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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.
1. Calculating your hourly rate contract template
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:
1.1. Admin work % in the hourly rate contract template
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.
1.2. Going rate in the hourly rate contract template
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.
1.3. Admin + going rate in the hourly rate contract template
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.
1.4. Self-employment tax in the hourly rate contract template
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.
1.5. Remain competitive using the hourly rate contract template
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).
2.1. Turnaround in the hourly rate contract sample
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.
2.2. Additional work (scope creep) in the hourly rate contract sample
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.
2.3. Client notes in the hourly rate contract sample
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.
2.4. Late payments in the hourly rate contract sample
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.
2.5. Upfront deposits and retainers in the hourly rate contract sample
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:
This Contract is between Sample Client (the "Client") and John Doe (the "").
The Contract is dated [the date both parties sign].
1. WORK AND PAYMENT.
1.1 Project. The Client is hiring the to do the following: The Contractor will assist the Client with specialized services.
1.2 Schedule. The will begin work on August 21, 2020 and the work is ongoing. This Contract can be ended by either Client or at any time, pursuant to the terms of Section 6, Term and Termination.
1.3 Payment. The Client will pay the a rate of $80.00 (USD) per hour. Of this, the Client will pay the $650.00 (USD) before work begins.
1.4 Expenses. The Client will reimburse the 's expenses. Expenses do not need to be pre-approved by the Client.
1.5 Invoices. The will invoice the Client weekly. The Client agrees to pay the amount owed within 15 days of receiving the invoice. Payment after that date will incur a late fee of 5.0% per month on the outstanding amount.
1.6 Support. The will not provide support for any deliverable once the Client accepts it, unless otherwise agreed in writing.
2. OWNERSHIP AND LICENSES.
2.1 Client Owns All Work Product. As part of this job, the is creating “work product” for the Client. To avoid confusion, work product is the finished product, as well as drafts, notes, materials, mockups, hardware, designs, inventions, patents, code, and anything else that the works on—that is, conceives, creates, designs, develops, invents, works on, or reduces to practice—as part of this project, whether before the date of this Contract or after. The hereby gives the Client this work product once the Client pays for it in full. This means the is giving the Client all of its rights, titles, and interests in and to the work product (including intellectual property rights), and the Client will be the sole owner of it. The Client can use the work product however it wants or it can decide not to use the work product at all. The Client, for example, can modify, destroy, or sell it, as it sees fit.
2.2 's Use Of Work Product. Once the gives the work product to the Client, the does not have any rights to it, except those that the Client explicitly gives the here. The Client gives the Contractor permission to use the work product as part of the Contractor's portfolio and websites, in galleries, and in other media, so long as it is to showcase the Contractor's work and not for any other purpose. The Contractor is not allowed to sell or otherwise use the work product to make money or for any other commercial use. The Client is not allowed to take back this license, even after the Contract ends.
2.3 's Help Securing Ownership. In the future, the Client may need the 's help to show that the Client owns the work product or to complete the transfer. The agrees to help with that. For example, the may have to sign a patent application. The Client will pay any required expenses for this. If the Client can’t find the , the agrees that the Client can act on the 's behalf to accomplish the same thing. The following language gives the Client that right: if the Client can’t find the after spending reasonable effort trying to do so, the hereby irrevocably designates and appoints the Client as the 's agent and attorney-in-fact, which appointment is coupled with an interest, to act for the and on the 's behalf to execute, verify, and file the required documents and to take any other legal action to accomplish the purposes of paragraph 2.1 (Client Owns All Work Product).
2.4 's IP That Is Not Work Product. During the course of this project, the might use intellectual property that the owns or has licensed from a third party, but that does not qualify as “work product.” This is called “background IP.” Possible examples of background IP are pre-existing code, type fonts, properly-licensed stock photos, and web application tools. The is not giving the Client this background IP. But, as part of the Contract, the is giving the Client a right to use and license (with the right to sublicense) the background IP to develop, market, sell, and support the Client’s products and services. The Client may use this background IP worldwide and free of charge, but it cannot transfer its rights to the background IP (except as allowed in Section 11.1 (Assignment)). The Client cannot sell or license the background IP separately from its products or services. The cannot take back this grant, and this grant does not end when the Contract is over.
2.5 's Right To Use Client IP. The may need to use the Client’s intellectual property to do its job. For example, if the Client is hiring the to build a website, the may have to use the Client’s logo. The Client agrees to let the use the Client’s intellectual property and other intellectual property that the Client controls to the extent reasonably necessary to do the 's job. Beyond that, the Client is not giving the any intellectual property rights, unless specifically stated otherwise in this Contract.
3. COMPETITIVE ENGAGEMENTS. The won’t work for a competitor of the Client until this Contract ends. To avoid confusion, a competitor is any third party that develops, manufactures, promotes, sells, licenses, distributes, or provides products or services that are substantially similar to the Client’s products or services. A competitor is also a third party that plans to do any of those things. The one exception to this restriction is if the asks for permission beforehand and the Client agrees to it in writing. If the uses employees or subcontractors, the must make sure they follow the obligations in this paragraph, as well.
4. NON-SOLICITATION. Until this Contract ends, the won’t: (a) encourage Client employees or service providers to stop working for the Client; (b) encourage Client customers or clients to stop doing business with the Client; or (c) hire anyone who worked for the Client over the 12-month period before the Contract ended. The one exception is if the puts out a general ad and someone who happened to work for the Client responds. In that case, the may hire that candidate. The promises that it won’t do anything in this paragraph on behalf of itself or a third party.
5.1 Overview. This section contains important promises between the parties.
5.2 Authority To Sign. Each party promises to the other party that it has the authority to enter into this Contract and to perform all of its obligations under this Contract.
5.3 Has Right To Give Client Work Product. The promises that it owns the work product, that the is able to give the work product to the Client, and that no other party will claim that it owns the work product. If the uses employees or subcontractors, the also promises that these employees and subcontractors have signed contracts with the giving the any rights that the employees or subcontractors have related to the 's background IP and work product.
5.4 Will Comply With Laws. The promises that the manner it does this job, its work product, and any background IP it uses comply with applicable U.S. and foreign laws and regulations.
5.5 Work Product Does Not Infringe. The promises that its work product does not and will not infringe on someone else’s intellectual property rights, that the has the right to let the Client use the background IP, and that this Contract does not and will not violate any contract that the has entered into or will enter into with someone else.
5.6 Client Will Review Work. The Client promises to review the work product, to be reasonably available to the if the has questions regarding this project, and to provide timely feedback and decisions.
5.7 Client-Supplied Material Does Not Infringe. If the Client provides the with material to incorporate into the work product, the Client promises that this material does not infringe on someone else’s intellectual property rights.
6. TERM AND TERMINATION. This Contract is ongoing, until ended by the Client or the . Either party may end this Contract for any reason by sending an email or letter to the other party, informing the recipient that the sender is ending the Contract and that the Contract will end in 7 days. The Contract officially ends once that time has passed. The party that is ending the Contract must provide notice by taking the steps explained in Section 11.4. The must immediately stop working as soon as it receives this notice, unless the notice says otherwise. The Client will pay the for the work done up until when the Contract ends and will reimburse the for any agreed-upon, non-cancellable expenses. The following sections don’t end even after the Contract ends: 2 (Ownership and Licenses); 3 (Competitive Engagements); 4 (Non-Solicitation); 5 (Representations); 8 (Confidential Information); 9 (Limitation of Liability); 10 (Indemnity); and 11 (General).
7. INDEPENDENT CONTRACTOR. The Client is hiring the as an independent contractor. The following statements accurately reflect their relationship:
- The will use its own equipment, tools, and material to do the work.- The Client will not control how the job is performed on a day-to-day basis. Rather, the is responsible for determining when, where, and how it will carry out the work.- The Client will not provide the with any training.- The Client and the do not have a partnership or employer-employee relationship.- The cannot enter into contracts, make promises, or act on behalf of the Client.- The is not entitled to the Client’s benefits (e.g., group insurance, retirement benefits, retirement plans, vacation days).- The is responsible for its own taxes.- The Client will not withhold social security and Medicare taxes or make payments for disability insurance, unemployment insurance, or workers compensation for the or any of the 's employees or subcontractors.
8. CONFIDENTIAL INFORMATION.
8.1 Overview. This Contract imposes special restrictions on how the Client and the must handle confidential information. These obligations are explained in this section.
8.2 The Client’s Confidential Information. While working for the Client, the may come across, or be given, Client information that is confidential. This is information like customer lists, business strategies, research & development notes, statistics about a website, and other information that is private. The promises to treat this information as if it is the 's own confidential information. The may use this information to do its job under this Contract, but not for anything else. For example, if the Client lets the use a customer list to send out a newsletter, the cannot use those email addresses for any other purpose. The one exception to this is if the Client gives the written permission to use the information for another purpose, the may use the information for that purpose, as well. When this Contract ends, the must give back or destroy all confidential information, and confirm that it has done so. The promises that it will not share confidential information with a third party, unless the Client gives the written permission first. The must continue to follow these obligations, even after the Contract ends. The 's responsibilities only stop if the can show any of the following: (i) that the information was already public when the came across it; (ii) the information became public after the came across it, but not because of anything the did or didn’t do; (iii) the already knew the information when the came across it and the didn’t have any obligation to keep it secret; (iv) a third party provided the with the information without requiring that the keep it a secret; or (v) the created the information on its own, without using anything belonging to the Client.
8.3 Third-Party Confidential Information. It’s possible the Client and the each have access to confidential information that belongs to third parties. The Client and the each promise that it will not share with the other party confidential information that belongs to third parties, unless it is allowed to do so. If the Client or the is allowed to share confidential information with the other party and does so, the sharing party promises to tell the other party in writing of any special restrictions regarding that information.
9. LIMITATION OF LIABILITY. Neither party is liable for breach-of-contract damages that the breaching party could not reasonably have foreseen when it entered this Contract.
10.1 Overview. This section transfers certain risks between the parties if a third party sues or goes after the Client or the or both. For example, if the Client gets sued for something that the did, then the may promise to come to the Client’s defense or to reimburse the Client for any losses.
10.2 Client Indemnity. In this Contract, the agrees to indemnify the Client (and its affiliates and its and their directors, officers, employees, and agents) from and against all liabilities, losses, damages, and expenses (including reasonable attorneys’ fees) related to a third-party claim or proceeding arising out of: (i) the work the has done under this Contract; (ii) a breach by the of its obligations under this Contract; or (iii) a breach by the of the promises it is making in Section 5 (Representations).
10.3 Indemnity. In this Contract, the Client agrees to indemnify the (and its affiliates and its and their directors, officers, employees, and agents) from and against liabilities, losses, damages, and expenses (including reasonable attorneys’ fees) related to a third-party claim or proceeding arising out of a breach by the Client of its obligations under this Contract.
11.1 Assignment. This Contract applies only to the Client and the . The cannot assign its rights or delegate its obligations under this Contract to a third-party (other than by will or intestate), without first receiving the Client’s written permission. In contrast, the Client may assign its rights and delegate its obligations under this Contract without the 's permission. This is necessary in case, for example, another Client buys out the Client or if the Client decides to sell the work product that results from this Contract.
11.2 Arbitration. As the exclusive means of initiating adversarial proceedings to resolve any dispute arising under this Contract, a party may demand that the dispute be resolved by arbitration administered by the American Arbitration Association in accordance with its commercial arbitration rules.
11.3 Modification; Waiver. To change anything in this Contract, the Client and the must agree to that change in writing and sign a document showing their contract. Neither party can waive its rights under this Contract or release the other party from its obligations under this Contract, unless the waiving party acknowledges it is doing so in writing and signs a document that says so.
(a) Over the course of this Contract, one party may need to send a notice to the other party. For the notice to be valid, it must be in writing and delivered in one of the following ways: personal delivery, email, or certified or registered mail (postage prepaid, return receipt requested). The notice must be delivered to the party’s address listed at the end of this Contract or to another address that the party has provided in writing as an appropriate address to receive notice.
(b) The timing of when a notice is received can be very important. To avoid confusion, a valid notice is considered received as follows: (i) if delivered personally, it is considered received immediately; (ii) if delivered by email, it is considered received upon acknowledgement of receipt; (iii) if delivered by registered or certified mail (postage prepaid, return receipt requested), it is considered received upon receipt as indicated by the date on the signed receipt. If a party refuses to accept notice or if notice cannot be delivered because of a change in address for which no notice was given, then it is considered received when the notice is rejected or unable to be delivered. If the notice is received after 5:00pm on a business day at the location specified in the address for that party, or on a day that is not a business day, then the notice is considered received at 9:00am on the next business day.
11.5 Severability. This section deals with what happens if a portion of the Contract is found to be unenforceable. If that’s the case, the unenforceable portion will be changed to the minimum extent necessary to make it enforceable, unless that change is not permitted by law, in which case the portion will be disregarded. If any portion of the Contract is changed or disregarded because it is unenforceable, the rest of the Contract is still enforceable.
11.6 Signatures. The Client and the must sign this document using Bonsai’s e-signing system. These electronic signatures count as originals for all purposes.
11.7 Governing Law. The laws of the state of Hawaii govern the rights and obligations of the Client and the under this Contract, without regard to conflict of law principles of that state.
11.8 Entire Contract. This Contract represents the parties’ final and complete understanding of this job and the subject matter discussed in this Contract. This Contract supersedes all other contracts (both written and oral) between the parties.
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