What Is a Day Rate?
Some purchasing organizations prefer to receive a quoted day rate instead of an hourly rate for services.
Understanding the Day Rate
Day rates are common in industries in which workers are employed on a per-project basis or for seasonal work, such as the oil and gas industry and construction.
Lore Law, a legal firm that specializes in representing workers in overtime wage and law claims, indicates that day rate payment is common for workers classified as field specialists, field operators, pipeline inspectors, top drive technicians, service supervisors, field coordinators, tool pushers, pumpers, lease operators, mud engineers, field engineers, and water truck drivers.
Day rates also are becoming common among white-collar professionals who work on a freelance or occasional basis rather than as regular salaried employees.
- The day rate, or per diem, is a flat fee charged for a single day of an individual's work.
- Day rates are common in industries which employ workers on a per-project or seasonal basis.
- Day rates also have become common among consultants who work on a freelance basis.
Workers who are employed on a day rate basis generally do not receive benefits from the company whose work they perform, though some are given benefits by a third-party contractor who is their actual employer.
A day rate is usually based on an eight-hour workday.
A worker who is paid a day rate is entitled by law to time-and-a-half for work beyond a 40-hour week.
In the U.S., a company paying a day rate is required to pay overtime if the individual works more than 40 hours a week. The U.S. Department of Labor has cracked down on oil and gas and construction companies that hired workers for day rates but required them to work overtime without additional pay.
An employee who works at a day rate is entitled to an overtime rate of one and a half times the hourly rate, based on the actual number of hours worked.
Setting a Day Rate
MMO Freelance, a web-based company search agency for freelance consultants, suggests that workers who charge a day rate base it upon the rate they were paid at their most recent full-time jobs. From there, it advises adding on the cost that the individual will pay for benefits that are typically available to employees, such as health insurance and 401(k) contributions. The site estimates that this can add between 50% and 150% to a day rate.
In addition, a day rate contractor may charge a premium for jobs that require highly specialized skills. Such contractors often have at least two day rates, one for specialist jobs and a second, lower, rate for more routine work.