Builder day rate or fixed price: choosing the right way to charge

The going day rate in your area is not necessarily the rate your business needs to charge. Once you know your required rate, decide whether the job is best priced by the hour, by the day, as a fixed price or with separate terms for the uncertain work.

Use time-based pricing where the scope or duration cannot be defined reliably in advance and both sides can keep clear records. Use a fixed price where the drawings, specification, access and programme are clear enough for you to price the work and accept the stated delivery risk. This guide explains what each basis should include, how to set the terms and when to switch approach.

For current market comparisons, use the UK builder day-rate and labour-rate benchmarks. To work out the underlying rate your business needs to recover, use the charge-out-rate calculation guide and calculator.

Day rate, hourly rate or fixed price?

Neither basis removes risk. Use the one that matches how clearly the scope can be defined, and state who carries the cost if the scope or duration changes.

Start with the right inputs

Before choosing the pricing basis, separate three things:

• Market benchmark: what comparable builders and trades are charging in the area.
• Required charge-out rate: the rate needed to recover labour cost, non-billable time, overhead and profit.
• Project price: the amount offered for the stated scope after allowing for quantities, productivity, preliminaries, materials, plant, subcontractors, programme and priced risk.

A market average does not tell you whether your own rate recovers the business costs. A charge-out rate does not price a defined building package by itself. It gives you a labour input that still has to be used properly in the quote.

What should a builder’s day rate include?

A day rate is only clear when the working day and the items included in the rate are defined. Confirm the points that matter before work starts.

Working time

• the expected site hours;
• whether breaks are included;
• when travel or collection time is chargeable;
• the overtime, evening or weekend basis;
• any half-day or minimum attendance charge.

People and supervision

• which trades or grades are covered;
• whether the rate is for one person or a gang;
• whether supervision is included or charged separately;
• how apprentices, labourers and subcontractors will be recorded.

Tools, plant and materials

State whether the day rate includes small tools and ordinary consumables. List plant hire, specialist equipment, materials, delivery, waste, parking and long-distance travel separately unless they are expressly included.

Overhead, profit and VAT

Build the required overhead and profit recovery into your selling rates. In the client-facing terms, state any separately chargeable additions for materials, plant or subcontractors and whether the figures include VAT. Where a formal contract sets daywork percentage additions, follow those rules.

Most work on existing houses and flats is standard-rated for VAT, but qualifying new-build, conversion, renovation and other work can be treated differently. Check the project against current HMRC guidance for builders rather than applying one VAT assumption to every job.

When time-based pricing fits

A time-based basis can make sense where the work cannot be measured properly before it starts. Examples include:

• opening up to investigate concealed conditions;
• short reactive repairs;
• minor instructed variations;
• testing, cleaning or making safe after an unexpected event;
• limited work where quantities depend on what is uncovered.

Keep the uncertain part narrow. Once the remaining work can be defined, notify the client or contract administrator and agree how it will be valued before continuing where the contract allows. That may be a fixed quotation, measured valuation or continued daywork under an agreed limit.

A quoted day rate is not the same as contract daywork

For small direct works, a builder and client may simply agree a daily labour rate and the costs that sit outside it. Under a formal building contract, “daywork” can be a specific method of valuing additional or substituted work.

RICS describes daywork as a last-resort valuation where work cannot properly be valued by measurement. Its guidance calls for records of the labour, plant and materials used, submitted for verification, and says significant or prolonged work should normally be measurable or priced on another basis. The contract and its valuation rules take priority.

See RICS: Valuing change for the formal context. This guide is practical pricing guidance, not a substitute for the daywork provisions in the contract being used.

When fixed price is the better route

Fixed price is usually the cleaner basis when the builder has enough information to measure the work and state what is included. That normally means:

• drawings and specification are available;
• the scope and quantities can be checked;
• access, working hours and logistics are understood;
• client-supplied items and design responsibilities are identified;
• programme assumptions are stated;
• exclusions, provisional items and variation rules are written down.

A fixed price can include a reasonable allowance for risks the builder is accepting. Where the scope itself is unknown, state the assumption or use a provisional allowance, measured valuation or separate instruction rather than presenting the unknown work as fully defined.

A quotation is an offer to carry out the stated scope for the stated price, subject to its terms. An estimate is an indication rather than a firm offer. Make the scope, assumptions, allowances and circumstances in which the price may change clear in writing. Citizens Advice gives a useful consumer summary in its guidance on getting building work done.

Use a hybrid basis carefully

A hybrid can work where most of the package is defined but one part genuinely is not. For example:

• fixed price for the measured installation;
• daywork for opening up and tracing an existing defect;
• an agreed schedule for labour, plant and materials;
• an agreed review and approval threshold before further uncertain work continues, stating whether it is a notification point or a hard maximum.

Show the fixed-price work and the separately valued work as distinct sections of the quotation, with the rates, authorisation process and any review threshold stated for the latter.

How to quote and record daywork

Use records that identify the instruction, labour hours, plant, materials and work completed. Check the contract for any required form, signature and submission deadline.

Before starting

• identify the work or instruction;
• state the hourly or daily labour rates by trade or grade;
• set the working-day and overtime rules;
• state what is included in the labour rate, what will be charged separately, any contractually agreed additions and the VAT basis;
• agree who can authorise the work;
• set a review point where the duration is uncertain.

During the work

• record names, trades and hours;
• record plant and equipment used;
• record materials and delivery evidence;
• describe the work completed, not just “daywork”;
• note delays, access restrictions or instructions affecting time;
• submit records for signature or verification within the period required by the contract, noting that verification of resources does not necessarily confirm entitlement or final value.

On the account

• reference the instruction and dates;
• attach the agreed records;
• show labour, plant, materials and mark-ups separately;
• show VAT treatment clearly;
• avoid charging again for resources already recovered elsewhere in the price.

Worked example: opening up followed by defined repairs

For illustration only, assume the charge-out-rate calculation gives a labour selling rate of £320 per day excluding VAT. The client has a recurring leak, but the source is concealed and the repair scope cannot be measured yet.

1. Investigation: agree up to two days on a recorded daywork basis, with the £320 labour rate, stated working hours and separate treatment for access equipment and materials.
2. Review point: provide the findings and agree whether further investigation is needed before exceeding the initial limit.
3. Defined repair: once the opening-up work establishes the quantities and method, issue a fixed quotation for the repair and making good.
4. Changes: keep anything outside that repair scope subject to written instruction and separate valuation.

This keeps the investigation on recorded daywork and prices the defined repair separately. The client can approve further investigation before the initial limit is exceeded.

Check the terms before the quote goes out

• the scope covered by each pricing basis;
• the working hours and labour grades;
• separately charged materials, plant and other costs;
• assumptions, exclusions and allowances;
• who may instruct additional work;
• the record and approval process;
• the VAT basis.

For the wider process, read how to price a building job properly and how to keep assumptions and exclusions clear.

Frequently asked questions

What is included in a builder’s day rate?

Only what the written terms say. Define the working hours, labour or gang covered, supervision, small tools, travel and any minimum charge. Build overhead and profit recovery into the selling rate, then state any separately charged materials, plant, waste or subcontractor costs and the VAT basis.

Is a builder’s day rate always based on eight hours?

No. There is no universal number of hours in a builder’s day rate. State the site hours, treatment of breaks and travel, and the point at which overtime applies.

Are materials included in a day rate?

Usually not unless the agreement says otherwise. List materials, delivery, handling, waste and any mark-up clearly so the client knows how the final charge will be built up.

Should a builder use day rate or fixed price?

Use a time-based rate for narrow work that cannot yet be measured reliably. Use fixed price when the scope, quantities, access and programme can be defined well enough to price the delivery risk. A hybrid can separate a defined package from one controlled unknown.

How should variations be handled?

Follow the contract. For smaller direct works, record the changed scope, price or valuation basis and obtain agreement before proceeding where possible. Under formal contracts, use the stated instruction, notice and valuation procedure.

Does VAT go on top of a builder’s day rate?

If the builder is VAT-registered, the correct VAT treatment must be applied and shown clearly. Most work on existing houses and flats is standard-rated, but qualifying work can be reduced-rated or zero-rated. Check the project rather than assuming every building job is treated the same.

Where do I calculate the rate my business needs?

Use the charge-out-rate guide for the method and the charge-out-rate calculator to run the figures. Then compare the result with the UK labour-rate benchmarks.

Pricing and contract wording should match the actual job and agreement. Formal contract provisions take priority over general guidance.