The most common freelance mistake is to take the hourly pay of a similar job and charge that. An employee's wage does not include their pension, holiday, sick pay, equipment or the unpaid time you spend finding work. Your rate has to.
Start from the income you need
Decide how much you want to take home each year. Add business costs, such as software, equipment, insurance and accounting. Add tax and social insurance. That is the amount you need to earn from your clients.
Count the hours you can actually bill
You will not bill for 40 hours a week. Time goes on finding clients, sending invoices, learning and rest. Take weeks off for holiday and illness. Many freelancers bill for something like 20 to 30 hours a week. Divide the income you need by the hours you can really bill and you have an hourly rate. Our Freelance Rate Calculator does the sum for you.
Hourly pricing
Good for work whose scope is unclear. It is easy to explain and fair when the job grows. The downside is that clients worry about the total, and you earn less as you get faster. Use it with an estimate and a cap.
Day rates
Common in consulting and creative work. A day rate simplifies planning and makes it easier to say no to a short call that eats the day. Make clear how long a day is and what happens with travel.
Fixed prices and value pricing
A fixed price for a defined project rewards you for working efficiently, and gives the client certainty. The risk is scope creep, so write down exactly what is included and charge for changes. For work with a large benefit to the client, you can price on the value delivered, not on the time taken, though it takes experience.
Review your rates
Raise your prices at least once a year, and with each new client when you are busy. Clients will stay with good work. If nobody ever says it is expensive, it may be too cheap. Show your rate clearly on your quotes and invoices so there is no argument later.
Tools for this guide
More tips
- What to Put on an Invoice: A Checklist
- Ten Ways to Get Paid Faster as a Freelancer or Small Business
- Invoice Numbers: How to Number Your Invoices Sensibly
- Quote, Estimate, Pro Forma, Invoice: What Is the Difference?
- Payment Terms Explained: Net 30, Due on Receipt and Everything Between
- Credit Notes: When to Use One and How to Write It
- How to Chase a Late Payment Without Damaging the Relationship
- Purchase Orders Explained for Small Businesses
- VAT, GST and Sales Tax on Invoices: The Basics
- Keeping Invoice and Receipt Records: What to Keep and for How Long
- Invoicing Clients in Other Countries and Currencies
- Tracking Billable Time So You Never Under-Bill Again
- Your First Invoice: A Calm Guide for New Freelancers
- All tips and guides
These guides are general information to help you get paid and stay organised. They are not legal or tax advice. Rules differ by country and change over time, so check with your tax authority or an adviser.