demand meets higher available capacity.

To add strategic implications to this topic, the below analysis focuses on the general distribution of spot price levels compared to contracted price levels across all markets we track. To ensure meaningful results, we used a truncated mean to ignore outliers. The results are displayed in the following chart.

General difference between spot and contracted rates for the past 17 months in Europe

The past 17 months showed various phases where spot rates were either below or above the contracted rate levels. If we extend this analysis to the beginning of 2021, we would see more instances with spot rates exceeding contracted rate levels due to high demand and limited supply during this time.

Coming back to the graph above, Q1 of 2023 is clearly identified as the period with the lowest spot rates. This trend persists even if we examine data from other years. Hence, during this time of the year, the potential for savings on the spot market is high. Dynamic assignment strategies from shippers and brokers could take advantage of this period if a decision towards strategic spot sourcing is made. But this analysis also confirms that there are times in which less spot business could be financially advantageous.

It's therefore becoming evident that there isn't a simple and direct answer to the initial question, as we cannot identify a clear advantage for either of the assignment possibilities. The best approach, as is often the case, is to dynamically identify the right mix of spot and contracted sourcing based on current market conditions, rather than as a one-time decision. There are countless reasons why this may not be suitable for a specific company, industry or business area. But if we are honest, we need both markets to get things done, so why not professionalize both with tools, processes, and up-to-date information?

This strategy not only benefits shippers, but also carriers. It's sensible for carriers to be well-informed about current market conditions and to understand which area, market or line of business offers the best opportunities.

Anticipating one of the next questions, I'm happy to share my perspective and expectations on how the spot vs. contract graph could evolve in the coming weeks.

Source: Transporeon Market Insights, own illustration and evaluation

We are likely to see an overall advantage on the spot market for the next 3-4 weeks. However the closer we get to Easter, the higher the probability of increasing spot price levels needs to be considered. After Easter, we may experience a balanced situation - with a tendency towards slightly higher spot rates compared to contracted - with ups and downs influenced by numerous bank holidays throughout Europe in the weeks of April, May and June.

Christian Dolderer Lead Research Analyst Transporeon Market Intelligence

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By Niraj Chokshi

Four years ago, Airbus scored a major victory: For the first time in its history, more of its passenger planes were flying around the world than those made by its rival, Boeing. Airbus has only tightened its grip on the market since.

Shifting the balance of power back in Boeing’s favor will be one of the most difficult challenges facing its new chief executive, Kelly Ortberg, who started last week. Pulling that off will require navigating the industrywide challenges hampering both companies while also landing a string of successes — starting with getting plane production back on track.

“Boeing is in a situation that is way more difficult than Airbus,” said Saïma Hussain, an analyst at AlphaValue, an equity research firm. “Airbus is gaining market share while Boeing needs to recover.”

The two companies form a duopoly in the global passenger plane market, but Airbus has far outproduced and outsold Boeing in recent years. Airbus has delivered over 3,800 planes to customers since the start of 2019, while Boeing has handed about 2,100, according to Cirium, an aviation data provider.

Of late, however, both companies are struggling to make planes fast enough for their customers, who are desperate for aircraft to serve rising global demand for travel.

“Is it frustrating? Of course. Would we love to get more aircraft more quickly? Of course,” Campbell Wilson, the chief executive of Air India, a Boeing and Airbus customer, said last month during a panel discussion at the Farnborough Air Show near London. But there is a silver lining, he added: “We’re all on the same boat. We’re all suffering.”

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Converting Salary to Hourly Rate for contract employment

Among the most frequently asked questions from job seekers converting from salaried to a contract or consulting positions is that of hourly compensation. Specifically, how to convert their current or desired salary to an hourly rate for a W-2 contract position. The following steps can be used as a guide:

Divide your annual salary by 2080 (equivalent to working 40 hours a week for 52 weeks in a year) to arrive at the raw hourly rate {A} Multiply your raw hourly rate {A} x number of desired vacation days + Paid Holidays x 8 (hours per day) {B} Add in your annual health insurance premiums {C} Add your annual salary + Vacation / Holiday Pay {B} + annual health insurance premiums {C} and divide by 2080 to arrive at your hourly rate inclusive of basic benefits As an example, assuming an annual salary of $100,000, 3 weeks of vacation + 6 paid holidays, and $4800 in health insurance premiums, the hourly rate would be: $100,000 / 2080 = $48.08{A} $48.08 * 15 vacation days + 6 paid holidays * 8 hours/day = $8077.44 {B} Salary $100,000 + Vacation & Holidays $8077.44 + Health Insurance $4800=$112,877.44 $112,877.44 / 2080 = $54.27 Contract / Consulting hourly rate

You can add other benefits such as employer’s 401(k) contributions to this formula, however, it is important to note that the job market ultimately determines the going rate for your skill set. You must set realistic expectations by researching the job boards to gauge what the employers are paying for your skills. There are other benefits to working contract which should also be considered in addition to your compensation.

Salary To Contract Rate Calculator

What is salary to contract rate calculator.

Salary To Contract Rate Calculator is an online tool that helps freelancers, contractors, and consultants to calculate their equivalent hourly contract rate from their yearly salary. The calculator is designed to provide an easy and quick way to determine the hourly rate for a contract job, based on the salary that an individual receives in a year.

Formula and Calculation

The formula used to calculate the equivalent contract rate (ECR) is:

ECR = YS / 1,768 * 1.52

where YS is the yearly salary in dollars.

For example, if an individual’s yearly salary is $75,000, the equivalent contract rate (ECR) would be:

ECR = $75,000 / 1,768 * 1.52 = $63.50/hour

How to Use the Calculator

To use the Salary To Contract Rate Calculator, simply enter the total yearly salary in the input field provided and click on the “Calculate” button. The calculator will automatically compute and display the equivalent hourly contract rate based on the entered salary.

What is a contract rate?

A contract rate is the hourly or daily rate charged by a freelancer or contractor to their clients for the work they perform.

How is the equivalent contract rate calculated?

The equivalent contract rate is calculated using the formula: ECR = YS / 1,768 * 1.52, where YS is the yearly salary in dollars.

How can I use the Salary To Contract Rate Calculator to negotiate my rate?

By using the Salary To Contract Rate Calculator, you can determine the hourly rate you need to charge to earn the same salary as your current job. You can use this information to negotiate a fair rate for your contract work.

In summary , the Salary To Contract Rate Calculator is a useful tool for individuals looking to calculate their hourly rate for contract work based on their yearly salary. The formula used to calculate the equivalent contract rate provides a quick and easy way to determine an appropriate hourly rate for freelancers, contractors, and consultants.

We are a team of experts from different fields working on yourcalculatorhome.com with the motto effortless compute. Our team comprises experienced professionals from various fields, including finance, health and fitness, mathematics, physics, time, biology, chemistry, and more. We are trying our best to provide effortless computing with accuracy. We started only to help people of every field who are facing trouble with calculators. We are trying our best to make easy to use calculators which can be used by school going child to professionals of every field. If you have any questions, suggestions, or concerns, please feel free to contact us on [email protected]

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Off-payroll: ‘assignment rates’ pose problems for contractors, agencies and clients.

Contractors engaging in ‘inside IR35’ contracts are advised to be aware of the term ‘assignment rate’ quoted by agencies, as the actual contract rate received could be considerably less.

In response to the Off-Payroll rules, some agencies and umbrella companies have engaged in non-compliant practices by unlawfully deducting employment taxes and other deductions from pre-agreed contract rates with contractors.

This is due to the confusion surrounding the concept of a rate commonly referred to as the ‘assignment rate’, which is not a PAYE salary-based rate. An ‘assignment rate’ actually includes the umbrella company’s various costs, as well as accounting for the employment taxes which should be paid on top of the contract rate.

With the rules set to be extended to the private sector in April 2020, this is a problem which threatens to snowball, with competition within the recruitment industry only exacerbating the situation.

“Unfortunately, many agencies are failing to distinguish between the “invoice rate” - this is the rate paid to the umbrella company which covers the necessary costs – and the PAYE (Pay As You Earn) rate that contractors expect,” explains Janet De-Havilland, CEO of Pendragon Consultancy Ltd . “This is largely because they are in competition for the contractors, which has driven some to advertise the invoice rates to entice contractors who later find that they don’t receive the quoted rate.”

How employment taxes are accounted for under Off-Payroll

The Off-Payroll legislation is very clear regarding the tax treatment of contractors considered caught by IR35. Chapter 10, Part 2 of the Income Tax (Earnings and Pensions) Act 2003 , Section 61Q clarifies the calculation of the deemed direct payment, which for most ‘inside IR35’ contractors with no applicable expenses will simply be the agreed contract rate.

Elsewhere, Section 61N(3) states: ‘The fee-payer is treated as making to the worker, and the worker is treated as receiving, a payment which is to be treated as earnings from an employment (‘the deemed direct payment’).’

Treating a payment as earnings from an employment simply means deducting PAYE income tax and employee’s National Insurance Contributions (NICs) from the sum, while paying employer’s NICs (13.8%) and the Apprenticeship Levy (0.5%) on top of this amount.

In law, the term ‘employment taxes’ refers to employer’s NICs and the Apprenticeship Levy. However, HMRC frequently incorrectly uses this to refer to all of the taxes paid, generating confusion. To be clear, employee taxes are deductions from employment income, and employment taxes are paid on top of employment income.

Under the original IR35 rules, a contractor would have been expected to treat their pre-tax revenue as inclusive of employer’s NICs, effectively subjecting them to a double NICs charge.

However, by making deductions for employment taxes as well as the umbrella margin, offending parties are breaching not only the Off-Payroll rules, but also the Social Security Contributions and Benefits Act 1992, Schedule 1, Section 3(2)(a) of which states:

‘No secondary contributor shall be entitled to make, from earnings paid by him, any deduction in respect of his own or any other person’s secondary Class 1 contributions.’

‘Assignment rates’: the risks for contractors, agencies and clients

In the public sector, many agencies have circumvented their liability by deducting said costs from the advertised rate by referring to it as the ‘assignment rate’. Contractors who have confronted agents over missing fees have been informed that the assignment rate is distinct from their contract rate, and that the fees paid are correct.

As De-Havilland observes, this is a misunderstanding of the rules by a lot of agencies and umbrellas which contractors can be forgiven for falling for: “If you enter a contract for which an ‘assignment rate’ is advertised at £15 per hour, you expect to receive £15 per hour for completing that assignment, subject to PAYE. Nobody expects to be advertised rates which are inclusive of costs that are supposed to be borne by the agency and umbrella company.”

Though contractors are the victims, this arrangement also poses risks for agencies and umbrellas, several of whom have had successful civil actions brought against them by affected contingent workers. Though it will depend on the circumstances, and an umbrella company was required to pay the shortfall in a recent contractor win, De-Havilland believes that the agency will usually bear the greater risk of being targeted:

“I think the agency would be at greater risk because the umbrella company doesn’t advertise for the work. As much as an umbrella may be complicit with the agency’s wrongdoing, it still isn’t responsible for the wrong rate being advertised to the worker. But umbrella companies can do better in clarifying from the start the rates agreed between parties.”

As a relatively untested area of law, the consequences of abuse of the Off-Payroll tax calculation rules are uncertain. But, in deducting employment taxes from contract rates agreed with contractors, rather than making contributions on top of said fees, offending parties also diminish the amount of tax paid to HMRC.

There is a chance that this could be construed as failure to prevent tax evasion under the Criminal Finances Act 2017, in which case offenders risk an unlimited fine and a criminal record, if convicted.

Measures to curb abuse still a work in progress

Government is aware of the issue, and has proposed measures to prevent exploitation through greater transparency. Industry bodies have lauded the ‘Good Work Plan’ proposal that agencies be required to produce a ‘ key information document ’ stipulating all deductions from a contractor’s rate.

However, these proposals and other measures yet to be drafted into legislation, which has raised questions of the timing of the Off-Payroll rollout from Recruitment and Employment Confederation ( REC ) director of policy and campaigns Tom Hadley:

“Transparency in supply chains is key to ensuring that all agencies are working on a level playing field, and the REC has consistently raised this issue with Government. Some progress has been made with the introduction of the Good Work Plan.

“The introduction of IR35 in the public sector saw a marked increase in the number of umbrella companies. Although many umbrella companies are clear with their clients about fees, there are others who may not be as transparent.

“We therefore welcome Government’s commitment to include umbrella companies under the remit of the Employment Agencies Inspectorate. However, this will need to be done as primary legislation. As such, we would like Government to delay the introduction of the Off-Payroll rules until 2021 to ensure the necessary regulation of umbrella companies is in place beforehand.”

How umbrella companies can remain compliant

The risk for non-compliant agencies and umbrella companies rises for every contractor subject to a so-called ‘assignment rate’ and will increase considerably more when the private sector Off-Payroll rules are introduced. For umbrella companies, the risk is not worth the reward, whereas compliance is remarkably straightforward:

“All umbrellas need to do is ask the contractor at the beginning of each contract what their job is, how many hours they work, and what contract rate they are on. That’s mandatory for an umbrella to know in any case. It also provides all the information they require to confirm whether the amount paid to them by the agency is enough to cover the contractor’s rate as well as all associated employment costs.

“We always ask the contractor if the rate they have come to us with is the uplifted invoice rate or the PAYE rate. Once we’ve done the necessary calculations, if we don’t think the rate has been sufficiently uplifted, we advise the contractor to go back to the agency. We will also communicate this to the agency ourselves.”

“Good umbrella firms have a thorough on-boarding process in place that will explain everything to contractors regarding assignment rates, pay rates and deductions,” adds Julia Kermode, CEO of the Freelancer & Contractor Services Association. “Transparency is key, and without clear joined-up communication between agencies and umbrellas, misunderstandings may occur which could cause reputational damage.”

Some umbrella companies will unfortunately encounter agencies that are unwilling to uplift insufficient rates, in which case the best option is to walk away, rather than rolling the dice with non-compliance.

Agency compliance and the tax avoidance scheme risk

For recruitment agencies, compliance is even simpler. “All an agency needs to do is quote the PAYE rate for the contract,” comments De-Havilland. “They don’t need to do anything else, bar factoring in employment taxes and other necessary deductions into the separate invoice rate.”

Unlike umbrella companies, the dangers of non-compliance for agencies aren’t limited to civil action from contractors and concerns over the threat of tax evasion penalties. Agencies must also beware of tax avoidance schemes under the guise of ‘umbrella companies’.

In the public sector, to avoid employment tax deductions from their rates, many contractors have unwittingly entered into tax avoidance schemes. These schemes often offer a similar net pay to the amount the contractor should have received following PAYE, making them difficult to spot.

“Since the Off-Payroll legislation hit the public sector we have seen a proliferation of schemes that aggressively target contractors to sell their product of higher take-home pay,” says Kermode. “They ‘work’ by paying a small portion of contractors' earnings via PAYE and then disguising the remaining larger part of their income as something else, often an offshore loan.Most of these schemes are illegal, and any scheme that sounds too good to be true probably is.”

As part of the private sector implementation, the Off-Payroll rules will grant HMRC license to pursue parties further up the supply chain for tax liabilities owed by non-compliant parties, should it not manage to retrieve the sums owed from the offending parties. As a result, inadvertently introducing a tax avoidance scheme into the supply chain poses a huge risk for agencies who, having incited the adoption of tax avoidance schemes, could be pursued by HMRC for debts owed.

Of course, this is also a risk for compliant agencies, albeit a significantly smaller one. Nonetheless, agencies will want to mitigate the threat by adopting a considerable level of transparency with umbrellas at the end of the supply chain. This may entail requesting copies of payslips sent to contractors or seeking indemnification from the umbrella company.

Contractors can also take measures to ensure that they aren’t entering into a dubious arrangement. As Kermode highlights, there are numerous ways to spot a compliant umbrella company: “A true umbrella employs the worker whilst giving them flexibility to work for numerous end-hirers - so the worker has an umbrella of employment benefits and rights that they take with them wherever they work.Crucially, an umbrella will always pay 100% of your gross pay through RTI payroll.”

Related News

Related guides.

Clarity Umbrella Ltd

Making Sense of Umbrella Pay Everyday! Clarity; a UK based PAYE Umbrella Company!

Agency PAYE or Umbrella PAYE?

Agency paye or umbrella paye.

When you take on an assignment via a recruitment agency, they may give you the opportunity to be paid in one of three different ways;

Via your own Ltd Company; Via an Umbrella Company; or Via Agency PAYE.

So how do you know what route to go down? Well this depends on a number of variables.

First of all, if you assignment is stated as an Inside IR35 contract, then you may well not be able to work via your Ltd Company, unless the agency can make the necessary employment deductions. To find out more on the implications of IR35 in the Private Sector, please click here . If the assignment is outside IR35 then the recruiter can make payment direct to your Ltd Company.

OK so if you are deemed inside IR35 , or you decide that you do not want the hassle of operating via a Ltd Company, then you have the option of umbrella or agency. This assumes that the agency is able to operate the payroll for you, if not then you may be asked to work via an umbrella.

Choosing between Agency PAYE and Umbrella PAYE

So if you have been given the option to operate either via agency PAYE or umbrella PAYE, we would expect to see two different rates offered to you dependent on which option you choose.

We would expect to see a lower rate offered if you opt to go down the Agency PAYE route. You would be taken onto the agency payroll and they would ensure deductions are taken for PAYE and NI contributions before issuing you with a payslip. The rate you are given would be deemed your taxable salary and would be similar to what you would see if you were in standard employment.

Contract Rate vs Taxable Salary

The rate offered for Umbrella PAYE (or Ltd if feasible) would usually be inflated to account for the additional deductions you would not see through Agency PAYE. Operating via an umbrella your rate would be deemed as your contract rate and not your taxable salary. This is subject to Employers NI, Apprenticeship Levy and the umbrella margin before reaching your taxable salary.

So let’s take a look at some rate comparisons paid on a weekly basis…

Agency PAYE Rate (Taxable Salary) £500 per day. Nets a take home figure of £1,614.00

Umbrella PAYE (Contract Rate) £575 per day. Nets a take home figure of £1,621.00

The figures above (based on 2019/20 tax figures) show that if you were to be offered figures for either way of working on the assignment then you would need an uplift of around 15% for umbrella over agency PAYE.

If you have been offered two rates and would like us to review your take home, then please do get in touch and we can provide you with a breakdown. You will also need to consider that operating via an umbrella company can come with other benefits too. At Clarity, we can offer a flexible Group Pension Scheme, GAYE payments, and an employee rewards scheme.

TAKE HOME PAY CALCULATION Use our online umbrella company calculator to find out what your take home could be.

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Tracking Your Pay on an International Assignment

An issue that often confuses expatriates is that of “host-location spendable income.” Since comprehension of this concept is critical to understanding the nature of an expatriate pay package, the following discussion will illustrate it through practical examples.

Start at the Beginning

To grasp the concept of host-location spend- able income, it is necessary to look at your home-country salary. One can describe the ways in which that salary is spent by using four categories of expenditure: goods and services, housing, taxes, and reserve (savings and investments).

The focus in this article is on goods and services. As your income increases, the percent of salary you spend on goods and services decreases; as family size increases, the percent increases, too. When you go on assignment, it is important to know the cost of goods and services in your home country and what you would have to spend in the host location to buy the equivalent amount of goods and services. This determination is evident through the use of the goods and services index and differential.

The goods and services differential that your employer provides to you on a regular basis represents the difference between your home-country and assignment-location spendable income (the amount you spend on goods and services). This differential amount is calculated by means of a goods and services index — that is, a number that summarizes the relative total cost of the market basket of goods and services in the assignment location when compared with a similar basket in your home country at the same point in time. By definition:

If prices are the same in both locations, the index is 100.
If costs are higher in the assignment location, the index will be greater than 100 (positive); if costs are lower in the assignment location, the index will be less than 100 (negative).

Therefore, a goods and services index of 150 means that a market basket costing 100 units in the home country would cost 150 units in the assignment location – or, 50 percent more.

The following formula calculates the accompanying differential that your employer would provide to keep your purchasing power “whole” while abroad:

Tracking Your Pay On An International Assignment purchasing power calculation

The equation considers 100 to represent that portion of income already being spent by you at home for goods and services (the home-country spendable income). It also assumes that you need the excess of the cost above 100 for the higher prices of goods and services abroad (the differential). For example, if the index is 130 and your monthly spendable income is USD1,000, the differential would be USD300, calculated as:

Tracking Your Pay On An International Assignment purchasing power calculation example

Then, add the home-country spendable income of USD1,000 and the differential of USD300 to result in USD1,300. Multiply this amount by the exchange rate in effect at the time (assume Z4:USD1) to result in the host- location spendable income (USD1,300 x 4 = Z5,200) – or, the amount needed to purchase the equivalent amount of goods and services in the host location.

The differential is not intended to be the sole amount spent in the host location on goods and services. Just as part of your base pay is spent on goods and services at home, so are you expected to spend that same amount on assignment.

Percent Change in Exchange Rate vs. Differential

There are times when the decrease in the differential far exceeds the percent change in the exchange rate. Assume the exchange rate changes from Z50:USD1 to Z60:USD1 and results in a 20 percent drop in the value of the Z. Assuming the index was 150, the new index becomes 125. If home-country spendable income is USD1,000, you would see a drop in the differential from USD500 to USD250 – a 50 percent decrease in the differential, compared with a 20 percent devaluation.

However, since the differential is the way to get from the costs of goods and services in the home country (USD1,000) to those in the host location, it is necessary to look at the host-location spendable income:

Tracking Your Pay On An International Assignment Percent Change in Exchange Rate vs. Differential example calculation

After the devaluation:

Tracking Your Pay On An International Assignment Percent Change in Exchange Rate vs. Differential example calculation 2

So, despite the drop in the currency value, the host-location spendable income has not decreased. Host-location spendable income does not change as exchange rates change. The differential in home-country currency and foreign currency unit changes.

Understanding the Impact of an Exchange Rate Change

What happens to a differential when there is a change in the exchange rate? If, for example, the rate changes from Z4:USD1 to Z5:USD1, all else being equal, the index would decrease from 130 to 104, and the differential in the above situation would drop from USD300 to USD40. That USD40, however, would allow you to buy the same amount of goods and services as before:

Now consider what happens when a new index is calculated as a result of changes in the price of goods and services. Even though prices in the host location have risen, the index (and differential) may drop because of the exchange rate change. If the revised index goes from 130 to 120, there is a drop in the differential (from USD300 to USD200), but an increase in the host-location spendable income:

Tracking Your Pay On An International Assignment Understanding the Impact of an Exchange Rate Change calculation example 2

Here, a smaller differential, when combined with the home-country spendable income and converted at the new exchange rate, buys more host-location spendable income. This increased amount will keep your purchasing power comparable to what it would have been in the home country, even after the increase in prices in the host location.

Two key points to remember are these:

A differential should always be combined with the home-country spendable income. By itself, a differential is simply a way to equate costs in two different countries. If a differential is not combined with the home-country spendable income, you may think you are not expected to spend any of your base pay on goods and services in your host location.
Once the differential is added to your home-country spendable income to become the host-location spendable income, the total amount should be converted into foreign currency. As the foreign currency devalues, each unit of home-country currency buys more foreign currency units; consequently, fewer home-country units are necessary.

There are times when the decrease in the differential far exceeds the percent change in the exchange rate. The example in the sidebar, “Percent Change in Exchange Rate vs. Differential,” explains this situation.

One Step Further:The Concept of Split Pay

An employer that follows the split-pay methodology pays part of your compensation in home-country currency and the remainder in foreign currency. Although the way the split is made varies, the best split is usually to pay the host-location spendable income amount in local currency, plus any amount needed for housing in the host location, and pay the rest in home-country currency.

Particularly in economically volatile situations, this approach neutralizes the effect of currency fluctuations by limiting the need to transfer funds from home to host for daily purchases of goods and services. It protects the portion of your base salary (spendable income, not total pay) to buy what you need in the host country, which protects your purchasing power and lifestyle.

Splitting pay also ensures a stable number of local currency units for the host-location portion (needed for daily living) and home- country currency units (for reserve and incentives). And finally, you do not have to worry about the hassles and fees of converting currency into local funds, particularly since you do not need this portion overseas. All in all, it represents a fair and reasonable approach to pay delivery.

The Bottom Line: Expatriate Satisfaction

Understanding how your international compensation package works is a key element to satisfaction on your assignment. The host- location spendable income is an essential component of that package.

Heather Thomas, an Associate of Mercer, is based in New York.

Want to learn more about Expatriate Compensation Approaches?

Make sure to download our free guide to understanding compensation strategies

Download Here

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Salary vs Hourly Rate

This information is intended simply as a guide for those of you who are looking to make the transition from being an employee on a salary to becoming an independent contractor on an hourly rate. If you employ contractors, this can help to explain why contractor rates can appear to be much higher than the salaried equivalent for the same role.

The information provided here is for general guidance based on our experience of the contracting market. We strongly encourage you to seek professional advice around tax and financial obligations.

One of the most common questions we get is “how much should I charge as an hourly rate?”. The answer to this depends on a number of factors:

The length of the contract. Short term contracts may justify a higher hourly rate vs longer term contracts of six months or more.
The scope of the assignment. Depending on the nature of the assignment if there is high demand, your hourly rate may increase vs low demand during quiet times. Be prepared to be flexible.

Your track record. If you are new to contracting you may need to charge a lower hourly rate to “get your foot in the door” and build up your reputation as a contractor. As you become more established and have a few good assignments under your belt, you can charge a higher rate as demand increases for you based on your reputation.

What hourly rate should I charge?

Contractors have to absorb a number of significant costs that are provided for employees. Simply dividing your salary by the number of hours you work each year will result in you under paying yourself. As a general guide, we use the formula of calculating your base salary + 35% (of your base salary) divided by 2000 hours to arrive at an hourly rate. (note we are now using 35% vs previously 30% to account for additional public holidays and changes to employee entitlements) The 35% is to account for:

No paid sick leave
No paid annual leave
No paid public holidays (Matariki an additional holiday from 2022)
Uncertainty of getting the next contract or contracts terminating early. eg: economic and political changes
Home office expenses, Office 365 subscriptions, Xero, Zoom, vehicle costs, car parking, electricity etc
Accounting expenses for compliance with tax obligations (GST, Prov Tax)
Professional indemnity and public liability insurance which contractors are usually required to have

So as an example, for someone on a base salary of $150K deciding to go contracting, their approximate hourly rate would be:

$150,000 (Base Salary) + $52,500 (35% of Base Salary) = $202,500

Approx Hourly rate = $202,500/2000 hours in the year = $101.28 per hour. If you are talking to a recruitment agency you would quote something in the region of 95-110 per hour as a ball park figure. Remember you need to consider all the other factors above as well. Below are some indicative rates ( these have been updated in April 2022 to account for changes in public holidays and leave entitlements) :

Base Salary Approximate Contracting Rate

$80,000 $54 per hour (range $50-65 per hour)
$100,000 $68 per hour (range $65-80 per hour)
$120,000 $81 per hour (range $80-100 per hour)
$150,000 $101 per hour (range $95-120 per hour)
$180,000 $122 per hour (range $115-135 per hour)
$200,000 $135 per hour (range $130-150 per hour)
$220,000 $148 per hour (range $140-165 per hour)
$250,000 $169 per hour (range $160-180 per hour)
$270,000 $182 per hour (range $170-200 per hour)

Remember, these figures are just indicative and tend to be aimed more at people starting out as contractors. Rates for certain skills vary depending on region (Wellington generally has higher rates than Auckland and other main centres because of high demand). Those of you who are established superstar contractors in high demand ( yes we know who you are ) will also have higher rates.

If you want an estimate of the market rate for contractors in your area of specialty, feel free to ask one of our contracting specialists for their view of the current market.

Accounting, GST and Provisional Tax

Recruitment agencies are now required by Inland Revenue to deduct tax from contractors at source before it is paid out to the contractor. The contractor needs to complete an IR330c form and nominate a level of tax deduction eg 10%, 20% or even 0%. (A special application needs to be made to justify to the IRD that you are eligible for a 0% rate). Whatever is deducted by the recruitment agency and passed on to the IRD will be offset against your provisional tax payments so all you are effectively doing is paying your prov tax slightly earlier. If you want to see what IRD requires in terms of contractor tax deductions and download an IR330c form, click here .

Most contractors are required to have a certain level of cover for professional indemnity (in case you gave incorrect advice) and public liability (in case you left your muffin in the toaster and burned their building down). The level of cover required is usually around $1M and $5M respectively. You can either buy your own insurance (in which case you will need to produce your insurance certificates) or take up H2R’s contractor insurance which is deducted from your hourly rate (about 60 cents per hour)

If this is all too much for you and you want to outsource the accounting, GST and tax work then you can use a specialist provider such as HNRY who will look after all of this for you. They can also do your insurances. You can check them out at www.hnry.co.nz

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HCMWorks Insights

What is the Difference Between Bill Rate, Markup and Pay Rate?

If your business is one of the many organizations in North America making use of the highly-skilled gig economy, then it’s more than likely that you are working with a staffing agency.

A staffing agency will recruit temporary workers for your company, allowing your business to scale up for peak and seasonal periods, access skills that you don’t currently employ in-house, as well as hire highly-qualified and experienced workers for specific projects.

The result of using a staffing agency is the acquisition of top talent , reduced time spent on sourcing workers and lower costs.

But that’s only if you use the correct staffing agency for your business. That’s why many businesses turn to the expertise of a managed service provider (MSP), such as HCMWorks , to find the right staffing vendors and fill the growing talent gaps in their ever-changing workforce.

If you are new to the use of staffing agencies, there are some costs that you should fully understand to ensure you have complete visibility into your hiring decisions. All staffing agencies charge for their services based on three elements - pay rate, markup and bill rate.

While these costs are simple when isolated, many HR professionals, procurement teams and business owners confuse these interrelated terms when they are grouped together.

To help improve the visibility of your contingent workforce and staffing agency spend, HCMWorks has defined what each of these costs are.

What is the bill rate?

The bill rate is the amount that your company will pay to a staffing agency, per hour, for both their services as well as the services of a contingent worker. The bill rate is simple, and is a combination of both the pay rate and the markup.

To find out how much you will be paying a staffing agency for the entire lifespan of a contingent worker, you can simply take the hourly bill rate and multiply it by the number of hours that the temporary worker will be working with your business.

What is the pay rate?

The pay rate, not to be confused with the bill rate, is the amount that the staffing agency is paying the contingent worker for the services that they are providing your company. This is the largest component of the bill rate and it generally plays a significant role in the quality of the temporary worker.

What is the markup?

The markup is generally applied as a percentage on top of the pay rate, which is provided to the staffing agency for its services.

The markup is the more complex cost, as there is plenty of variation. This cost can fluctuate depending on market demand, assignment duration, buyer’s knowledge, type of workers and skill sets, business volumes and much more.

Markup rates can be anywhere from as low as 15 percent, when talent is sourced inside a competitive environment such as a (MSP) program , to as high as 50 percent or more under less structured processes.

Many organizations struggle to understand exactly what they are paying their staffing agency. However, through the clarification of the three key components of contingent labor spend, your company will be in a position to better control costs and make informed hiring decisions.

If you have any further questions around these three costs and want to increase the visibility of your business has into contingent labor spend, contact HCMWorks today .

Tags: Contingent Workforce

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Bill Rates Versus Markup: Setting Contingent Workforce Rates for a Flexible Workforce Advantage

Secure the right person for the work, right now, at the right cost. These long-held workforce priorities still apply today, and they will remain relevant well into the future. But changes are being felt:

More workers embrace careers as contractors and freelancers.
Advanced strategies and technologies give companies a path toward managing flexible workers.

Organizations of all sizes are embracing these strategic practices and innovations, as mid-market companies adopt solutions formerly associated only with larger enterprises.

One such practice is the managed services provider (MSP) solution that coordinates staffing suppliers and other sources of non-employee talent through a single program. An effective MSP maximizes the strength of the talent supplier network. It provides visibility into the workforce supply chain, delivers quality candidates, and enables companies to control their costs and total spend on non-employee talent.

The last part of the MSP equation around cost control has a significant influence on program impact. Here are key questions that can help organizations arrive at an MSP cost strategy that is right for them.

What are the Cost Calculation Choices?

Two options are at play. First is the “bill rate” or rate card approach to tracking talent costs.

In this approach, the price for talent is considered the total rate the supplier is being paid for the worker’s services.
This rate includes the base pay rate paid to the worker plus the supplier markup on that rate.
The client sets the strategy by establishing a maximum bill rate it would pay for talent for given roles.

The second choice is a “markup” approach.

In this case, the market and the supplier may determine the base pay rate needed for a given role.
At the same time, the client dictates the percentage a supplier is allowed to apply as a markup on top of the contractor’s pay rate.

Both approaches have their merits. For decision-makers in the initial stages of MSP planning, the markup approach may seem compelling at first, as it appears to offer an easy path for Procurement to demonstrate visible cost-savings to the company. However, two decades of experience aligning cost management tools to client program objectives have shown that a bill-rate strategy typically provides the most lasting positive impact. Either approach should be applied only after careful consideration.

What is the Full Impact of the Cost Calculation?

The real cost of talent is not determined in a vacuum. Companies must navigate a shifting balance of workforce supply and demand . Ultimately, cost is a function of three elements:

How much a worker is paid
How much a supplier marks up that cost
What impact the cost has on the quality of talent and speed of delivery

The challenge, if the company dictates the markup, is that suppliers may deliver talent at an unnecessary low quality or high cost. Start with the risk of reduced quality. If a supplier is told how much it will be paid to deliver on a certain talent need, it will prioritize the task accordingly. Consider the factors that go into the supplier’s effort — statutory costs, insurance, and benefits, to name a few. These elements vary by supplier. If the markup does not adequately match the hard work needed to secure that talent, then the best suppliers in the network may opt-out of the potential business, leaving the client with sources that take longer to deliver candidates or provide lower-quality results. These quality issues add pressure on hiring managers to sort through inadequate talent choices or to suffer from making poor selection decisions and handling the fallout of a misaligned worker.

When markup applies, a supplier may see an opening to deliver talent at a base rate that is higher than market value, providing a larger margin as the value of its markup percentage will be inflated due to the elevated base rate. Over time, the unnecessarily high base pay rate can lead to overall rate inflation and pay equity issues. Without Procurement’s continuous and detailed attention to the market, the risks of low quality or high-cost variations will remain a factor throughout the life of the contingent workforce program if a markup calculation is used to determine pricing among suppliers.

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What is Bill Rate and How Does it Compare to Markup?

What does bill rate mean.

The client sets the maximum rate to be charged by suppliers for a role or skill being sought. The supplier determines the base pay plus mark-up (supplier profit), but the total does not exceed the stated client bill rate.

Allows the supply chain to adjust to market fluctuations
Achieves consistency in overall cost, speed of delivery, and quality of talent
Enables the highest-quality suppliers to deliver their best workers
Controls the total cost of ownership effectively
Decreases visibility on the tactical cost breakdown to the client

What Does Markup Mean?

The client sets the percentage by which a supplier is allowed to mark up the base pay for a given role. Suppliers invest resources or opt-out, as needed, based on business alignment with the set markup percentage.

Gives clients a detailed breakdown of talent costs
Boosts perceived savings by adjusting the markup
Creates challenges in adjusting to fluctuations in effort and costs associated with acquiring talent
Puts quality suppliers at a disadvantage, as the margin may not reflect their investments in a needed talent type or skill
Encourages high base rates to improve markup value
Increases privacy risks due to sharing VMS pay rate data
Permits clients to be at risk for co-employment if perceived as setting a pay rate based on markup

Does the Bill Rate Approach Give Up Control to Suppliers?

In a nimble organization, each contributor in the workforce supply chain is empowered to bring its strengths to the table while coordinating with other contributors as part of a larger workforce strategy. To do their best work, suppliers with the best resources and connections to fill a talent need may come at a higher markup than others.

Add in variations in supply and demand in geographic markets, and the forces at play will impact the program’s ability to deliver talent consistently and reliably. When the MSP and the supplier work toward a standard bill rate , the markups can be adjusted up or down as needed to accommodate a smooth and continuous flow of talent. In essence, the buyer cedes some control of the engagement method to the suppliers that specialize in their fields but improves control of the outcomes by holding them to a standard bill rate.

Are There Regulatory or Privacy Implications?

Finally, evolving privacy regulations add a new concern to the mix. Holding suppliers accountable to a set pay rate plus markup requires access to pay rate data through the vendor management system (VMS) used in the MSP program. While the use of such data is currently permissible, this data is not typically captured today due to the privacy best practice of data minimization or to only processing data that is essential for performing a service. Under the General Data Protection Regulation (GDPR), a client, as controller of such data, can instruct the MSP program to process information such as pay rate on their behalf as long as the data is collected for specific and legitimate purposes. As regulations continue to evolve, capturing pay rate information is the VMS may add another level of risk. In the changing landscape of data privacy, the pay ray is considered personal information that is particular to the contractor, compared to the bill rate, which is specific to the job. This relation of data to the contractor may lead to a further restriction on the capture or sharing of pay rate information necessary to enforce a markup strategy.

A Bill Rate Strategy Addresses the Big-Picture Need

Today, the best practices applied for calculating value and cost apply to mid-market organizations and large enterprises alike. For anyone thinking about how to manage their spend on non-employee workers, careful consideration of the big-picture impact typically makes the bill-rate calculation a solid foundation for controlling costs, maintaining timely delivery, and achieving quality results.

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Provisional Rates Are Not the Same as Bid Rates

Calculating what to charge your agency customers is obviously one of the foundational actions for success in the government marketplace. What isn’t so obvious is how to navigate the complexities of rate setting to come up with a price that will reach your goals: 1) attract agency clients, 2) comply with government regulations, and 3) still earn a healthy profit.

One area where the process can get confusing is the proper use of provisional rates and bid rates. It’s true that there are certain circumstances—discussed below—where provisional rates may function as bid rates.

For the most part, however, provisional and bid rates are apples and oranges. They serve different purposes and get developed at different stages in the government procurement process.

The Apples: Provisional Rates Run for A Year

Your firm must establish provisional rates for interim billing purposes. Here’s how it works:

Provisional rates are based on the indirect costs (fringe, overhead, general & administrative, and other allowable indirect pool costs) that apply across all government contracts your firm has already won or expects to win for the fiscal year. You apply these provisional rates to bill your customers for their estimated share of your allowable indirect costs. Rules for establishing provisional billing rates appear in the Federal Acquisition Regulation (FAR) Part 42.704. These rules specifically regulate contract administration, not proposal pricing.
Provisional rates apply to contracts with a cost-reimbursable element—including cost-plus—as well as the reimbursable portion of most Time & Material (T&M) contracts. If a contract includes an Allowable Cost and Payment Clause (FAR 52.216-7) or a T&M Payment Clause (FAR 52.232-7), a provisional rate is required.
Your firm calculates provisional rates before the year begins, or as early in the fiscal year as possible, so you can invoice indirect costs throughout that year. Provisional billing rates are intended to approximate the future year-end rates adjusted for any unallowable costs. You are responsible for monitoring provisional billing rates and revising them if significant changes render your original estimates inaccurate.
The DCAA prefers a voluntary submission of a billing rate proposal each year. Ultimately, this should be discussed with the Contracting Officer or cognizant auditor in terms of establishing billing rates and the process for truing up indirect rates.
Actual indirect rates are computed for the fiscal year’s end and submitted through an incurred cost submission to your Defense Contract Audit Agency (DCAA) office and Contracting Officers (COs). The final true-up of provisional rates occurs when a settlement is reached on final indirect rates, although you may coordinate a process for annual adjustments.

The Oranges: Bid Rates (Mostly) Span Multiple Years

Once you’ve carefully calculated the most accurate provisional billing rates possible, it may seem to make sense to use them as bid rates in contract proposals. After all, some bid solicitations even sanction this use of provisional rates.

Here’s why provisional rates are rarely an adequate stand-in for bid rates:

Most proposal bids are for multi-year contracts. When provisional rates cover a single fiscal year, they cannot reasonably represent forward pricing rates for future years.
Calculations for provisional billing rates do not factor in how a contract win will affect the bidder’s indirect rates. The solicitation often explicitly requires you to do the math: bidder’s current work + contract win = new basis for calculating indirect costs.
The letter you receive from DCAA that establishes your provisional billing rates will explicitly state something comparable to, “The established rate shall not be used for any other purpose than for provisional billing rates (e.g. forward pricing or final indirect cost rates).”
You may, however, include provisional billing rates as part of your justification and support for your forward pricing bid rates.

Mixed Fruit: The Exceptions to The Rule

There are circumstances where you can use provisional billing rates as your bid rates. One exception may be when you’re bidding on a contract with a narrow period of performance that is completely encompassed by your current fiscal year and the bid will not materially change your rate outlook.

Other instances are when the bid will not materially change your rate outlook over multiple years. Examples include:

The bid is not large enough to have a notable rate impact,
Indirect cost increases are needed to support the work, effectively maintaining the existing rate structure, or
The bid will replace business ending—resulting in a neutral position.

The bottom line is, do the extra math! Know your rate impact and use this to your advantage in pricing your bids.

Contract bidding requires calculations that are complete, precise, and profitable. That’s the only way to produce a win-win for you and your agency customer. CAVU’s experienced financial team has helped our clients come out on the winning end of hundreds of government solicitations. Contact us to tap into that expertise.

IMAGES

CONTRACTORS
PPT
Bonds Market Rate vs Contract Rate
Spot Rates vs Contract Rates
What Are the Differences? Spot Rates vs Contract Rates
Comparison of Swaps and Forward Contracts

COMMENTS

Umbrella companies
What is the Assignment / Umbrella rate? What we are seeing is that many contractors are being quoted an "umbrella rate", or "assignment rate" which is, and always has been the Gross (Contract) Rate. If you are quoted an umbrella or assignment rate then this is deemed to meet all employment costs before the taxable salary is arrived at.
How To Calculate Contractor Rates (With Equation and Example)
They determine 80% of $4,000 is $3,200 by multiplying 4,000 by 0.8. To determine the contractor's pay rate, they subtract 3,200 from 4,000 for a difference of 800. This means the company can afford to pay the contractor a rate of $800 for the project. Discover why calculating contractor rates is important to do, and find out how to calculate ...
Understanding the Difference Between Assignment Rate and Gross Rate of Pay
The main difference between assignment rate and gross rate of pay is that the assignment rate is the amount that you are paid for a specific assignment or project, while the gross rate of pay is the total amount that you earn before any deductions are made. The assignment rate is often negotiable, and it may include a range of costs and fees ...
What is the difference between your assignment rate and gross rate of pay?
The assignment rate is made up of the actual wages payable to you (your gross pay), the recruitment agency's and the umbrella company's fees (or margin), and the employment costs. As employers, umbrella companies are legally required to pay employment taxes on any income paid to their employees. However, as umbrella companies only charge a ...
What is an Assignment Rate? Plus other umbrella pay questions
12.07% Holiday Pay (this can be advanced to you each week, or accrued) 0.5% Apprenticeship Levy (when umbrella's total payroll reaches a certain level) 3.0% Employer Pension contribution (this is paid into the workers workplace pension) This is why an assignment rate is usually much higher when a worker contracts through an umbrella company ...
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Contract rates come from long-term contracts between shippers and carriers. The negotiated rate is, to some degree, fixed for the duration of the contract; this is in contrast to the real-time ...
Here's How To Set Your Contract Staffing Rates
Company Bill Rate. Once you have the multiplier, simply multiply it by the contractor's pay rate to determine the bill rate to the company. For example: $45.67/hr pay rate x 1.60 = $73.07/hr bill rate. The goal is to get the bill rate as high as you can and the pay rate as low as you can.
Finally some clarity on Assignment Rate vs Pay Rate
Welcome to the very first edition of Orca Pay Group's Helpful Hints.Our comprehensive guide for contractors working under umbrella companies, where we'll bre...
Contract Bill Rate
Bill rate vs. pay rate. Unlike a bill rate, the pay rate only applies to the contract worker's wage (hourly or weekly rate). ... Assignment length: Short-term contracts generally demand higher pay rates; Conversion potential: The pay rate can be closer to a direct salary if the position is likely to convert;
How To Successfully Negotiate Contract Rates
Use these steps to negotiate your next contract rate: 1. Determine your minimum acceptable rate. Your bottom line, also known as a minimum acceptable rate, is the lowest hourly rate you are willing or able to charge a client. You can determine your lowest rate by using the following calculations: Add your desired salary to your overhead costs.
Umbrella or PAYE: what is the difference?
Umbrella Margin: £25.00. TAXABLE SALARY: £2,186.49 (£437.29 per day) - Agency PAYE Figures. PAYE: £632.79. Employees NI: £111.39. NET PAY: £1,442.31. In simple terms, an umbrella rate of £500 per day is the equivalent of £437 per day PAYE, so if the agency is offering anything less than that PAYE, you would be better off working umbrella.
How to compare independent contractor vs full-time employee salary
Here's how I do that: Take your hourly rate and multiply it by 2,080, which is the number of hours in a year if you work 40 hours a week for 52 weeks. Or if you need to convert a salary into an hourly wage, you can divide the salary by 2,080. That way, you can compare the salary for each role to each other role.
Consulting Fees Guide: How Much To Charge For Consulting (3 Formulas
29% use an hourly rate. 16% use a monthly retainer. 15% use value pricing. 10% use a daily rate. One of the highest ROI moves you can make is switching to value-based fees. Here are some more interesting findings about this data: Nearly 60% of consultants use a pricing strategy we DON'T recommend: project rate (based on hours) and hourly.
Spot vs. contracted rates, what fits better when and where
The following map illustrates the countries where domestic transports rates were lower on the spot market (green) vs. the contracted market (red) during week 7 of 2024. To ensure comparability between spot and contracted prices, values are harmonized based on distance. Spot prices vs. contracted prices for domestic road transportation
Boeing Faces a Steep Climb in Catching Up to Airbus
The company has postponed plans to increase production of the A320 family of planes, the competitor to the Max, saying in June that it expected to reach a rate of 75 A320s per month in 2027, a ...
Converting Salary to Hourly Rate for contract employment
Salary $100,000 + Vacation & Holidays $8077.44 + Health Insurance $4800=$112,877.44. $112,877.44 / 2080 = $54.27 Contract / Consulting hourly rate. You can add other benefits such as employer's 401 (k) contributions to this formula, however, it is important to note that the job market ultimately determines the going rate for your skill set.
WHO declares mpox global health emergency
Scientists are alarmed at the high fatality rate and rapid spread of a new variant of the virus.
Salary To Contract Rate Calculator
The formula used to calculate the equivalent contract rate (ECR) is: ECR = YS / 1,768 * 1.52. where YS is the yearly salary in dollars. For example, if an individual's yearly salary is $75,000, the equivalent contract rate (ECR) would be: ECR = $75,000 / 1,768 * 1.52 = $63.50/hour.
Off-Payroll: 'assignment rates' pose problems for contractors, agencies
An 'assignment rate' actually includes the umbrella company's various costs, as well as accounting for the employment taxes which should be paid on top of the contract rate. With the rules set to be extended to the private sector in April 2020, this is a problem which threatens to snowball, with competition within the recruitment industry ...
Agency PAYE or Umbrella PAYE?
So let's take a look at some rate comparisons paid on a weekly basis…. Agency PAYE Rate (Taxable Salary) £500 per day. Umbrella PAYE (Contract Rate) £575 per day. The figures above (based on 2019/20 tax figures) show that if you were to be offered figures for either way of working on the assignment then you would need an uplift of around ...
Tracking Your Pay on an International Assignments
Percent Change in Exchange Rate vs. Differential. There are times when the decrease in the differential far exceeds the percent change in the exchange rate. Assume the exchange rate changes from Z50:USD1 to Z60:USD1 and results in a 20 percent drop in the value of the Z. Assuming the index was 150, the new index becomes 125.
Salary vs Hourly Rate
The length of the contract. Short term contracts may justify a higher hourly rate vs longer term contracts of six months or more. The scope of the assignment. Depending on the nature of the assignment if there is high demand, your hourly rate may increase vs low demand during quiet times. Be prepared to be flexible. Your track record.
What is the Difference Between Bill Rate, Markup and Pay Rate?
The bill rate is the amount that your company will pay to a staffing agency, per hour, for both their services as well as the services of a contingent worker. The bill rate is simple, and is a combination of both the pay rate and the markup. To find out how much you will be paying a staffing agency for the entire lifespan of a contingent worker ...
Bill Rates Versus Markup: Setting Contingent Workforce Rates for a
First is the "bill rate" or rate card approach to tracking talent costs. In this approach, the price for talent is considered the total rate the supplier is being paid for the worker's services. This rate includes the base pay rate paid to the worker plus the supplier markup on that rate. The client sets the strategy by establishing a ...
Provisional Rates Are Not the Same as Bid Rates
Provisional rates apply to contracts with a cost-reimbursable element—including cost-plus—as well as the reimbursable portion of most Time & Material (T&M) contracts. If a contract includes an Allowable Cost and Payment Clause (FAR 52.216-7) or a T&M Payment Clause (FAR 52.232-7), a provisional rate is required. ...
assignment rate vs contract rate
What is an Assignment Rate? Plus other umbrella pay questions. The difference between an assignment rate and worker's gross pay is one of the most common causes of confusion amo

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How to Calculate Contract Bill Rates

What is a bill rate?

Bill rate vs. pay rate

Calculating contract bill rates

1. Get a bill rate range from client

2. Determine the contract worker’s pay rate

3. Apply a multiplier (mark-up)

This video from our President, Colin LaBeau explains:

What does the mark-up cover?

How to avoid the back-office duties

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