Starting a freelance business can be a daunting move, and there are many things to consider before you can take on a client and begin your work. One of the most important things is determining how much you should get paid for your work. 

Whilst there is no exact science to finding your rate, and pay rates differ from industry to industry, there are a few questions you should ask yourself when setting your freelance rate.

Determine Your Pay Structure 

First, you want to figure out how to charge your clients. There are a few pricing structures you can use when you are starting out.

Top Tip: It’s a good idea to determine your rate for a few different structures as a client may ask to pay in a certain way. 

Hourly 

Most freelancers begin by setting an hourly rate, it's simple to track and easy to invoice. However, it can be inefficient for your time, and you may need to keep a really detailed time sheet for your clients. 

Daily

A day rate is a fixed fee that is paid for a single day of work. Similar to hourly, a day rate is easy to track and invoice. However, unless your contract specifically stipulates a specific number of hours, for example, a day is 7.5 hours, you could get paid the same amount for a 7.5-hour day or a 14-hour day. So before you commit to a day rate contract, make sure you set what your ‘normal’ amount of working hours are, and what counts as overtime.

By Project 

Charging by project is suited for those who want to work with multiple clients. You can set your rate depending on the project’s demands and your estimation of how long it takes to complete. A by-project rate is best for those who work quickly, but it's better suited for more experienced freelancers.

How to Calculate Your Freelance Rate

Now you’ve decided on how you’ll be getting paid, you can determine your rate.

Freelance rates tend to be higher than a salary, as they come without benefits. As an employee, your company gives you additional benefits such as paid leave, pension, and other schemes like a training allowance, cycle to work, or healthcare. These benefits are a part of your compensation from work.

As a freelancer, you will have to compensate for these ‘non-working’ benefits or you’ll be earning less than you would have as a salaried employee.

Find Your Rate Through a Formula

One way to find your rate is:

(Your Annual Salary + 30%) / 220 Working days

The 30% is to compensate for your lost benefits such as your holiday pay, sick leave and pension. The 220 days is an estimate of how many days you may work in the year, with around 260 working days as the standard. However, as a freelancer, you may find yourself with periods of non-working days for holidays or gaps between jobs.

You’re likely to adjust your rates depending on your client and the project’s timeline and workload. However, you can use the formula as a starting point.

Research your Peers

It’s worth noting what other freelancers in your industry are charging. If possible, you can reach out to your peers on LinkedIn or at conferences and discuss the rate of pay. While salaries and payments are an uncomfortable topic, talking about your freelance rate can help you find out the industry standard and can benefit the entire pay rate for your industry. Many freelancers believe they should ‘go it alone’ but finding a community is important in many ways.

Look at Salary Reviews 

Recruitment agencies often publish an annual salary review broken down by industry. This is a good way of seeing what the industry rate is. Some professional bodies such as unions or associations also publish annual salary reports. Try searching for your industry and ‘salary report’ on a search engine.

How to Ask for Your Rate 

Now that you’ve determined your rate and way of paying, you have the hard task of asking it from a client.

It is vital that you charge what you are worth, and what you need to survive as a freelancer. However, that doesn’t mean you’ll be paid the same rate for each job. Every client and project is different and will have different demands and budgets. So you will need to adjust your rate depending on the situation.

A few things to consider when adjusting your rate are:

Length of the Contract

If the contract is for a long time period, you may consider a lower rate as it provides you with a steady income for a longer period. This can save you time in the long run as you’re not constantly seeking a new project or client. If the contract is short, you can charge a more premium rate for the inconvenience.

Career Benefits 

If the project is for a dream client, a valued name, or gives you the chance to build your skills and portfolio in a hugely beneficial way it makes sense to accept a slightly lower rate. A good client/project can help you secure more big names through exposure. Secondly, by upskilling you can start to up your rate too!

Nature of the Client 

As a freelancer, your clients will be a mixed bag. A ‘easy’ client, who pays on time, is easy to work with and is respectful of you and your time may be worth a lower rate. Alternatively, you can up your rate for a ‘hard’ client who may be more difficult to work with.

Other Things To Consider When Starting a Freelance Business

Become a Limited Company 

A good way to protect your personal finances as a freelancer is to incorporate as a Limited Company (LTD). An LTD exists as a separate entity to yourself, which means you are not liable for any debt the company creates.

An LTD also allows you to protect your business’s name and gives your company a more professional reputation.

You can form a company in 4 easy steps with us, we can guide you through the whole process while you focus on the big picture.