CNZ’s recomended rates
Full article: Creative NZ needs to step up: $25 an hour is a joke for contractors, Dominion Post, Aug 12 2021 https://www.stuff.co.nz/entertainment/arts/300380322/creative-nz-needs-to-step-up-25-an-hour-is-a-joke-for-contractors.
Here’s how I established the contract rates for my opinion piece in the Dominion Post. To submit on Creative New Zealand’s draft remuneration policy go to https://www.creativenz.govt.nz/news/seeking-feedback-on-remuneration-policy-for-artists-and-arts-practitioners:
To work the rates out I had to start with a hypothetical scenario, so I chose the best case example for you, our young creative. I started with the assumption that you’d got a contract gig providing 37.5 hour a week work for 48 weeks of a year and, that you were taking your four weeks holiday, earning a lovely $45,000 a year. Yes, I know how unlikely that is, but we’ll deal with that question next.
First, put 8% for holiday pay aside from your contract rate of $25 per hour to cover your four weeks of holiday. That gives us $23.15 per hour. Now, let’s save to cover your own sick days. From the 24th of July 2021 we’ve been entitled to 10 days sick leave per annum at 3.85% of the year – 93 cents at $25 an hour – bringing you down to $22.22. Next you need to put aside the money for your ACC Levy. As a full time worker, earning $45,000 a year your levy is $921.15 or 2.05%. This equals 50 cents at $25 ph, dropping us down to $21.72. Finally, don’t forgot to pay yourself for your statutory holidays. From next year there will be 12 days of holiday or 4.62 percent – $1.10 – bringing our gross, or in-the-hand-before-tax rate down to $20.62, a mere 62 cents above minimum wage. Given our current rate of minimum wage increases, your contract income may fall under the minimum wage threshold by April 2022.
|Per hour rate||$25.00|
|Leave and ACC deductions:|
|Holiday pay @8%||$1.85|
|Sick leave 10 days pa||$0.93|
|Statutory Holidays, 12 days pa||$1.10|
|Total hourly rate||$20.62|
Now let’s look at the reality of the full time work assumption and consider how many hours you’re actually going to work for pay. There are few creative practitioner roles that offer 37.5 hours per week 48 weeks of the year. Generally you are stitching together an annual income from a variety of projects or selling a percentage of the total art you make, leaving hours of work that are not paid. Your unpaid hours are called non-chargeable hours and include all your admin to do the paid work – proposals, auditions, and grant applications, invoicing, marketing, networking, and travel – as well as the things you do to contribute to the wider field of practice like professional peer support and your ongoing skill maintenance. Given the success of the paid work relies on the contractor undertaking the unpaid work it should be calculated for across our year. Every art form is different which makes it tricky to estimate, so I’m going to borrow from the ANZ Bank’s explainer on calculating a contract rate. ANZ suggests factoring for 25% of your time at work as non chargeable hours. If you don’t adjust your hourly rate up your $45,000 a year is now down to $33,750.
Our final thing to think about is our overheads. Above and beyond project costs that can be funded there are the ongoing costs of maintaining a practice. For a visual artist that might be studio rent, materials and tools, power, website hosting and so forth. For a dancer that might be gym memberships and class costs, clothing, travel, massages and other ongoing medical costs that ACC doesn’t cover. Each field has a set of overheads. According to the Colmar Brunton research the median total for work related expenses is $6,000 and the early career total tends to sit around $3,000. Given we are discussing the recommended starting rate let’s deduct the $3,000, which brings our annual income down to $30,750.
If we pro rata $30,750 across the year we end up with an effective hourly rate for full time work of $15.77. With these calculations it looks like Creative New Zealand is setting the income aspiration for our emerging creatives miserably low, in fact, below the minimum wage.
Now let’s look at what happens when we calculate in the other direction and work out what Creative New Zealand should be recommending as a baseline contract rate for early career creatives working gig to gig. To do this I’m going to follow the ANZ Bank’s explainer, adjusting it for the new sick leave allowances and Matariki, our newest public holiday. Remember, we’re aspiring to a $45,000 a year income as a skilled early career professional.
First we start by working out how many hours you can work per year. We’re going to keep treating it like a healthy practice where you don’t overwork and burn out and put forward a working week of 37.5 hours per week, or 8 hours a day 5 days a week with a half hour unpaid lunch break each day – 1950 hours over a year. Then we deduct your leave.
|Total working hours in the year||1,950|
|20 days annual leave||150|
|12 statutory holidays per year||90|
|10 sick days||75|
|Non chargeable hours (25% of time at work)||408.75|
|Total chargeable hours||1,226.25|
Now we add our ACC Levy and our overheads to our aspirational annual rate, bringing it up to $48,921.15. Then we divide it by our chargeable hours of 1226.25. This gives us an hourly rate of $39.90 – what, at a minimum, Creative New Zealand should be recommending.
Finally, let’s do an extension activity. ANZ wrote its explainer for people seeking to grow a business over the long term, so they recommend adding a profit margin of 15% on to reinvest in the business to allow for this expansion. While it may feel strange to many of us to think of our arts practice as a business, we do want our practice to be able to grow, so we can explore new creative ground, take risks, and do bigger and more ambitious things. According to Creative NZ, so do they. Therefore, let’s put that that 15% or $7338.17 on to our annual income – bringing your needed income up to $56,259.32 or $45.88 per hour.
These calculations are intended as a basic demonstration of the realities of what goes into a contract rate and may not include everything that you need to factor in to reach your contract rate. Talk to people working in your field and, if you can afford it, your accountant, to get your calculations as accurate as possible.