How do freelancers get paid: by the hour or by the project?
Being self-employed, your salary doesn't quite look and function the same as it did when you were working for someone else. As an employee, you had a fairly dependable income, regardless of the amount of work you did. But that security vanishes when you become a freelancer.
The biggest difference is that you're in full control of your income.
And for many freelancers, that's a scary thought!
We're pulling back the veil on how freelancers get paid and my own best practices when it comes to setting your prices.
How Do Freelancers Get Paid: Flat Fee or Hourly Rate?
Some freelancers charge by the hour. Others charge a flat rate. Which one should you choose?
There aren't any hard-and-fast rules that favors one over the other. In fact, some freelancers opt to charge some clients by the hour and others on a project by project basis.
Not all projects are created equally, and you need to learn how to identify which type of pay scale makes the most sense to the projects you land.
For example, if you have a long-term project with multiple roles and responsibilities, it can seem almost impossible to break down your job into individual "projects". Or, when project goals are fuzzy and there's no distinct timeline, charging hourly makes sense.
Of course, charging per project has its perks. It can help you maximize your productivity since you're getting paid the same rate no matter how long it takes you. It gives the client a specific rate to anticipate with no surprises. And when you're charging different rates for different clients, agreeing on a set fee can take away the hassle of keeping up with your hours.
Let's look at the pros and cons of each so you can decide which makes the most sense for you:
Freelancer Pay By the Hour
If you're entering the freelance world from the traditional workforce, chances are you're tempted to opt for an hourly rate. You're still learning the ropes, not sure how long certain projects might take, and want to make sure you're paid for your time.
It sounds logical, but in most cases, I highly discourage you from taking this route.
When you charge by the hour, it gives the appearance that you value your own time more than you do the client's time. It also doesn't provide much transparency into your work (because how will they know how much time you actually spent on an assignment?).
I recently worked with a branding client who shared a story about her outsourced CMO. The monthly fee she paid included eight hours of work, but she felt like the CMO was long winded during meetings and quickly ate up the promised eight hours on work that should have taken half the time.
Though she felt the CMO did offer valuable advice, she was more concerned about how that time was used.
This is a common issue for pay-by-the-hour projects. Though you may be doing all the right things, your clients become more concerned with how that time is used. They're paying for it, after all, and want to feel like they're getting their money's worth.
If you want to make a certain hourly rate, it's better for you and your client when you can estimate how long projects will take you. This way, there's a concrete agreement from the start: clients know exactly what they're paying and you have incentive to work studiously to finish the project on time.
Freelancer Pay by the Project
In my experience, I find it more desirable to charge per project for several reasons:
First, I'm terrible at tracking my time. I glance at the clock occasionally, but I have to ballpark my guess on how much time I spend on projects. If I had to track every minute I work on a blog post, I'd go crazy.
Second, the client isn't paying me for my time. They're paying me to do a specific task. It doesn't matter to them how long it takes, provided I complete the work as promised and deliver it to them by or before the deadline.
Third, when you charge a flat rate, your income potential increases. Charging by the hour means you're pay is limited to the hours you work. But flat rates add a little more flexibility. You might finish projects early, which leaves you to take on more work or work fewer hours.
Also, having a set rate makes me look more professional and in control of my work. Being able to estimate project costs only comes through experience, which adds to my credibility.
I get that some projects aren't suited for flat rates. If you're building out an entire website whose scope is likely to change midway through the project, you're probably better off charging by the hour.
But as you grow into your freelance career and start recognizing how long projects take and how much you need to make from your work, you may find that charging a flat rate is the most effective way to grow your income.
How to Get Paid as a Freelancer: Best Practice
There's no right or wrong way to determine how to get paid as a freelancer. It's largely a matter of how you prefer to work. In fact, you may find that you need the best of both worlds to remain profitable while also satisfying your clients.
Worst case scenario, you try one method and change it later if it doesn't work for you. As long as you commit to your clients and find an agreeable method that suits you both, you'll be too busy counting your money to give it much thought.
How do you bill your clients as a freelancer? Drop a comment below to share your thoughts.