Setting Rates - What ratio should I use for my Hourly : Daily rates?

Question

In Brief: I have a short-term, part-time software consulting contract (200-300hrs over 2-3months) for which the client has specified hourly and daily rates. What is a typical ratio between hourly : daily rates (given details/context below)?

Details/Context: The client does business with a close colleague of mine - so I am doing this work as a courtesy to some extent - though I figure the client isn't aware of this fact (early versions of the contract were shamelessly one-sided, etc). My originally proposed rates were $100/hr capping at $800/day (so a 10hr day = $800). However, the client made the following change in the latest version of the contract:

...Consultant shall be paid an hourly fee of $80/hr or a daily fee of $600...

Notice that 8hrs * $80/hr = $640, not $600. (I never bill for lunch)

- I'll put any updates / answers to questions below here. Thanks! -

Answer 1

Normally daily rate is number of hours worked * hourly rate.

The only time when I make an exception is for ad hoc assignments where a client asks for an afternoon of my time, or one day for a specific workshop or training. I charge a higher "ad hoc consultancy" rate for that.

E.g.:

• ad hoc consultancy: 1.000 / day
• longer projects (10 days and up): 850 / day

For semi permanent roles (e.g. 6 months full time) I know some of my colleague-freelancers give another discount but I never take such assignments (didn't become freelancer to still spend months on end at the same client).

Answer 2

I don't understand the question. It seems straightforward to me....

Number of hours worked in a day times my hourly rate.

I don't give discounts for "daily" work. Why would I? If I can make $800/day at my hourly rate for any client, why would I charge less for this one specific client? My expertise, abilities, speed, etc don't change because something takes 8 hours instead of 5.

If I am inclined to give any discount I stick to percentages... 5%, 10%. So if I were to offer a discount (and that's a BIG "if")... 8hr * $100/hr = $800 - 10% = $720 -- if you subtract and hour for lunch.. 7hr * $100 = $700 - 10% = $630.

Seems to me cutting the hourly rate from $100/hr to $80/hr is really providing at 20% discount. That, to me, is too great of a discount.

(FYI $100/hr for a 10 hour day is $1,000 not $800 - if you subtract an hour for lunch, then $900).

Answer 3

It looks like they have a 7.5 hour day. I've had projects where my day rate is not 8 times my hourly rate. I always just bill hourly.

In your case, if I were working 8 hour days, I would just bill for 1.07 days for every day I worked. That being said, I've never had a client calculate a day and hourly rate for me -- it is always one or the other in my contracts.

If you have doubts about how you bill to the project, just ask the client for clarification.

Good luck!

Answer 4

I think it would not be unreasonable to expect a proportionately lower day rate for a longer project, compared to a higher hourly rate for a shorter project (e.g. a day rate of $800 (eight hour day) for a longer project and and $110-120/hr for a short project). For a shorter project, one will spend a disproportionate amount of time setting it up and then looking for the next contract.