Career & Legal Advice
Calculation of fees when self-employed
What are you worth? As a self-employed person you’ve probably asked yourself many times. There is no fixed hourly rate or fee for self-employed consultants. It is a question of negotiations between you and your customer.
However, a recommended point of departure for your fee could be 2½-times the average hourly rate for a privately employed engineer, MSc or someone else who graduated at the same time and with the same education could earn.
If you have registered for VAT, you should remember to add VAT, and this should be noted in the contract.
If you need assistance with VAT and taxation, you can book a free meeting with accountant firm Lysehøj as an IDA-member.
Use IDA's fee calculator
IDA has prepared a fee rate calculator so you can calculate what level your fee and thus the hourly rate should be.
Based on your calculation, you can be more confident when pricing your services.
Please note that the calculator is in Danish for the time being.
Why is your hourly rate so high?
When you tell people who are not self-employed how much you earn per hour, perhaps you’ve seen some raised eyebrows. But they probably don’t know that the self-employed themselves have to pay everything that an employee often takes for granted, and therefore you have to include this in the calculation of your fee:
- Holiday pay
- Sickness
- Continuing training and courses
- Pension
- Insurance
- Office equipment and stationary, cleaning, rent etc.
Furthermore, you should take account of expenses for travelling and the time this takes, either in your fee or in your consultancy agreement with your customer.
How to use IDA's payroll tools as a self-employed person
As an IDA member, you have access to a number of salary tools such as IDA's salary statistics and IDA's company statistics, which you can use as a self-employed person to calculate an appropriate salary level for a profile such as yours. We have created a guide for how you can best use IDA's salary tools to determine your fee as a self-employed person.
How do you pay a salary to yourself when you are self-employed?
When you’re an employee, your employer pays your salary, and the salary is paid as “A indkomst” (primary earnings). This means that your employer will already have deducted various taxes. You can therefore spend your net salary as you like. As a self-employed person, however, you are your own employer, and therefore you are also responsible for paying the tax. If you have a sole proprietorship, your “salary” will usually be the profit from your business. You will typically receive fees and payments from your customers as “B indkomst” (income from self-employed activities) and you will therefore have to pay tax and VAT on the amount yourself. When you have paid all the taxes and expenses of your business, you pay your “salary” or profit to yourself.
Contact SKAT (the Danish tax authorities) if you have any queries regarding tax.
To save up or not to save up in your business?
There are many different ways to pay yourself when you have a sole proprietorship. Some choose to pay themselves all the profit every month, so their income fluctuates, while others pay themselves a fixed amount each month.
The amount is usually the average of the business profits over a year. If you choose to save up in your business and only pay a little of the profits to yourself, you should note that money on your business bank account is not covered by your private insurance.
Therefore, it may be an idea to consider taking out online banking insurance.
Important for you as a consultant:
- What insurance cover should you have as a self-employed person
- Are you a fee-based employee?
- Download consultancy and collaboration agreements
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