Majority of IT contractors admit to working non-billed hours

Almost six in ten “self-employed” workers admit to overservicing clients, in a sort of eager-to-please commercial misstep.

Speaking to IPSE and Workwell, 53% of people who work for themselves confessed to ‘providing extra time they don’t charge for.’

ContractorUK quizzed IT contractors yesterday and turned up similar, with two in three contractors admitting to offering overly good deals.

'Underestimating'

Or at least, two contractors did as first-timers by either “underestimating” the time needed, or intentionally doing extra hours to try to impress.

But time isn’t the only commodity that freelance consultants potentially sell themselves short on.

While the IPSE-Workwell study found 30% refuse to overservice (2% underservice and 15% weren’t sure), 34% said they undercharge.

More specifically, this chunky one-third said they do not “pass on [to the client] any of the cost incurred as part of being a contractor”

'Set the day rate to cover the costs of doing the job'

Alan Watts, one of the contractors quizzed who never overserviced or undercharged, said not factoring such costs into the rate is silly.

“In my world [of service management]…I’d set the day rate to cover the costs of doing the job, including accommodation and travel.

“And I refused offers where I wouldn’t make a sensible profit. Today, many contracts bar expenses. Inside IR35, you cannot claim anyway.”

'Naive'

Writing about IR35 today exclusively for ContractorUK, contractor Chris Sebok said he overserviced and undercharged in his early days.

“The issue many naive contractors face - especially those coming from an employed background - is that they believe it is standard to agree to a day rate, defined as a ‘professional day’ in their contract.

“This is not a sensible business practice,” Sebok said.

“A ‘professional day’ is too woolly and could be construed to also include free overtime at the behest of the client.

“Charging on a day rate basis is perfectly fine, but the hours required to complete the work should be defined clearly – for example ‘7.5 hours labour per day,’ with any additional hours charged at a specified hourly rate.”

'Undershooting'

Now running a successful software consultancy some 25 years later, Sebok says such an approach maximises profits and grants the option to say ‘no.’

Risk consultant Stephen Rookes also has some tips, specifically for the 53% who overservice and on average, do 22% more work than contracted to do, according to the IPSE-Workwell study.

“To avoid undershooting on time, invest in a ‘count up timer’ to enable you to accurately record the hours,” Rookes began.

“Nowadays, with our 14 clients, for the few whom I need to show time-spent, I use Google Sheets, which offers full transparency and real-time reporting.”

'Fly in the ointment'

Now retired, Watts observes that a still popular, potential way around feeling shortchanged, is ‘fixed-price’ contracts.

“These can work out well, because you get paid for a set deliverable and how much effort that deliverable takes is down to you.

“But fixed-price contracts are a fly in the ointment of the overservicing-undercharging debate. If I charge you a total of £40,000 for the contract and in the process I save you half a million, as I have done a few times, am I overcharging or undercharging?”

'Extra work for no extra remuneration'

Regardless, contractors who claim to be ‘in business on their own account’ must guard against “carrying out lots of extra work for no extra remuneration.”

Sebok, boss of Shadow Moses Developments Ltd expanded: “I’ve not under-charged or worked a significant amount of free overtime for many years.

“But that isn’t to say I don’t do the odd hour here and there, and don’t provide my clients value. I perform my duties exceptionally well, but most clients worth their salt respect that my time and experience are valuable commodities.”

'We don't need to shy away from invoicing all the hours worked'

At Strategic Risk and Compliance Consultancy Ltd, where Rookes is boss, a similar two-way street is in play.

He told ContractorUK: “We’ve raised over 80 invoices in the last 12 months, with only two of those invoices paid late.

“Proactive credit control has been essential but we don’t need to shy away from invoicing all the hours worked. We know the value we’ve delivered and we’re happy to explain all the hours, with evidence if necessary. That said, we’ve never once been asked, and I think that’s down to the trust and integrity built up with clients over many years.”