Setting a day rate that still pays after holidays, rain days and the van

Written for general builders, groundworkers, carpenters and joiners, roofers, plasterers, bricklayers and kitchen and bathroom fitters in the UK, from one-van firms to small main contractors.

The short version

1. Add up each worker's full yearly cost.Gross pay, employer National Insurance, employer pension, and their share of the van, tools and PPE.
2. Divide by the hours you can charge.Take off holiday, weather, training and travel hours no client pays for. Dividing by what is left gives your real cost per hour.
3. Add overheads, then divide by one minus margin.For example, divide by 0.8 for a 20% margin. Adding 20% to cost is markup, and gives only a 16.7% margin.

It is easy to set a day rate by looking at what others charge, or by adding a bit to what you pay a labourer. Both miss the hours nobody pays you for: holiday, weather, training and travel. Price from your full cost per productive hour instead, and the rate tells you whether a job is worth taking.

Margin and markup are different numbers

Margin is profit as a share of the price: (price minus cost) divided by price. Markup is profit as a share of the cost: (price minus cost) divided by cost. For example, a 25% markup produces only a 20% margin, while a 25% margin needs a 33.3% markup.

1. Add up the full yearly cost of each person.Gross pay, employer National Insurance, employer pension, and their share of the van, tools and PPE. Holiday pay sits inside 52 paid weeks.
2. Count only the hours you can charge.Take off holiday (5.6 weeks a year for workers), weather, training and travel hours that no client pays for.
3. Divide one by the other.That is the full cost of a productive hour. Multiply by the hours in your working day for a day cost.
4. Recover your overheads before profit.Divide the overheads you do not charge to any job by your expected chargeable labour hours, or add them as a percentage of direct cost. Show any risk contingency as its own line.
5. Then price for the margin you want.Divide the full cost by one minus the target margin. For example, for a 20% margin divide by 0.8.

On the worked figures the first rate brings in about £9,700 a year less than the 20% margin needs, because 7.6 paid weeks a year are not chargeable.

Pricing the job, not just the rate

• Measure the quantities (the standard method is NRM2).
• Date every merchant and subcontract quote and check it covers the same scope as yours.
• List the preliminaries, the general site costs that are not part of any one item, as their own lines.
• State how long the price is valid (commonly 30 days), or agree a fluctuations clause (JCT options A, B and C) on a long job.
• Settle the VAT rate before you quote: the tax lesson sets out the rates.
• Working as a CIS subcontractor? Gross up: for example, to keep £800 in hand after 20% CIS on labour, invoice £1,000 of labour (£800 / 0.8). As of Oct 2026.

Compare your won and lost quotes by job type to see where your price stands. For a long fixed price, check the current ONS construction output prices, or the BCIS (RICS) tender-price indices if you subscribe, before you sign.

Asked in Greymill

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