Day rate

Day rates dominate UK professional contracting in technology, change, finance and engineering, because both sides would rather price a day's output than argue about hours. Hourly rates survive where hours genuinely vary or where the client's own systems work in hours. A day rate is almost always quoted net of VAT. If the contractor's company is VAT registered, 20 per cent is added to the pay side, and the agency adds VAT to its own invoice to the client.

The word day needs a definition, and the assignment schedule is where it belongs. Most agencies treat a day as 7.5 hours, some as 8, and a surprising number of schedules say neither. The difference appears the first time a timesheet shows 40 hours for a week: at 7.5 hours a day that is 5.33 days, at 8 hours it is exactly 5. The schedule should also say whether half days are billable, what happens to hours beyond a standard day and whether travel time counts.

Take a contractor on £550 a day placed with a client at £660. Over a five-day week the contractor's company is paid £2,750 and the client is billed £3,300, leaving £550 of gross profit for the agency. Expressed per hour on a 7.5-hour day, the same deal is £73.33 to the contractor and £88 to the client. Quote a client £88 an hour, then invoice for a contractor who worked 8-hour days, and a £660 day becomes £704 on an invoice nobody agreed to.

Rates also drift. A contractor asks for more at extension, the client agrees a new bill rate by email, and the pay rate on file stays where it was, or the other way round. Because a day rate multiplies by every day worked, a £25 discrepancy over a year of roughly 220 working days is about £5,500 by the time anyone notices. The rate a candidate mentions on a first call is also not a rate. It is an expectation, and it belongs in a different place from the figure on the signed schedule.