Day rate is a generic financial term that can be used in a number of industries. It generally refers to a fee that is charged on a daily basis. Such fees usually pertain to the costs of labor or services. Examples of services that are commonly rendered based on day rates include lodging and equipment rental. A self-employed person, such as a photographer or model, may also have a day rate.
There are several increments that can be used to set prices for labor, such as hourly and per diem. For example, in the fishing industry it is common for workers to be paid per diem, while it is more likely that fast food workers will earn hourly wages. A day rate, however, which can be considered a fixed cost because it is a stable amount that is charged on a periodic basis, is often used by consultants and freelancers.
A day rate can be an advantage or a disadvantage for the client, depending on the circumstances. When a professional, such as a consultant or photographer, charges a day rate, it may be calculated by taking an hourly wage and multiplying it by eight hours, which is often regarded as a standard work day. If the service is rendered in a shorter period, then the client can be viewed as the disadvantaged party because paying an hourly rate would likely have resulted in lower costs. This disadvantage may be outweighed, however, by the benefit of being able to budget the needed service well in advance since it is already known what the cost will be.
Individuals often price their services this way as a means of convenience and incentive. If fees are set in a different manner, a client may find herself with itemized costs, such as those for labor, business expenses, and perhaps materials. A day rate is commonly, but not always, all-inclusive, meaning that there will not be any other variable costs.
In some instances, there may be an agreement in place that defines the term “day” as a certain number of hours. Anything beyond the specified number of hours may need to be addressed on another day or it may be subject to additional compensation. When this term is not defined, however, a self-employed individual may work more for less money than he would if he charged for his services on a different basis. It is still possible to benefit from using the day rate, however, due to the volume of work that it can attract.