Freelance: Calculating your rates

Putting a price on your work can feel tricky. You want to attract business, and it’s very common to worry that charging too much will put off potential clients. But remember, your freelance income doesn’t just keep the business going. It also has to cover your personal living costs like rent, food, bills and everything else you need day to day. Freelance income can go up and down. It’s a good idea to build in a buffer for quieter periods. That way, you’re not caught short if work slows down.

One way of charging is to use a day rate. A day rate means you set a fixed price for each day you work. To figure this out, start by deciding how much you’d like to earn over the year, then add on around 30%. This covers things you don’t get when self-employed like holiday pay, sick pay, pension contributions and other benefits employees usually receive. Once you’ve got that number, divide it by the number of days you expect to work. A common benchmark is around 220 working days a year, which works out at about nine days every two weeks. That allows for roughly 40 weekdays off during the year. Charging a day rate can make things much easier.

One of the biggest benefits is that it’s very simple. You set one price for a day of your time, and that’s exactly it. Clients know exactly what they’re paying for and you know what you earn. It also makes your income more predictable. If you know roughly how many days you’ll be working in a month, you can work out what money you’ve got coming in. That can help with planning your bills and other costs. Another benefit is that clients often find day rates easy to compare. They can quickly see your price alongside someone else’s, which can make you easier to hire. The important thing to remember about day rates is that your payment is based on the days you work. If you’re not working, you’re not earning. Clients are also more likely to see your fee as payment for your time, rather than for your skills and expertise. And of course, if you work in an industry like weddings, you might have a lot of work in the summer, but much less in the winter.

Your rate needs to reflect these ups and downs, and also allow for flexibility if you need to pay for extra help during busy times. Another option is to use a project rate. A project rate means you agree a price for the whole job, no matter how many hours or days it takes. This can work really well because it shifts the focus from the time you spend to the value you deliver.

Clients often like knowing exactly what the total cost will be upfront. And if you’re skilled and efficient, project pricing can reward you for working quickly, rather than making you feel like you’re losing out if you finish sooner. The drawback is that if the work takes longer than expected, you might find yourself doing more hours for the same money. It’s also harder to get the right price when you’re starting out, because it takes experience to know how long different jobs will really take. There are also other ways of charging. For very short or one-off jobs, charging by the hour may be more transparent and fair, or if you’re working with the same client regularly, you might agree on a fixed monthly fee for a set amount of work. This is called a retainer and it can give you more stability with your income. 

Whichever method you choose, remember to put aside money for tax. It’s sensible to save around 25% to 30% of what you earn. That way, you’re ready when your tax bill comes. Finally, once you’ve set your rate, it can feel uncomfortable to raise it with existing clients.

But as your costs go up and your skills improve, it’s perfectly reasonable to review your prices and make changes when needed.

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