Simulation for calculating the ADR based on a target salary

A well-calculated Average Daily Rate (ADR) is crucial to ensuring both a satisfactory income and a competitive rate, whether you are a freelancer or a consultant.

The ADR is not set at random: it reflects not only your skills and experience, but also your personal and professional financial needs. We’ll take you step by step through the process of calculating your target salary, taking all the necessary factors into account.

A target salary is the amount you want to earn annually, including :

• Your daily needs,
• Your professional expenses,
• And your unbilled days, such as holidays or training days.

Converting this annual salary into a consistent ADR ensures that your income as a self-employed person is comparable to, or even higher than, that of a salaried job.

This guide will cover the essential steps in determining your target salary, and then we’ll use this information to calculate your ADR. We’ll also provide you with practical tools and real-life examples to illustrate each stage of the process. Whether you’re an experienced freelancer looking to adjust your rates or a newcomer to the world of freelancing, this guide is designed to give you a solid foundation for evaluating and setting your rates.

By following our advice, you’ll be able to set an ADR that not only covers your financial needs, but also positions you competitively in the market. Get ready to optimise your income and better manage your freelance career thanks to a precise and effective method of determining your rates. Compared with a salaried consultant, the ‘portage salarial’ model is perfect for defining a gjr because it takes into account all costs (insurance, accounting, charges, expenses, etc.).

Our simulator for calculating the daily rate based on salary

This simulator calculates the Average Daily Rate (ADR) on the basis of the gross salary or net salary required, as well as the associated benefits and expenses. This simulation tool takes into account the social security contributions applicable in 2024, and is free of charge and requires no registration. If you prefer to simulate the income associated with a given GRT, choose our freelance administration salary simulator.

How our GRT simulator works

Our simulation tool is based on the real cost of a salary, including wage costs, employer contributions and expenses. As freelance activities are relatively precarious, it is possible to add a precariousness premium to the indicated salary. For example, if the salary indicated is for a fixed-term contract, untick the ‘10% insecurity premium included in the salary indicated’ box. In the case of freelance administration, it is also advisable to uncheck this box to take account of the financial reserve.

Our simulator includes the following options:

Effective working time (based on 218 days worked per year)
100% financing of company mutual insurance
Participation in meal vouchers
Mission expenses to be included
The option of adding a 10% insecurity premium to the salary indicated (also corresponding to the financial reserve).

Formula for calculating ADR

ADR = Total annualised cost of target salary / Number of billable days per year

 

Total annualised cost of the target salary:

This salary cost is the sum of the following items:

Desired Net Salary: The amount you wish to receive after deduction of taxes and charges.
Tax and social security charges: The costs associated with tax and social security contributions. In the case of an employee and, for example, freelance administration
Business expenses: Expenses related to your professional activity (office, equipment, software, etc.).
Holidays and unavailability: Include holidays, sick days and unbilled days (canvassing, training).

Number of billable days per year:

This is generally 218 days for a salary based on a fixed day rate and 225 days for a 7-hour day. This result of 218 days takes into account weekends, public holidays, days of leave and days of RTT (in the case of the fixed day rate).

Example of calculation for a salary of €50,000 gross / year

• Desired salary of €50,000 gross per year, i.e. a monthly salary of €4,166.67 gross per month
• Luncheon vouchers = YES
• Mutual insurance = YES
• Expenses taken into account: €1,000
• This salary includes the financial reserve (a kind of precariousness bonus adapted to freelance administration).

The average daily rate determined by the simulator is therefore €412.85 excluding VAT/day (calculated on 29/02/2024). This example is based on an annual calculation and the social security contributions applicable at regie-portage to date, as detailed below:

• 50,000 / year gross salary (i.e. €39,500 net before tax and €1,500 employee contributions)
• 14,530 / year in benefits (€12,000 expenses; €965 health insurance and €1,565 meal vouchers)
• 25,470 / year in charges (€20,250 employer charges; €720 tax and insurance and €4,500 commission).

The turnover to be generated is therefore €90,000 for one year. This is then divided by the number of days worked, i.e. 218 days, to arrive at a daily rate of €412.85.

Note that the rate of employers’ contributions applicable (in this case 20,251 / 50,000 = 40.5%) varies according to the salary required:

• the Fillon reduction applies if the salary is below 1.6 SMIC;
• the general reduction in contributions of 6% applies if the salary is below 2.5 SMIC;
• if salary is below 3.5 SMIC, there is a 1.8% reduction in the family allowance contribution;
• unemployment contributions (4.25%) no longer apply to brackets above 4 SS ceilings (€15,456 in 2024).
• supplementary pension contribution tranche 2 (14.78%) only applies to the salary tranche below 8 SS ceilings.

This example calculation is based on a monthly salary of less than 2.5 SMIC. If the salary is higher, the rate can be as much as 7.8% higher.

Nota bene: To obtain details of the calculation of the TJM, you need to fill in the associated form.

Simulation of the ADR for umbrella employment

For umbrella employment, the GRT is calculated in the same way as above. As a reminder, this mechanism allows you to become a freelancer or self-employed worker while benefiting from :

• The security of a permanent contract: entitlement to unemployment, sickness, pension and even … creditworthiness in
• The eyes of banks and lessors.
• The simplicity of salaried employment: the back office (contracts, invoices, collection, accounts) is handled entirely by the freelance administration company, and starting up and concluding the contract are also simplified.
• Because you negotiate your assignments yourself, you have a great deal of freedom and independence
  and, of course, you get the same level of pay as a self-employed worker (generally 30% more than a traditional employee).

Why choose Régie Portage?

Régie Portage, set up by a former employee, is the benchmark for transparency (FEDEPS zero hidden costs label, activity statement). Portage should be simple, with no surprises and close to the employee to ensure a perfect experience.

Our company is therefore providing this simulator to make it easier for freelancers to calculate their Daily Rate on the basis of the net monthly, gross monthly or gross annual income they want. We wanted to create a simulator that quickly calculates, using fair and objective criteria, the price per day that you can advertise to your clients.

At Régie Portage, we offer a range of services to help freelancers grow.

What is an Average Daily Rate (ADR)?

The Average Daily Rate (ADR) is an essential concept for freelancers, consultants and self-employed people who invoice their services on a daily basis. It represents the average amount invoiced for a day’s work. The ADR enables you to set a rate that is consistent with the market and to ensure that the income generated covers your financial and professional needs. Understanding and calculating your ARR is fundamental for anyone working as a freelancer, as it has a direct impact on your financial viability and competitiveness in the market.

Definition of ADR

The ADR is calculated by taking several factors into account: skill level, experience, market demand, operational costs and personal income targets. It is an indicator that allows freelancers to set a daily rate for their services, ensuring that each day’s work makes an adequate contribution to their annual income.

Factors influencing the ADR

• Skills and experience: The more skills and experience a freelancer has, the higher their ADR can be. Clients are prepared to pay more for high-quality services and specialist expertise.
• Market demand: Demand for certain skills varies according to market trends. For example, a developer specialising in artificial intelligence may charge a higher ADR due to the high demand for these skills.
• Operational costs: Including operational costs such as office expenses, hardware, software and other professional expenses in the calculation of the ADR is crucial to ensure that all costs are covered.
• Income targets: The ADR must allow personal income targets to be met. This includes basic financial needs as well as long-term aspirations such as savings, investments and leisure.

The Average Daily Rate is a fundamental parameter because it is at the heart of commercial discussions between the freelancer and his client(s):

• Financial Management: A well-calculated ADR helps to maintain good financial management, ensuring that all expenses and income targets are covered.
• Market Positioning: Setting an appropriate ADR allows you to position yourself correctly in the market, neither too low to avoid under-valuing, nor too high to remain competitive.
• Negotiations: Having a clear and justified ADR helps in negotiations with the customer. It enables you to justify the cost of your services and defend your rates with confidence.
• Growth forecasts: The ADR can also be used to forecast growth. By adjusting the ADR in line with changes in the market and experience gained, a freelancer can increase his or her income over time.

ADR is an essential tool for any freelancer or consultant. It enables you to structure and plan your income, cover your costs and position yourself effectively in the market, whatever your project. Understanding and calculating your TJM is a crucial step in ensuring the success and longevity of your self-employed activity.

Why calculate your ADR?

As we said earlier, the TJM reflects the price of the service provided by the freelancer and also makes it possible to cover his social security contributions, employers’ contributions and expenses (insurance, retirement, professional expenses, etc.). But as well as providing information about the price, it is also a positioning tool. It is not uncommon for freelancers to be referenced on platforms in order to gain visibility and land assignments.

The daily rate is therefore a positioning tool. Since the daily rate changes over the course of a freelancer’s career, it also reflects their experience. So calculating the daily rate not only gives you a figure in euros, it also gives you a tool for positioning yourself in the market.

The 7 steps to calculating your ADR from a target salary

Calculating your Average Daily Rate (ADR) based on a target salary is an essential step in ensuring the financial viability of your freelance activity. Here’s a step-by-step guide to help you determine your ADR accurately and in line with your objectives.

Step 1. Define your desired net salary

The first step is to determine the annual net salary before tax that you want to receive. This amount should cover your personal needs, including living expenses, savings and leisure activities. For example, suppose you want a net salary before tax of €60,000 a year.

Step 2. Calculate social security contributions and tax

As a freelancer, you are responsible for your social security contributions and taxes, which can represent a significant proportion of your income. These costs vary depending on your status (auto-entrepreneur, EURL, SASU, etc.) and the rate of deduction applicable. For example, if your social security charges and tax represent 80% of your desired net income, this means that you need to add €48,000 (80% of €60,000) to your desired net salary before tax.

Step 3. Estimate business expenses

Your business expenses include all the expenses you need to run your business, such as

Rent for your office or coworking space.
Computer hardware and software.
Communication costs (telephone, internet).
Transport costs.
Professional insurance.
Subscriptions to professional associations.

Let’s assume that your annual business expenses are €10,000.

Step 4. Calculate the total annualised cost of the target salary

The total annualised cost is equal to the sum of the amounts obtained in the first three steps. In our example, this gives :

Total Annual Target Salary = €60,000 + €48,000 + €10,000 = €118,000

Step 5. Determine the number of billable days

The number of billable days in the year is generally 218 days for a day rate executive. As we have seen, this calculation includes deductions for paid holidays, days off work, public holidays and, of course, weekends. However, this figure may vary in certain situations. If you only work 7 hours a day, you end up with 225 days a year. In the case of trainers, you need to take into account the gaps between assignments, and it is not uncommon to limit yourself to 100 billable days a year, or even less for a beginner trainer.

 

Step 6. Calculate your TJM

Finally, divide your total annualised cost of the target salary by the number of billable days to obtain your TJM.

In our example, this gives: TJM = €118,000 / 218 days ≈ €542/day

Step 7. Adjust and re-evaluate regularly

The ADR thus obtained must be compared with the market by questioning both colleagues and client companies.

The rate we have calculated is valid for a full-time position, so it is essential to adapt it, especially when it is a short assignment, since we are entering into the hypothesis of trainers who spend a lot of time prospecting and preparing. It’s often said that the rate for a short assignment is double the rate for a long assignment. After that, if it’s an opportunity alongside a ‘river’ assignment, it’s a different story.

It’s also important to note that your TJM is not fixed. It needs to be adjusted regularly in line with changes in your costs, your financial requirements and market trends. Re-evaluate your ADR at least once a year or when there are significant changes in your professional situation.

Why use a simulator to work out your rate?

The Average Daily Rate enables you to set your rates for your services by targeting your desired net salary. It provides a clear picture of your financial strategy and your negotiating options with your customer. This rate assesses the turnover that can be invoiced per day, month or year.

Often the projected salary of a self-employed person is higher than the remuneration in a company as an employee. To establish an accurate Average Daily Rate, it is advisable to take into account other expenses such as canvassing time, supplies and mission costs (meals, transport).

This simulator will then give you your gross remuneration per day worked, and you can adjust the result according to your benefits and professional expenses (flat-rate meals, transport allowance, salary advance, recognition of job insecurity, etc.).

How do you calculate your Average Daily Rate?

The calculation steps are as follows:

Firstly, the rate can be calculated using tools such as the one above.
Next, you can consult the daily rates on different platforms. For example, for IT developers in Paris, out of 5 people surveyed on certain sites, the daily rate is 431 euros.
And finally, compare the rate with your peers. This will ensure that your daily rate is as accurate as possible.

Another technique for calculating the Average Daily Rate is to start with an employee’s annual salary. You then add 10% to 30% for job insecurity and job hunting. This gives you the freelancer’s total salary, which you then divide into the number of days worked to convert into a daily rate.

Comparison between Daily Rate and Salary

Understanding the differences between the Average Daily Rate (ADR) and the traditional salary is crucial for assessing the advantages and disadvantages of each method of remuneration. This comparison will enable you to make an informed choice based on your professional situation and personal aspirations.

 

1. Nature of remuneration

Salary: Salary is a fixed amount paid regularly (usually monthly) to employees on permanent (permanent contract) or fixed-term (fixed-term contract) contracts. This income generally includes benefits such as holiday pay, health insurance, pension contributions and sometimes bonuses.

ADR: ADR is a variable remuneration charged per day worked. Freelancers and consultants use it to calculate their income on the basis of the days invoiced to their client. Unlike a salary, the TJM does not guarantee a regular income, as it depends on the number of days worked and invoiced.

 

2. Financial advantages and disadvantages

Salary

Advantages :

Financial stability: Salary provides financial stability with predictable income.
Social benefits: Employees enjoy a range of social benefits (health insurance, paid leave, pension contributions).
Job security: Employees are protected by employment regulations (notice periods, redundancy payments).

Disadvantages :

Limited Growth: Salary increases can be limited and depend on company policies.
Less flexibility: Less freedom to choose your assignments and manage your schedule.

ADR

Advantages :
High earning potential: Freelancers can potentially earn more by adjusting their GWA and choosing high value-added assignments.
Flexibility: Freedom to choose clients, assignments and schedule.
Income diversification: You can work on several projects simultaneously, diversifying your sources of income.
Disadvantages :
Income uncertainty: Income can vary from month to month depending on the number of days invoiced.
Lack of social benefits: self-employed workers have to manage their own insurance, contributions and holidays without pay.

 

3. Management of charges and taxes

Salary: Employees generally have social security contributions and taxes deducted directly from their gross salary. The company takes care of the administrative procedures and tax returns, simplifying the financial management of employees.

TJM: Freelancers have to manage their own employer/employee and tax charges. They also have to set aside provisions to pay taxes and contributions. Administrative and accounting management is therefore more complex and may require the help of an accountant.

4. Professional freedom and career development

Salary

• Benefits
  Career Plan: Employees can benefit from career plans, internal training, and promotions within the company.
  Network and Resources: Access to company resources and a structured professional network.
• Disadvantages
  Hierarchy and constraints: Less freedom in professional decisions and a certain hierarchical constraint.

ADR

• Advantages :
  Autonomy: Freelancers have complete autonomy in managing their careers.
  Skills development: Opportunity to diversify skills by working on different projects.
• Disadvantages :
  Professional solitude: The lack of a structured framework can sometimes lead to a feeling of isolation.
  Total responsibility: Freelancers are responsible for all aspects of their business, including prospecting, negotiating contracts and administrative management.

5. Risks and security

Salary: Employees enjoy a degree of job security and social protection. Financial risks are minimised by regular pay and benefits.

ADR: Freelancers face greater financial uncertainty and the absence of integrated social security. They need to be proactive in managing periods without assignments and in building up security savings.

Choosing between a salary and an ADR depends on your risk tolerance, your need for financial stability and your desire for autonomy. A salary offers security and stability, while a TJM offers flexibility and higher income potential, at the cost of more complex financial management. Each method of remuneration has its own advantages and disadvantages, and the choice will depend on your personal and professional priorities.

Additional tools and resources

To help you optimise the management of your freelance activity and refine the calculation of your TJM, here is a selection of essential tools and resources:

1. Salary barometer

As we have seen, the level of ADR is directly proportional to the level of salaries. In the same way as salaries, ADR therefore depends on skills, experience, location, availability and also … negotiation.

To help you decide what to pay, we recommend that you consult the salary barometer. Various sites offer information on this subject, but we have our favourites: Michael Page and Hays come out on top, but if you find something better, let us know!

2. Barometer of ADR

Keeping up to date with market trends is crucial to adjusting your MRR and staying competitive. Subscribe to newsletters, follow specialist blogs and take part in discussion forums to talk to other freelancers.

Did you know that there are different APR barometers? Yes, they are imperfect, and of course we prefer a good calculation based on the salary barometers, which are often better informed and more up-to-date, but they do exist. If you’re tempted, we’d recommend Malt or La crème de la crème.

3. Networking groups

Joining networking groups can help you develop your professional network, find new assignment opportunities and exchange tips on managing your TJM. Here are a few suggestions:

• LinkedIn Groups: Search for groups specific to your area of expertise and take an active part in discussions.
• Meetup: Take part in local or online events to meet other freelancers and professionals.

By using these tools and resources, you will not only be able to refine the calculation of your ADR but also improve the overall management of your freelance activity, ensuring that you remain competitive and profitable in the marketplace.