A year has 52 weeks of 5 working days: 260 days. Contractors who set their day rate on that number are planning to be paid for days they will never work.
Where the days go
- Holidays: 20 to 25 days is typical if you want the same time off as an employee.
- Public holidays: roughly 8 to 12 days, depending on the country.
- Sick days: a few days a year, on average.
- Gaps between contracts: from zero for a long engagement to several weeks when searching.
- Admin, sales and training: time that is work, but not billable.
Take those out and 220 to 230 billable days is a realistic planning figure for a contractor with steady work. Six weeks off leaves 46 billable weeks, or 230 days.
From day rate to annual income
Hourly
$500.00 ÷ 8 hequals$62.50
Annual
$500.00 × 5 days × 46 wkequals$115,000
Planning on 260 days would put the same rate at $130,000 a year, overstating income by $15,000.
Working back to the rate you need
Start from the annual income you need to cover your pay, taxes, pension, equipment and savings, then divide by billable days. At 220 days, a $100,000 target needs a day rate of about $455; at 200 days, it needs $500.
Tip: Check whether a contract's day is 7.5 or 8 hours. The same day rate is a 6.7% higher hourly rate on a 7.5-hour day.