How Freelancers Can Determine the Right Hourly Billing Rate
Written by Nicola Brown
Monday, September 24th, 2018
You tend to hear a familiar refrain in freelancer communities across the country: what should I be charging for my work?
This is one of the most difficult questions to answer whether you're a writer, graphic designer, software developer or accountant. It's also a very personal question, as there are no gold standards in the world of freelancing, and any two people may be making wildly different hourly rates even for similar work.
Here are some key strategies I've used in determining the right hourly rate as a freelancer.
Do Your Research to Find a Starting Point
I use Robert Half's Canadian salary guide. You can use their salary calculator to enter your area of specialization, location, job category and title, and even number of years experience to hone in on the most accurate average salary.
I also research hourly rates on Indeed's salary search engine. Enter a job title to find out the average hourly rate in Canada, and a list of individual companies' hourly rates for that position. You can narrow your search by location, too.
Compare Your Hourly Rate to an Equivalent Full-Time Salary
Once you know what the average full-time salary is for your position, you can break it down to come up with an equivalent hourly figure. In reality, many hourly rates don't compare adequately to what a person would be making if they worked in that role full-time. I believe this is an area in which freelancers still need to advocate strongly for higher figures.
- I start by dividing that salary number into the average number of days I'd work or expect to work per year if I kept full-time hours. I subtract vacation days, statutory holidays and sick leave allowance before dividing. Freelancers don't get paid for any of this, so an hourly rate needs to cover this time spent not working.
- Then I consider the cost of benefits and overhead I'm saving the company as a freelancer. These are costs that I have to cover myself, like health insurance and buying a laptop. I add 15-20% to the hourly rate for this.
- I add a further 15-20% for the precarious nature of freelance work. This is intended to reflect the lack of job security, and will help me stay afloat for a short time if a project gets terminated suddenly.
This is how I determine a ballpark hourly rate I present to clients.
Join Online Freelancer Communities Relevant to Your Discipline
Determining the right hourly rate is an ongoing process. Once you have a few clients, it becomes easier to compare new rates with those of your existing clients, but I always like to source information from the broader community regularly. This helps me keep up with trends, gain further knowledge, and find out how I can go about increasing my rates effectively over time.
I belong to a few Facebook groups dedicated to freelancers in my specific industry. These groups regularly share questions, comments and advice when it comes to compensation and hourly rates.
How to Negotiate a Rate Successfully with a New Client
As long as your hourly rate isn't way out of line and can be backed up with numbers, you should be able to negotiate a rate that accurately reflects your value and level of experience.
Clear, straightforward communication is always the best policy here. They're your new potential client after all, so you'll want to ensure you're on the same page right off the bat.
I always allow room for flexibility in the negotiation by asking for a rate slightly higher than I'm willing to accept. I also inject small reminders of the unique value I bring to the team, and look for ways to demonstrate a proactive approach, like commenting or offering initial ideas on a new project before we've struck a deal.
It's important to be professional, of course, but remember to keep it personal. A new client isn't just hiring your work, they're hiring you. Never underestimate the importance of the human relationship beyond the numbers.
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