One the most frequently asked questions when people start contracting or freelancing is ‘how much should I charge?’ As well as knowing what other contractors in your field charge you can also apply following factors to work out a rate of pay.

Factors affecting rates of pay

Skills and Experience

Those with the most recent and in depth knowledge can earn £100+ an hour, but on average contractor rates are £30 – £40 per hour. Basically the more in demand the skill or role, the higher the chargeable rate.

Location

Although contractor rates vary widely across the UK, it will come as no shock though that the highest contractor rates of pay are in the City, followed by Greater London and the South East. Contractor rates tend to reflect the general income trends across the UK.

Economy

The current economic climate since 2008 means that contract work is harder to find and some rates of pay have fallen. However the better news is that instead of dropping contractors, clients have generally imposed rate cuts instead. Many companies also find hiring contractors or freelancers a useful way of getting the job done without hiring permanent staff and thus avoiding having to make staff layoffs.

Agency Commission

Many contractors find work through recruitment agents and therefore will have commission deducted from the final rate of pay. Make sure you check how much your agent’s cut is before you sign the contract. Try and negotiate lower if the rate is too high – although this may be tricky if demand is low.

Company Structure

As contractor or freelancer you will make a lot more money working as a limited company instead of through an umbrella company. Working as a freelancer via a limited company is the most tax efficient method, as it extracts most of your income in the form of dividends and a low salary.

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