How to work out your contractor pay rate when hiring?
You’ve come to a decision on the contractor vs employee debate. The allure of adaptability, niche skills and flexibility swayed you; hiring a contractor is the right move for this specific role.
Regardless of the reasons why you think contract recruitment is the most suitable way to go, you always want to ensure you hire the best person for the job. An important aspect of being able to attract the right contracting talent is meeting expectations in terms of pay.
Looking for temporary additions to your teams? We can connect you with highly skilled contractors.
We’ve covered how to work out a starting salary in the past, but it is slightly different for independently operating contractors - who are paid on a daily or hourly rate as opposed to an annual salary.
So, how can you calculate what you should pay your contractors?
Before we delve into that, it’s important to remind yourself about the contract recruitment process...
How hiring a contractor normally works
A contractor is essentially an external business that bills you for their services over a set period of time according to a fixed project fee or daily/hourly rate.
Most businesses find their contractors through a recruitment or staffing agency. In that instance, the agency will pay the contractor’s wages.
Alongside looking after invoicing and payroll, the agency’s contractor experience team is likely to provide additional support that will help the assignment run smoothly for both you, the hiring organisation, and the contractor.
This can include assistance with onboarding (in the office or remotely) and regular check ups to provide progression feedback to both parties.
So the agency handles most of the admin side of it all. Sounds pretty good, doesn’t it?
Working out your budget when hiring contractors
As we’ve just covered, most of the ‘after hire’ work is covered by the agency. But you do still need to figure out how much budget you can allocate towards the hiring of each contractor.
Our interactive Salary Guide Calculator tool reveals salaries for a wide range of professions in various locations around the world, and you can even toggle years of experience to see how that impacts pay expectations.
This will give you an accurate picture of what the industry benchmark is for the specific role you’re hiring.
But if you can’t find the job title you are looking for, contacting a contract specific recruiter is a great way to get an insight into market rates - they deal with them everyday, after all.
Always bear in mind that location, industry, seniority of the position, current demand, length of assignment and other variables can impact this amount.
Perhaps the most important consideration when deciding on how much budget to allocate when hiring your contractor is the length of time that you require their services for - 3 months, half a year or longer?
Typically, the shorter the project, the more costly it is going to be to get the right contract talent.
The difference between your contractor’s rate and your budget for the hire
The figure you’ve got to is the pay rate you should advertise the role at.
You should also remember to allocate a bit extra into your budget for the hire if you are utilising a staffing agency - there will be a fee for their hard work of finding you the right contractor and then seamlessly integrating them into the assignment.
The value of the role to your business
It has to be a real balancing act when choosing the right contractor to hire.
At the one end, you can go for a highly experienced, senior professional who can provide direction to other employees on business critical and complex tasks - but you will have to pay for such a privilege.
You may conclude that it’s worth the investment for the long-term benefits of the value they will add.
But if you’re not so sure you can justify the expense of a senior contractor, why not look at the other end of the spectrum.
Have you considered hiring multiple, less experienced but still perfectly skilled in their particular area, contractors to spread across the duties instead? You may even find that their abilities and varying experiences complement each other nicely and bring unexpected benefits!
If you would like to just have a conversation to understand more about the market (both permanent and contracting), feel free to get in touch with us for a free consultation.