A per diem rate refers to the amount charged to a client for the work of a self-employed person for one full day of work.
What Is the Average Per Diem Rate?
The average per diem rate corresponds to the average remuneration of self-employed workers in a given industry for the equivalent of one full day of work.
The average per diem rate serves as a guideline. It makes it possible to compare the tariffs of different self-employed workers.
How to Calculate the Average Per Diem Rate?
In order to calculate an average per diem rate, the following information must be considered:
- Charges (taxes)
- Operational costs (material, training, administrative time)
- Time off (to ensure income during periods of inactivity)
- Market rates
- The added value of the service performed
- Business objectives
- Skills and experience
- Project deadlines
The following formula can be used to calculate the average per diem rate:
(Annual Personal Expenses + Annual Business Expenses) ÷ Annual Billable Days Worked = Average Per Diem Rate
For example, a self-employed individual who spends $50,000 per year on personal needs and $20,000 on business operations and has 168 billable days of work per year would have an average day rate of $416.67 ($50,000 + $20,000) ÷ 168 = $416.67.
What Are the Advantages of a Per Diem Rate?
The advantages of the per diem rate include:
- Ensuring a more stable revenue
- Standardizing service provision
- Allowing better planning of work
What Are the Risks Linked to a Per Diem Rate?
The risks of the per diem rate include:
- Not considering the added value of the project
- Not considering delivery times
- Lack of flexibility