Interim advice: deciding on your day rate
When working in a permanent role, your salary and benefits package is set at the start of your period of employment. This is the case for most professionals; their salary is calculated every month by their employer and will typically be the same amount every pay day.
If you’re an interim manager or a contractor, you’ll be in more control of the rates you’ll accept for your services and the way in which you are paid. However, it’s important to have a good understanding of the value of the services you can offer – don’t price yourself out of the market. Speak to your consultant for more information on the going rate.
When setting your daily rate, it’s important to remember the costs that will need to come out of your earnings. These include:
- National insurance and employer’s national insurance
- Any benefits that usually come as part of a benefits package (such as private healthcare, car allowance, pension contributions etc)
- Funds to cover your own sick pay and holiday pay
- Travel expenses
- Business expenses, such as professional indemnity insurance or necessary equipment
With all this in mind, a seemingly good daily rate may leave you with insufficient take-home pay.
A few other tips:
- Don’t calculate your annual salary by multiplying your rate by 365 days. We don’t work every day of the year.
- Due to the nature (lack of job security and benefits) of interim work, contractors may consider setting their rates higher than that of their permanent, salaried counterparts.
- Make note of all your expenses and keep all receipts.
- Depending on your situation, you may not get paid for holidays, so make sure you budget for this when planning a break away from work.
- An umbrella company can provide payroll services for you.
- As an interim manager, it may be necessary to set up as a limited company. For more information, Business Link has put together a guide to setting up as a limited company.
Each interim/contract employment situation is different, so we’d encourage you to consult a financial adviser/consultant for in-depth information.