How to Determine Your Hourly Rate as a Freelancer

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What’s not to like about freelancing? You get to do something you are passionate about, there’s tons of flexibility regarding how you get to manage your own time and work, and most importantly – no boss!  But, as with most things in this world, there are two sides of the coin. Undoubtedly, the greatest attraction of a freelancing career is the freedom it offers. Ironically though, that freedom has a trade-off: reduced financial security. If you want to control/predict your income and avoid issues down the line, you must select an appropriate hourly rate for your services. Here’s how:

Evaluate Your Industry

The market rate for freelancers depends on the specific industry. Freelance writers for instance will calculate their hourly rates based on words typed per hour.

To get a better understanding of your industry wage, you can check out the Payoneer Freelance Income Report 2015.  We recently surveyed over 23,000 freelancers from numerous industries to determine average hourly wages. While the worldwide average hourly rate charged by freelancers is $21, the rate per industry varies heavily. Freelance web designers earn an average hourly wage of $23 per hour, for example, while language translators earn approximately $17 per hour.

Competitors’ rates shouldn’t necessarily dictate your own; however, understanding the average hourly rates of other freelancers with similar skills, education and experience will ensure that you aren’t pricing yourself out of your market (either by charging too much, or too little).

Understand Full-Time Salary

If you were working for a company full-time, your “salary” only represents about 2/3rds of the cost to employee you. So yearly, an employee earning $66k is likely costing the company close to $100k. Why? Because in addition to salary, most companies also pay for the following:

  • health insurance
  • pay roll taxes
  • retirement plan contributions
  • employee stock purchases
  • paid time off (usually 2 – 6 weeks per year)
  • tools and resources (desk, computer, electricity, internet connection, paid training, etc.)
  • other perks (free food or the possibility of leaving early)

Understanding what a salary covers, doesn’t cover, and all the freebies along the way is critical. As a freelancer all that changes, and your hourly rate should reflect what you could be making if working full-time for a company.

Consider Administrative Time

As a freelancer, you don’t spend 100 percent of your work time immersed in client projects. You might process invoices, prepare estimates, brainstorm with potential clients, and market your services.

Track the time you spend engaged in these activities over a few weeks’ time. Figure out how many hours you spend on administrative tasks so you can set an hourly rate that includes this time as hours worked.  Spending too much time on these tasks?  Find out how you can apply Pareto’s Principal to get more return on your investment.

Factor in Vacation Time

Whether you take off a few days because of a nasty case of the flu or because you take your family to Disney World, you probably take some time off work each year. Just like a traditional employer, allow yourself a certain number of annual vacation and sick days.

Add Up Your Expenses

Do you rent office space downtown because you hate working from home? Do you purchase marketing materials or other supplies for your clients? Your work as a freelancer costs you money, so add up your expenses to help you define a reasonable hourly wage. Depending on your situation, your monthly expense may include:

  • Rent
  • Utilities
  • Office supplies
  • Postage
  • Advertising or marketing
  • Telephone fees
  • Insurance
  • Auto leases

Tally these all up and multiply by 12 to get your yearly overhead. Then add in any yearly costs, such as computer or software purchases.

Identify Your Expertise

Maybe you work as a freelance writer now, but ten years ago, you managed a restaurant or played music in a band. Your expertise should influence your hourly rate when you accept projects that rely on your education or experience.

If you possess a great deal of education in your field of choice, you might charge more than a less-educated freelancer. For example, a web designer with a master’s degree in computer-aided design might command a higher salary than a designer with only a high school diploma. Of course, your work experience also factors into your hourly rate.

Test the Waters

Once you set your hourly rate, pay attention to the ways in which clients respond. If most clients balk at your rate, for example, and you can’t land a project, you might need to reduce your hourly wage.

Similarly, you might have to raise your rates in the future. When demand (clients who want to hire you) exceeds supply (your available time), you must increase your rates to make every hour as profitable as possible.


Going from a full time salary job to freelancing can be tough.  Simply taking your desired salary and dividing that by 40 hours a week will put you in a bad financial place by year end.Instead, do plenty of research and uncover every expense your salary does or doesn’t include. Remember that vacation time and retirement plan contributions will no longer be free, so adjust your pay rate accordingly!




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