(this is off the top of my head, probably some glaring errors; it’s intended to give a general idea rather than be authoritative. How do YOU calculate your hourly rate for contracts?)
It seems there’s an increasing number of people around who have no prior experience of this, and are taking their first steps into freelance/contracting while doing iPhone dev in particular.
There are also an increasing number of clients offering impossibly low daily rates. I’m sure some of these are sharks taking advantage of first-time contractors, BUT … I know from personal experience that some are merely naive. Sometimes, it’s just that they are themselves ignorant of the realities of contracting.
So, to help first-time contractors, and to help clients trying to work out why they’re having trouble getting decent people on their seemingly “sensible” budget, here’s some quick thoughts on the standard practice on contract pricing.
By the way, to answer the titular question: Bad ones – about £250 / $350 a day; good ones – about £750-£1250 / (guess, but I haven’t asked any USA guys recently: circa $1200-$1500?) a day; Really really bad ones who have no idea what they’re doing and are probably teaching themselves programming as they go, on *your* budget – about £200 / $200 a day.
(note: the weak (disappointing, but bearable) and the worst (total waste of your time and money) are duking it out on price at the bottom end of the scale, that’s no coincidence. That’s all they can sell themselves on)
1. Salary is not remuneration
By law, in the UK and throughout Europe, companies *must* provide employees with cash and benefits above and beyond their salary. Whatever your official salary, the govt mandates that your employer pays you X% more than that (X varies from place to place and situation to situation).
X is made up of, among other things: “employer” tax, “employer” pension payments, sick pay, holiday pay (typically around 10% of base salary!), local govt taxes, various kinds of mandatory insurance, etc.
Some people get company bonuses as well, often from 1% to 20%.
Of course, at most companies, you also get a whole load of stuff “for free”. The rule of thumb at many companies is that *every* employee costs approx 10% on top of their base salary – and that any bonuses, benefits, etc, are extra on top.
Finding work is an unpaid activity
Contractors are required to spend some number of hours every month looking for their next contract. This can start simple – trawling websites – but even when a good match is found, the contractor has to take UNPAID time off work to speak to recruiters/hiring managers, attend interviews, etc.
Assuming everything goes perfectly and it takes you 2-3 days of preparation, search, interviewing, bidding, viewing specs, etc, and you work 2-3 month contracts on average, this is 5% of your working time.
If just one project gets cancelled / doesnt come through, that is immediately doubled. Any slowness on the part of recruiters again increases the cost to the contractor.
The numbers above are off the top of my head, and are far from complete. When you add it all up, and average over time, the rule of thumb for experienced contractors is that your hourly contract-rate should be at minimum 2 times your hourly employee salary, and as much as 3 times.
This is getting pretty long for an LI post, and I’m sure there’s a lot wrong with it, but hopefully it’s enough to give people an idea of the realities of the situation.
4 replies on “How much do iPhone developers cost (contract)?”
While I’d agree on your logic on calculating additional costs that contractors occur, I’d disagree on your daily rate numbers and the notion that you can judge quality on daily rate.
By your scale, we’d be pitched at the low quality end, and to toot our own trumpet, we’re definitely not that bad. Admittedly we’re not iPhone developers (yet), but we do cover most of the other gamedev platforms. I’ve worked with people who charged more than we do, and they definitely weren’t as good. The daily rate contractors charge is more closely related to what they’ve managed to get previously than it is their salary.
I’ve found that the clients have a limited budget for contractors – while they will more readily renew your contract if you’re good, their budget doesn’t stretch based on quality, and nor does the rate they’re prepared to pay.
As a senior engineer in a large/successful company, you might get closer to £40K-£50K. But if you expect to double that as a contractor, then I think you’re out of touch with the market. And that’s the regular gamedev market, not just the iPhone market which is almost by definition less lucrative.
Maybe I’m undercharging for our services, but the majority of clients in the games industry balk at contractor rates calculated by your formulae. I’d suggest that £200/day is a reasonable minimum, but I’d be surprised to find a client that would stretch to £400/day, even for a senior engineer with years of experience. Maybe a big client with deep pockets, but your average developer with tight margins isn’t going to touch a contractor at £400/day. But only a naive client expects to get a contractor in at anything less than 50% over what an equivalent employee would cost. I’ve found those too – and respectfully decline working with them.
So to answer your question – I calculate my rate based on what the market will bear, not from a formula based on my costs. Over the years that has allowed me to pay myself an equivalent salary to the one I used to get as an employee, but not much more.
In Canada there are different rules for contractors versus employees. For employees the employer is required to do various tax/benefit things like the UK, but for contractors there is no requirement. A contractor is paid whatever his/her full rate.(2-3x employee rate similar to UK), but there are no deductions taken from the contractors pay. The contractor is required to submit all taxes/required benefits themselves.
Are contractors treated like employees in this reqspect in the UK?
They used to be zero at-source tax on con tractors, but that led to things that Gordon brown felt were tax looophooes, and less controversially led to people opting out of the legal benefits ofemployees in return for higher wage packets. Most of that has now been made illegal, so the tax differences are now much smaller than they were – although sill significant for some.
It is the same in the US as Canada… the glory of the 1099 Consultant. People need to watch this, legally, in that a consultant is supposed to be self-directing – you don’t tell them “how” to do their job, just what you need done.
It will be interesting to see if this continues to be tolerated for the same reason that things have been changed in the UK as you noted, Adam.