Freelance Day Rate Guide 2023

A: Many freelance creators fail adequately to appreciate when pricing their work that they are responsible for a range of costs which, were they working as an employee, would be covered by their employer. These include office equipment, premises, sick pay, pensions, holiday pay, insurance and various other costs. When pricing their services, it is useful for freelances to take into account what the comparable cost would be for employers if they used their own employees instead.

A: The following items have been included: employer’s national insurance contributions; office premises costs; pension costs; average cost of staff training; average annualised cost of staff recruitment; cost of staff sickness; employer’s liability insurance; cost of additional employee benefits.

The detailed explanation of the methodology used is given below.

A: This has been calculated taking in to account the new minimum National Living Wage of £12 per hour in the UK, excluding London where the rate is £13.15 per hour (source: Living Wage Foundation) and using the average working week of 36.4 hours from the office for National Statistics data for Q4 in 2022.

A: For standard non-contracted-out employees, employers currently pay national insurance contributions of 13.8% of gross pay on all pay above the NI threshold (£9,100 a year).

A: A number of independent organisations attempt to calculate the typical cost to employers of providing accommodation for employees. These costs include the direct premises costs (typically rent/rates, lighting/heating, maintenance, office security/cleaning etc), the cost of property insurance, the cost of supplying office furniture (including computer workstations) and property overheads (telephones, catering, reception, post room, management, photocopiers etc). The Total Office Cost Survey (TOCS), carried out each year by Lambert Smith Hampton, analyses these costs to produce an average cost per workstation for offices located in different parts of the country. The 2022 TOCS found that this cost varied from £15,601 [2015: £17,486] in London’s West End to £6,079 [2015: £4,339] for a twenty-year old office in Preston. Over the last year there has been a steep rise in office costs with a rise of 12.4% for new builds and an even steeper rise of 18% for 20 year old office buildings which are less energy efficient.

The Guide, by using a single figure for property costs, considerably underestimates costs for employers in many parts of London but conversely may overestimate employers’ costs in secondary business areas. The figure used for the 2015 Ready Reckoner was £8300. This has been increased to £9189 for this year’s edition.

A: Data this year have been taken from Office for National Statistics Pension Provision Employer by SIC2007 Industry SIC2007 2021 (published April 2022). This figure was based on the average employer contribution of 7.9% for all schemes in the insurance Information and Communication Category ignoring the bottom and top groups.

Pension schemes vary hugely between employers. The 2015 version of the Ready Reckoner was based on the average employer pension contribution being 6.25% of pay. This underestimates pension costs for those employers who continue to operate final salary or other defined benefit schemes.

A: The main source here is the 2022 edition of the survey on recruitment known as Resourcing and Talent Planning, published by CIPD each year.

This survey, based on 1,055 UK-based HR/people professional respondents, found that the median cost of recruitment of employees (excluding senior managers and directors) for private sector companies (which would include media companies) was £1500 [£2000 in 2015].

The CIPD report also suggested that median labour turnover was 6%. (Put another way, on average 6% of the labour force leaves in any one year).

The Freelance Calculator combines these figures to assume an annual cost per employee to the employer of £1500 x 6%, or £90 [2015: £272].

A: The CIPD survey Learning and Development for 2023 found that the median annual learning and development budget per employee was in the range £151-£400. For the purposes of the Tables, it has been assumed that annual training costs per employee are £275 [2015: £225].

A: The cost of employers’ liability insurance (which is compulsory) has been taken from Statista Average cost of employers’ liability insurance in the United Kingdom (UK) as of February 2022 published by Jennifer Rudden (June 2022) which states that the average cost of employers’ liability insurance in the UK is £61 for an office worker. This rises to £213 for a worker who performs more specialised tasks. For the purposes of the table the figure for the office worker has been used as it assumes that office workers are less prone to workplace-related accidents or illnesses compared to other employees.

A: From the CIPD Reward Management Survey: focus on employee benefits published in April 2022 show that since early 2020 there has been extensive scrutiny of how employers treat their workforce by the media, investors, customers, politicians and staff themselves. This scrutiny is across the whole range of rewards and makes little distinction of what might be consider as pay or as a benefit. It also includes non-financial elements, such as the availability of flexible working, training and development opportunities, a safe and warm working environment and being managed fairly. Benefit packages these days can include a huge range of options from mental health, physical health and financial health benefits including cycle to work schemes, childcare and free lunches. Reward & Employers Benefits Association (reba) published research by Stacey Lowman in February 2023 which quotes that Open Sourced Workplace estimates on average that 32% of a company’s salary costs goes towards employee benefits. This includes employer pension contributions and training. The figure used in the table is erring on the side of caution and using the lower figure of 25% of the annual gross salary less Employer Pension contributions and Training costs.

A: It assumes that staff are given 25 days’ annual leave (plus public holidays and weekends). The assumption therefore is that staff are contracted to work 228 days a year.

A: According to the 23rd CIPD Health and wellbeing at work report (published Sep 2023), the average number of days lost through absence per worker is 7.8, the highest level in a decade and more than 2 days higher than in the 2019 report (5.8 days). The Guide, therefore, assumes that on average employees are actually working 220.2 days a year (228 less 7.8) [2015: 222.5].

The second column in the table above shows the total annual costs to an employer in employing a member of staff, using the methodology and data outlined above. The third column divides these figures by 220.2, to produce the same figure per working day.

A: The Guide’s methodology is to look solely at the actual costs to employers of employing staff , and from this to offer a comparable day rate which freelances may wish to use. It is not concerned with staff take-home pay or their actual standard of living. Equally, it does not examine the typical costs for freelances of running a freelance business.

Freelances may have business overheads which, when compared to those of their client media companies, are lower (for example, lower property costs because of location away from expensive business centres) or higher (for example, because of inability to benefit from economies of scale). Freelances may also be able to set more expenses against tax than employees. However, since the Guide is concerned with the actual costs faced by employers, not by freelances, these do not affect the calculations.

A: The figures in column 3 in the tables effectively underestimate the real cost to employers of using employees, in two respects.

Firstly, creative freelances are able to undertake their work in part because their employer employs other people to perform necessary administrative and operational tasks. These include everything from processing tax and pension contributions to offering IT support. Some of these add-on costs (reception and switchboard staff, cleaners, etc) have already been taken into account in the property overhead calculations but others are not.

Freelancers are advised that, were they to use the figures in column 3 in the tables for comparability purposes, they would be likely to be charging for their services at rates which undercut their staff colleagues. The Guide’s approach is to make allowance for these factors by assuming, in the calculation of the Recommended freelance daily rate (column 4), that 3/5th of employees’ working time is directly productive.

Another way of approaching this would be to ask what uplift freelances would need to add to their daily rate to allow for the fact that their clients normally pay just for their directly productive work. Freelances should recall that, even if it were possible to regulate the flow of work to such an extent that there was paid work offered for every single working day of the year, they would still be unable to take advantage of this: time also has to be spent on a wide range of administrative and non-paying work. The assumption of a ratio of 3:2 productive/unproductive work in this context seems not unrealistic.

A: Photographers and other freelances who use their own specialist equipment cannot use the calculator as it currently stands but may be able to adapt them for their own uses. It is possible to do this as follows:

Add to the figures in column 2 the total annual estimated equivalent cost to an employer of providing photographic equipment to a staff photographer. This is not the actual cost of capital purchase but either the depreciation figure or the total equivalent leasing cost, plus the full cost of disposable items such as photographic paper etc. Motoring costs may also need to be added. (Divide the revised figures in column 2 by 220.2 to produce figures for column 3 and divide again by 3/5, to produce figures for column 4.)

Standard PC equipment, desk equipment, etc, is already allowed for in the tables and should not be added again.

A: Following the production of earlier versions of the calculator, a number of requests were received for a similar table to be produced which adequately covers the situation where freelances (for example, casuals working shifts) work in clients’ premises, using clients’ equipment. The table below uses the main calculator but removes property costs; for a number of reasons, it is less robust methodologically than the Freelance Calculator, but may be used to give a broad indication of what comparable freelance day shifts rates ideally should be.

A: In headline terms, this year’s Guide show an increase of just under 10% in the estimated total cost for employers of employing staff, and therefore in the recommended freelance day rate.

This year’s Guide reflects increased costs for employers because of the cost of providing employee benefits as well as a slight increase in the cost of property. The freelance rate has also increased because of the increase in number of days’ absence for employees being at its highest level for a decade. On the other hand, the cost of recruitment and employer’s liability insurance have dropped. The cost of employer’s national insurance contributions has also fallen because of the increase in the threshold since 2015.