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Freelancer's Guide: Hourly Rate or Fixed Price?

Althea is a creative writer who enjoys creating informative pieces that aid in decision-making and problem-solving.

As a freelancer, should you charge an hourly rate or fixed price?

As a freelancer, should you charge an hourly rate or fixed price?

Let's talk about a subject that most freelancers find difficult: the pricing scheme. There's always this feeling of dread that accompanies the quintessential question, "How should I charge for my work?"

It can be a confusing time when you're choosing a pricing scheme that would give you a fair and profitable value for your freelance work. If you earn too low, you feel like you're cheating yourself and the value of your work. Meanwhile, if you charge too high, you risk losing your client and source of income. But even with the looming reality of this risk, what should always be your focus is finding a good middle ground between you and your client.

The ideal situation is having the best pricing scheme where you will be able to earn decent pay and yet still have the client thinking he or she is getting value-for-money. So it's important to study the pricing schemes available to ensure that your work is fairly compensated.

Hourly or Fixed?

As a freelancer, there are two charging schemes you can explore: hourly rate or fixed pricing. While each has its own advocates, let's lay down the pros and cons of both schemes so that you can make an informed decision.

Is charging by the hour the best option for you?

Is charging by the hour the best option for you?

Hourly Rate

Charging an hourly rate basically means that for each hour that you spend working on a project will charge the client a certain amount, say, $25 per hour.

A good thing about hourly charging is that you're sure to get paid for each hour that you spend on a project. In the end, you'll feel that your time was more or less compensated, unless you charged way too low. Also, if you get paid by the hour, you get to exercise your judgement on your work pace.

However, one drawback in charging by the hour is that some clients may be easily intimidated with hourly rates since they can't immediately see the total amount they have to pay. At certain situations, it also limits your maximum earning potential per day to the number of hours you work. It's also important to discuss and agree with the client on overtime charges, should you find yourself needing more hours per day than the original agreement.

In the end, it's most important that you understand your own work pace and quality. If you think a certain project will take you longer to complete and you’re anticipating revisions from the client, then hourly might be a good option. If, however, you find that the project would take you fewer hours but you'd like to be fairly compensated for the quality of your work, then fixed pricing might be the better choice.

Should you consider a fixed price instead?

Should you consider a fixed price instead?

Fixed Pricing

Fixed pricing is when you agree on a price beforehand with the client covering the entire project. Basically, no matter how many hours you spend on completing an assignment, whether you take longer or shorter, you'll get the agreed upon pay.

For freelancers, this scheme is highly desirable because the earning potential per day is higher. You learn to work fast and efficiently without sacrificing quality because you don't feel the looming hourly pressure. You're more relaxed, hence more productive.

But, like hourly pricing, the fixed payment scheme has its own challenges. For example, you underestimated the amount of work to be done and had to do overtime. If the client is not flexible on the terms, then you'll only get the amount promised and a thank you for the extra hours. Another scenario is if you didn't consider the probable changes in scope that might lead to more work.

Fixed pricing needs an extra amount of analysis based on the type of project and the possible work ahead. Sometimes freelancers tend to over simplify their estimates just to bag the job without thinking ahead. Don’t fall into that trap. As they say, think before you leap.

Which is the better choice, hourly or fixed pricing?

Which is the better choice, hourly or fixed pricing?

Verdict

The examples and scenarios presented always leaves the decision point in pricing to your ability to estimate your own output. In the end, you don't need to limit yourself to just one pricing scheme. If you're just beginning your freelancing journey, try exploring and employing a healthy mix of different pricing schemes.

Instead of focusing on which scheme will make more money with less work time, try to look at your work efficiency. Examine the pace of your work and the quality of your output based on feedback. In the end, this will help you judge when to charge hourly or fixed in order to ensure that you get the value of your work and your clients, in turn, are satisfied.

What's Your Pick?

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2020 Althea del Barrio

Comments

Althea del Barrio (author) from Manila, Philippines on October 03, 2020:

Hi, Carolyn! Thank you for your comment!

You're right, it's best to be handled on a case by case basis. I totally understand your difficulty in estimating the timeline of a project - been through the same thing. I found that having a record of my past work and detailing the length of time it took, what pricing scheme I employed, etc. helped me cut down the time in estimating for proposals - especially if it's for a similar project. It's not entirely foolproof, but it's a good thing to have that historical reference.

Carolyn Fields from South Dakota, USA on October 02, 2020:

My difficulty seems to be estimating the amount of time it will take to finish a project. I usually (almost always) underestimate the amount of time required, which means I'm doing a lot of work for free. On the other hand, I feel "pushed" when working hourly, because I don't want to seem like I'm padding my hours. So I really, really focus and rush through the work when doing it hourly. Not necessarily the best for either me or the client.

You're right - this is a difficult decision. I think that it's best handled on a case by case basis.

Thank you for this thought-provoking article!