What Is an Hourly Contract?
An hourly contract is a legal agreement between two parties in which the independent contractor charges the client an hourly rate for the time taken on the project.
There are two standard types of contract—an hourly contract and a fixed fee contract.
Note: To edit this legally vetted hourly contract template, sign up to Bonsai.
Why You Need an Hourly Rate Contract
Working as a freelancer or independent contractor is becoming more and more popular—as of 2020, freelancers made up 36% of the U.S. workforce, and is expected to grow 14% over the next six years.
If you find yourself working as a freelancer, you may be tempted to charge a fixed fee, however, it's super easy to end up doing more work than you're being paid for—especially if you have a joint venture or you enjoy working for a particular client.
Charging an hourly rate and clearly outlining the scope of work ensures that you're not only paid for all the work you've agreed to do, but also for all the extras that are requested along the way.
Alongside this specific advantage, this type of independent contractor agreement also ensures:
- Everyone is in agreement about the details of the project
- Everyone fulfills their side of the agreement
- Guidance is provided in the case of disagreement
What Should Be Included in a Freelance Hourly Contract
Here, we've outlined the necessary components of your freelance hourly contract. It's essential to be as comprehensive as possible when talking about the upcoming project to ensure all parties acknowledge and understand their responsibilities and roles throughout.
In this section, you'll include information relating to your organization and the client—such as your name as the independent contractor, the client’s name, and the start date. Be as attentive as you possibly can here—the entire agreement could be invalidated if you include any incorrect information or details.
Scope of work
This section of the service agreement is paramount for independent contractors that choose to be paid hourly—it's where you outline the exact details of the work you're being contracted to complete.
You need clear guidance around what's expected from you—the independent contractor—in order to accurately invoice and receive payment from the client.
Include any deliverables you expect to submit, and include what conditions must be met for the project to be considered finished. This is when you'll receive the final payment and be on your way to new projects and clients.
Schedule and dates
Here's where you provide information on when you'll be hitting the milestones you outlined in the scope of work. This gives you and the client an idea of how long the project will run, and when certain aspects will be finished.
The written agreement surrounding the schedule guides the progression of the project and ensures everyone's on the same page when it comes to expectations.
In an hourly contract, this section is especially important. It outlines all the details regarding payment—in this case, your hourly rate and any additional fees for extra services.
It's essential here to highlight that your client isn't just paying for the hours you spend working on their project, but also all the hours you spend on providing other services related to the project. This includes things like replying to emails, research, liaising with third parties, catch-up calls, or any other tasks related to the project.
You'll also need to include information on payment, such as when the payment is due and the expected payment period following your invoice.
Clients often request an estimate for the final fees to be able to stick to a budget—it's up to you whether you accommodate this and using a timesheet is the easiest way to do it.
Changes and revisions
This relates to the scope of work—specifically what happens if the independent contractor is required to complete extra work. This contract clause spells out how you'll be dealing with any additions, revisions, or changes to the original contract.
Extra work means extra hours—hours you need to ensure aren’t completed at your own expense.
This clause protects you from being held responsible for any damages a client or third party believes they have suffered as a result of the services performed. You don't want anything to go wrong or for the relationship to turn sour, however, sometimes it's inevitable and it’s smart to prepare for it.
Liability will also put your client’s mind at ease, knowing you’re taking responsibility for the work you’re doing.
It's essential to outline who gets what when the project is finalized. Creative work is often subject to intellectual property disputes, so it's key to ensure this is handled up front. It also protects the confidential information of your client’s company and yours as the independent contractor.
Prior written consent is essential when it comes to intellectual property rights as all parties must agree to—and stick to—the final result being one party's sole and exclusive property.
This clause is your escape plan—it outlines what happens when either party wants to abandon the project, including any consequences for the terminating party.
This provides remedies—such as written notice— for both you and the client, however, from your perspective it:
- Protects you if the client isn't paying
- Protects you if the client isn't cooperating
- Protects you if your intellectual property rights are infringed
What’s the Benefit of Using Bonsai, Instead of Editing a Template Yourself?
Nowhere is the phrase time is money more fitting than when working for an hourly fee as an independent contractor. You're in charge of everything—which is flexible and free but also somewhat overwhelming. Legal advice is expensive and timely and sometimes going solo is your only option.
Bonsai takes the guesswork out of your service arrangement and allows you to source and edit legally approved contract templates for all types of projects. It saves you precious time to use elsewhere—like on the project at hand.
How to Create an Hourly Contract With Bonsai
Creating contracts with Bonsai couldn't be any easier:
- Sign up for free to the platform
- Select your desired template
- Fill in the blanks with your projects' specifications
- Send it over to the client for approval and signature without even leaving Bonsai
Hourly Contract Template FAQs
How do you calculate hourly rate for contract work?
There are several methods you can use to calculate your hourly rate. It’s good to note that the hourly rate or dollar amount you choose to charge depends on a variety of factors, such as:
- The industry you operate in
- Your desired salary
- Overhead costs
- Expected vacation days
Your hourly rate is entirely up to you, and it’s important to make sure it represents your expertise and that you’re happy with it.
Are freelancers paid by the hour?
Not all freelancers are paid by the hour. Freelancers can charge an hourly rate or a fixed fee, with both having their pros and cons depending on the work involved.
Sample Hourly Contract Template
Choosing to charge an hourly rate ensures you’ll receive fair payment for the amount of work you do. It also means you need to be especially thorough when outlining what the project will entail.
Take a look at our hourly contract template below to begin creating your ideal agreement.