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Hourly rate vs Day rate: What is the best option?

One of the most crucial decisions you’ll make when starting out on your own as a tradesmen  is how to price your services. Will you charge by the hour, or will you set a fixed rate for the day? It’s a question that has sparked debates and divided opinions among contractors for decades.

We explore the pros and cons of each approach to help you make the best decision for your business. 

Understanding the difference

Before we dive into the specifics, let’s clarify the key difference between hourly rates and day rates. As the names suggest, an hourly rate means you charge for each hour worked, while a day rate involves charging a fixed price for a full day’s work, regardless of the number of hours put in.

Hourly rates

Charging by the hour is a popular choice among many contractors, and for good reason. Here are some of the main advantages:

Advantages of hourly rates

Clarity and transparency

With an hourly rate, both you and your client know exactly what you’re being paid for each hour of work. This can help build trust and avoid disputes over billing.

Flexibility

If a job takes longer than expected or the scope of work changes, you’ll be compensated for the additional time spent. This can be especially beneficial for complex or unpredictable projects.

Fairer pay

If you’re a fast and efficient worker, charging by the hour ensures that you’re not penalised for completing tasks quickly. You’ll be paid for the actual time spent on the job, rather than a fixed amount.

Disadvantages of hourly rates

However, there are also some potential drawbacks to consider:

Perception of value

Some clients may view hourly rates as a way for contractors to drag out a job and increase the bill. This can lead to a lack of trust and a focus on time rather than quality.

Difficulty in estimating costs

When quoting for a job, it can be tricky to accurately predict how many hours it will take. This can make it harder to provide a clear upfront cost to the client.

Pressure to work quickly

If you’re charging by the hour, there may be a temptation to rush through tasks to maximise your earnings. This can compromise the quality of your work and damage your reputation.

The case for day rates

Charging a fixed price per day is a common approach, particularly for contractors with higher rates of around £400 per day or more. Here’s why it can be a smart choice:

Advantages of day rates

Simplicity

With a day rate, there’s no need to track every minute spent on a job. You’ll be paid the same amount regardless of whether you work six hours or ten.

Client preference

Many clients favour daily rates as it gives them a clear idea of the total cost upfront. This can make budgeting and planning much easier.

Efficiency incentive

If you’re paid a fixed amount per day, there’s a strong motivation to work efficiently and get the job done as quickly as possible. This can lead to higher productivity and more satisfied clients.

Disadvantages of day rates

Of course, there are also some potential pitfalls to watch out for:

Scope creep

If the scope of work expands beyond what was initially agreed, you may end up putting in extra hours without additional pay. It’s important to have clear boundaries and be willing to renegotiate if necessary.

Undervaluing your time

If you’re not careful, you may end up working longer hours than anticipated just to get the job done within the agreed timeframe. This can lead to burnout and resentment.

Lack of flexibility

With a day rate, you may feel pressure to work a full day even if the job could be completed in less time. This can be frustrating if you have other commitments or priorities.

Factors to consider

So, which option is best for you? Ultimately, it depends on a variety of factors, including:

  • Industry norms: In some trades, hourly rates are the standard, while in others, day rates are more common. It’s worth researching what your peers and competitors are doing to ensure you’re in line with market expectations.
  • Your experience and skills: If you’re a highly skilled and in-demand tradesman, you may be able to command higher day rates. On the other hand, if you’re just starting out, hourly rates may be more appropriate until you build up your reputation.
  • The type of work: Some jobs are more predictable and straightforward, making them well-suited to day rates. Others are more complex and variable, which may be better suited to hourly billing.
  • Your personal preferences: Ultimately, you need to choose a pricing structure that you’re comfortable with and that aligns with your business goals and values. 

Tradesman Talk

At Tradesman Saver, we’re committed to supporting you in your journey as a tradesman. Our comprehensive insurance policies are designed to give you the peace of mind you need to focus on delivering exceptional work and building strong relationships with your clients.

Remember, whether you opt for hourly rates or day rates, the most important thing is to prioritise quality, professionalism, and open communication. By doing so, you’ll be well on your way to building a thriving and successful career as a tradesman.

Until next time, make sure it’s Tradesman Saver.

Darragh Timlin

With over 25 years’ experience, Darragh is an expert in all things insurance. Starting his career in commercial property underwriting, Darragh has worked for a number of global insurers and is now Managing Director of Tradesman Saver, part of the wider Henry Seymour Group.

All articles by Darragh Timlin

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