One of the most exciting yet intimidating topics in a new freelancer’s journey is the topic of money. We want our clients to feel like they’re getting a great deal (or at least equal value to what they are paying), but we also don’t want to short-change ourselves. After all, we often end up paying ⅓ of what we bring in for taxes, plus healthcare costs and business expenses — we have a vested interest in the highest bottom line.
I hope you find this guide helpful in understanding your options for freelancer payment schedules, plus the factors to consider when pricing your services.
Freelance Payment Schedules
Below I’ve covered the three primary pricing models most freelancers use to charge for their services. I recommend trying each out as they make sense in your business and seeing which works best for you.
Freelance Hourly Rate
You will hear some freelancers express that charging hourly rates, in the long run, is the quickest way to short-change yourself. As you gain more experience and improve your systems, you may end up punishing yourself for working faster.
Lower pay, for the same work, with more skill — not our goal here!
But there are times, especially in the beginning, when it makes sense.
Pricing your services hourly may be advantageous if you are unsure how long a project will take you or if the scope of the project is nebulous. If your deliverables are frequently changing for a particular client would be an example of another instance where a set hourly, or even day rate, may make the most sense. This protects you from times when you’re at risk of underestimating how long a project will take.
If you are contracting through an agency, you will likely get paid by the hour. There is no shortage of work when it comes to agencies, at least in the digital marketing arena, which can be helpful in your early days when looking for consistent contract work.
At this point you may be wondering, well that’s great Becca but, exactly how much should I charge per hour? Freelance marketing hourly rates can range anywhere from $15 an hour to $400 depending on a number of factors.
How much you can charge per hour depends on factors like your experience, skillset, evidence of previous successes, and your portfolio. I go into more details about that below.
Project-based pricing establishes a set fee by the project as an alternative to trading your time for money.
Charging by the project is a great way for your clients to know exactly what they are getting and for what final cost. If you are concerned about the project’s scope expanding, you could negotiate an hourly rate in your quote if the work goes beyond what you initially agreed upon.
Retainers are a great way to keep business consistent over a set period of time — monthly, quarterly, or longer.
A retainer fee is a fixed price paid in advance for your services. This fee can be based on the entire project, multiple projects, or estimated hours over the established time period.
You can calculate your retainer rate using your estimated time commitment multiplied by your ideal hourly rate. Your ideal hourly rate is not necessarily something you need to share with your client, rather it’s used for your own calculation purposes.
Make sure your contract explicitly outlines the scope of work involved. This will protect you from doing more work than you’re being paid for.
I recommend tracking your time for your own purposes, even on retainers or project pricing, to improve your sense of how long tasks will typically take you, over time.
To help you determine your freelance rates, there are a number of variables you need to take into account.
Skillset. The more unique your skillset, difficult the skill, more in demand, least overpopulated field — the more you can charge. For instance, there may be more social media managers than search-engine optimization (SEO) specialists due to the more technical nature of SEO. The easier barrier to entry means more people offer social media marketing. Higher saturation in the field means more people will be willing to price their services lower than you, driving the amount you can charge down. Keep this in mind when choosing a niche but don’t let it completely dictate your work. Lean into what you’re good at and you will almost certainly make more than if you had strictly optimized for what you thought you could make the most money at.
Education and Training. The more training you have, the easier it is to brag about yourself. Standard college degrees themselves may be decreasing in value. This will depend on the service you offer, obviously, as I wouldn’t trust my finances to an accountant without a degree. If you’re a writer, I recommend reading The Copywriter Club’s article discussing if you need a degree to be a copywriter and another on how much copywriters get paid.
Experience and aptitude. This goes without saying, but the more experience you have, the better your skills likely are. But this isn’t always true — try saying that to the 8-year-old influencer blogger worth $20 million. Can’t really say he has 10 years of experience, now can he? This is where aptitude comes in though. It takes a balance and ultimately it’s your proof of results that will speak for themselves.
Portfolio, Reviews, Results. What you have to show for your work matters more than just about any other factor. The more you can back up your work with testimonials, reviews, proof of results, or a portfolio demonstrating your skills, the more you can charge.
Location. This one is a little more difficult to talk about. I firmly believe that no matter where you live you should charge for the value of the work you do. But for individuals in lower-income countries, the lower cost of living means they often offer work at a lower cost. Vicoland discusses more on how to avoid the “race to the bottom” in freelancer rates if that’s of interest to you.
There are a number of additional expenses you’ll need to consider when factoring your rates and I just want to touch on them briefly.
Self-employment tax is an additional 15% that you’ll have to pay which includes Social Security and Medicare taxes. The more deductions you have, the less you’ll have to pay. But I always recommend setting aside 25-33% of what you bring in to pay during tax time. To avoid getting sacked with a giant tax bill at once, you can file your taxes quarterly.
Here is a free tool that will help you estimate how much you’ll owe come tax time. It allows you to put in your state and estimates federal, state, social security, and medicare taxes for you based on how much income you expect to bring in.
Don’t forget about factoring in the cost of healthcare, if you are not already on someone else’s plan.
There are a lot of things to consider when determining your rates and how best to charge what you’re worth. Unfortunately, you may have to start low in the beginning if you don’t already have a portfolio or testimonials. But once you can provide demonstrable proof of your skills and results of your work, start raising those rates!
Best of luck in your freelance journey. I hope you’ve found this helpful.
Becca Peterson is a freelance content marketing strategist from Iowa. Her work increases website traffic with relevant, helpful information that translates to trust and, ultimately sales for her clients. She works across industries including digital marketing, integrative health & wellness, parenting, and education. Connect with her on LinkedIn at https://www.linkedin.com/in/content-strategist-becca-peterson/