One of the perks of being a freelancer is the freedom to set your own rates. However, with this freedom comes great responsibility.
While many freelancers rely on email or verbal agreements, they often miss loopholes and gray areas, which can lead to problems with clients and payment down the line. That’s where your hourly rate contract comes in.
For a smoothly-run freelance career, professional contracts are essential. And if you prefer getting paid hourly for your work (as opposed to per project) we have everything you need in this mini-guide to create a masterful hourly rate contract that will keep you excelling as a freelancer.
First thing’s first: What’s your hourly rate, anyways?
Freelancers are subject to a number of additional expenses that are usually overlooked. However, by considering these factors when creating your hourly rate, you’ll be making sure you get paid fairly for the hard work you’re putting in.
Here are the 5 steps to create a fair hourly rate for yourself:
Figure out how much time (as a percentage) you’ll spend on your clients’ work and how much you’ll spend on administrative work such as computing taxes, billing and hunting down payments.
Search for the hourly wage you’d made if you were working for an employer. Use official government salary sites such as the Bureau of Labor Statistics to figure out the going rate of your services.
Next, add the hourly wage to the percentage of overhead and administrative work you calculated in Step #1. For instance, if the going rate for your services is $40 and you’ve estimated you’ll spend 10% of your time on administrative work, your rate can be bumped up to $44/hour.
As a freelancer, you’ll likely need to add 15% in self-employment taxes. Add this percentage to your hourly rate you’ve calculated in step #3.
Finally, before putting your new, professional rate onto your hourly rate contract, double check that it’s competitive in your industry. If other freelancers with the same services are charging less, you may want to lower your rate.
Now that you have your hourly rate sorted, you can start looking at other sections to include in your contract for increased flexibility (and decreased surprises).
When it comes to delivery time, stick to your word. Give yourself enough time to complete projects and make sure you meet your deadline. Clients love to see this type of reliability on paper.
What happens when additional work is included halfway through a project? Make sure you outline prices and contract adjustment guidelines for the common issue of scope creep.
Time is money. Save yourself from drawn-out client discussions by offering a “comments” section in your hourly rate contract. This is where they can provide any additional details, concerns or needs for the project.
Avoid late payments professionally by including information about late fees in your contract. For example, you can include a clause that states clients pay 10% late fee when payments become # days late.
Avoid working for free by including a deposit and/or retainer section in your hourly rate contract. If you feel more comfortable with asking for payment upfront, don’t be afraid to ask.
According to the Freelancer’s Union, one-quarter of the entire U.S. workforce is in the freelancing business.
However, only the prepared will continue reaping the benefits of this career style.
You create the freelance career you want. And if you’re hoping for a hassle-free system, a professional hourly rate contract is a great place to start.
All you need to do is: