A few years ago, I created a post about how to set a freelance rate similar to this one. It was very popular and I thought it was time to revisit the topic at the start of 2018. I have learnt a lot from my colleagues and from running a business since then.
I hope this helps you. You can also get a free worksheet to help you with some of the calculations.
Before we start:
1. There are several methods/means of arriving at a freelance rate and I will go through all of them. Figuring out the numbers for all of them will help you figure out the best amount to charge and how and in what circumstances.
2. The figures I use are just example figures so don’t panic – substitute your own.
3. This is tailored to people freelancing within Australia so while the ideas may be applicable, please do check for exact taxation and other figures etc as is relevant in the country that you are currently based in.
Before you begin:
1. Add up your living expenses – let’s say that for this example you are frugal and you are single and so your living expenses for the entire year come to under $15,000. Whatever number you get round it up to the nearest thousand.
2. Know the tax threshold. You won’t be charged tax on any income below $18,200.
3. Know how much you want to put into super. Do you want to contribute 10% of your income? Or do you have a set figure in mind? For this example, let’s say you want to put in $20 per week into super so that will get you roughly around $1000 at the end of the year in super plus $500 co-contributed from the government so a total of $1500 at the end of the year.
4. Is there anything you are saving for specifically? Or any debts you need to pay off? For this example we will assume that you need to save $5200 during the year so $100 per week. We will also assume you don’t have any debt.
5. What expenses do you have with regards to your freelancing business? This includes office rental, transport, internet, subscriptions to journals, membership of organisations and so on. Add these up and we will assume that you have $2000 in business expenses.
Work out how much you need per year
1. Add up your living expenses, your business expenses, your super goals, your savings goals and your debt repayment if any. This gets us to $23,200 ($15,000 + $1000 + $2000 + $5200).
2. Check the tax rate for $23,200. If you earn about $18,200, it is 19 cents per each dollar above $18,200. That gives you $950 due in tax.
3. If you round this up to $30,000, you would have $6,800 left after taking out all your other expenses except tax ($30,000 – 23,200) and then your tax would be $2,242 and you would end up with $4,558.
4. If this is insufficent for you, keep rounding up to the next number and checking the tax rate to see what you would end up with. If you earned $37,000, your tax rate would be $3,752 and you would end up with $10,048 in your pocket after all your other expenses.
Work out an hourly freelance rate
1. 40 hours is a full time work week in Australia. Let’s assume you are a full time freelancer and that you use half of those hours to do the admin, marketing and accounting work required to run your business. So you have 20 hours a week to work. This is just a starting number – please figure out how much time you may have to do actual work in.
2. Assume that you will work for about 45 weeks of the year and you have to earn enough in those weeks to cover the rest of the weeks that you have set aside for falling sick, holidays or life getting in the way.
3. If you decided to aim for $30,000 per year divide that by 45 to get a weekly target of what you should make each week. This comes to about $668 per week. If you are aiming for $37,000, you have to earn $823 per week.
4. If it is $668 per week, your hourly rate is $33.40. If it is $823 per week, your hourly rate is $41.15. Neither of those hourly rates seem scary, right? This is not your final hourly rate however.
5. Check what IPEd and MEAA recommend as a rate. Check with your colleagues. Ask yourself what your time is worth. The reason I ask you to do this is that these may be factors that help you decide on your final hourly rate and this part of the process depends on you.
6. Slow trade and bad luck can turn up at any moment so give yourself a cushion and double your rate. $33 becomes $66 and $41 becomes $82. This is your final hourly rate. Tweak it as much as you need to.
Work out a freelance rate for a project
- Figure out how long particular tasks take you and how long the project will take.
- Use your hourly rate above and charge accordingly and add a 20% buffer if you think there will be scope creep.
- You do not need to declare your hourly rate to anyone, you can just use it to calculate your project rate for a quote.
- Charge overtime for urgent and weekend work – charge 1.5 times your hourly rate. This is your version of overtime and penalty rates.
Working with set per piece rates from clients
- When they give a per piece rate to you such as $100 for an article or $100 for an interview, break it down in terms of your hourly rate and then in terms of tasks and how long they will take you.
- Then give yourself a set number of hours to work on the piece according to both these factors. For example I do hour long Facebook live interviews. When I was told the per interview rate, I was able to determine that I could and therefore would only spend one hour of my work time on each interview. That way I was able to earn my hourly rate and not waste any hours on it that would be effectively unpaid.
Working out a freelance rate/project fee when you don’t know how long it will take
- If you can break the project into stages, you can try to estimate how long each stage will take and double it in case it takes longer than your estimated time.
- As an editor you can estimate by having a set rate per page or per word. This is also possible for a writer – in the case of writers working with anything other than books, aim for between $0.50 to $1 per word whenever possible. For editors working with books of 20,000 words and up, set a cents per word rate.
- You can also offer to work in installments as a sort of pay as you go so you track the hours spent on the work and invoice accordingly at each stage.
Use your numbers as goals
- You can use your weekly required income as your target. As a writer I have a set target per week and I aim to pitch article ideas to publications where I know the rough rate per piece. If I aim to make $500 per week I would only need one publication to pay me $200 for one piece and another to pay me $300 for a second piece. But I may not get those pitches accepted so if I assume I have a success rate of 20%, I will pitch ideas for articles so that I have pitched a possible total of $2500 of articles per week.
- You can also break it up so that you know that within this example so far, you only have to work four hours per day or you only have to earn $134 per day if you work five days and want to make $668 each week.
How did you decide on your freelance rate?
I realised that not everyone would be able to follow all of this alone, so I created a worksheet online that you can download. You put in your numbers and it does the calculations for you. It is very plain and very basic but it does the maths for you. If you are already a subscriber, you will have received a link to the worksheet already.
I am also interested in learning how you have worked out your rates before. So leave a comment and tell me how you did it.