Freelancing: How Much To Charge Per Hour Rate

There’s no definite answer to decide how much you should charge for your freelance work. But there are some basics to get you started.

a. Find out the yearly wage for this kind of work in your area or the yearly wage you feel you’re worth.

b. Add the direct cost a company would have to hire this person, such as vacation pay, insurance, employment tax and pension. You could include other stuff here as well, like bonuses (broadband line, free mobile use etc) and added insurance etc.

c. What you have now is the cost it would be to hire a person full time for one year. There are other cost as well, like computers and stuff, but that should be covered by your margin.

d. Decide what kind of margin you would like to have on top of the direct cost. The margin should cover: a) your administrative and marketing overhead b) your profits. In a normal company the break down can look something like this:

yearly price = 45% labor cost + 30% margin + 25% sales/marketing cost

However freelancers usually does not have their own sales people. And usually they get work with word of mouth, which is cheap. So often they can cut their sales/marketing cost to almost 0.

e. Find out the number of effective work hours in a year (do not include vacation and other holidays). Where I live it’s around 1800 hours/year. Now lower this number to approximately 80%, e.g. 1800 * 0,8 = 1440. Why? Because your time usually never will be 100% billable. You will get sick. The customer will not want to pay for everything you do. etc. A billable factor of 80% is ok.

f. Divide “yearly price” above with the number of billable hours in the year. Wopha! Then you got the hourly rate to charge, included all your costs and profit.

via sitepoint