One crucial aspect often overlooked by freelancers is how to adjust your rates – not just for inflation or increased expertise, but also to account for time off. After all, unlike those with traditional employment, when you’re not working, you’re not earning.
Most freelancers consider their day rate when calculating income. But let’s be realistic you don’t work every single day. Holidays, sick days, and even time spent on admin tasks eat into your earning potential. So how do you ensure you’re truly compensated for your time and expertise?
The hidden cost of time off
Let’s say your day rate falls between £250 and £400. Seems decent, right? But consider this:
- Annual leave: Even freelancers deserve a break! Factor in at least 28 days (the UK statutory minimum) for holidays.
- Sick days: Everyone gets ill. Realistically, allocate 5-10 days for unexpected sick leave.
- Admin days: Chasing invoices, managing clients, marketing yourself – these tasks take time! Assume at least 1 day per week is dedicated to non-billable work.
Suddenly, that lovely day rate doesn’t seem so generous when spread across the actual working days in a year.
Doing the math
Here’s a simplified way to calculate a sustainable rate:
- Annual working days: Start with 365 days, subtract weekends, holidays, and sick days. Let’s be generous and say you have 220 working days left.
- Desired income: Decide your target annual income. Let’s aim for £60,000.
- Calculate your true day rate: Divide your target income by your working days: £60,000 / 220 = £272.72 per day.
This means to earn £60,000 while taking time off, your day rate needs to be closer to £273, not the initial £250.
Adjusting for different scenarios
Higher day rate: If you typically charge £400 per day, you might aim for a higher income. Using the same calculation, aiming for £80,000 per year would require 220 working days at £363.63 per day.
More time off: Need more holidays or anticipate more sick leave? Reduce your working days in the calculation. For example, with 200 working days, your £60,000 target requires a £300 day rate.
Communicating rate changes
Transparency is key when updating clients about rate changes.
- Give notice: Provide ample notice, ideally a month or more, to allow clients to adjust their budgets.
- Explain clearly: Outline the reasons for the increase, emphasizing your value and expertise.
- Offer options: Consider offering packages or retainers to soften the impact for long-term clients.
Beyond the numbers
While the math provides a solid foundation, remember to:
Value your skills: Don’t undervalue yourself! Factor in your experience, specialization, and market demand.
Review regularly: Re-evaluate your rates at least once a year to account for inflation, skill development, and changing market conditions. Also, consider the expenses that are vital for you to do business: IT equipment, software, travel and insurance, for example.
By incorporating time off into your rate calculations and communicating transparently with clients, you can build a sustainable income and not end up playing financial catchup should essential item prices go up, like petrol, food, utilities and insurance.
