When to charge an hourly vs. a flat rate

freelance money time Oct 08, 2020

Both freelancers and those hiring them think about work in terms of hourly rate even when a flat rate has been negotiated. In some instances thinking only about money per hour negates the experience and effectiveness of the freelancer and results in lower quality work at a higher rate. On the flip side, when you’re embarking on new work or a new long-term relationship, it might make sense to think in terms of hours so that compensation accounts for unknown factors. Follow these two simple rules to get paid what you deserve and provide value to your clients.  

 Results instead of hours

If you deliver high quality results and have a strategic, replicable system for executing your work, you can often get a lot more done in one hour than someone who doesn’t. This means that, if you’re getting paid hourly, you’ve in fact lowered the amount you’re making by being good at what you do.

You can definitely increase your hourly rate to reflect the efficiency of your work but when your marketing your services to clients who have never worked with you before, paying a higher hourly rate for your services isn’t going to make sense until they have first-hand experience with your quality and efficiency.  

When you present your services in terms of packages and deliverables instead of hours spent, you’re able to accurately price the quality of your work while still looking competitive with your peers.

Beware of your comfort zone

This only works if you stick to what you know. If it is a new type of work that you’ve never done before consider the time it will take you to figure things out the first time. You might want to think about an hourly rate to ensure that you’re fairly compensated when you’re not sure how long it will take you. If it is a project that you’ve done over and over again, you’ll have a pretty accurate idea of the time it will take you and could do a flat rate.

This same rule will also apply to long-term contracts. You’ll want to find the best fit for both you and the client but, generally speaking, start with an hourly rate so you can both see the time it is taking you and understand that it will take less time as you move forward because you’ll have a better understanding of not only the work, but the client and how to work best with them. Once you’ve established a structure, you can think about a flat rate if that makes sense for both of you.

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