Flat fee or hourly rate? For freelancers, this is the dreaded question potential clients ask. Really, getting paid, regardless of whether one charges a flat fee or hourly rate, should be the best part. After all, money is the reward for their talent and hard work. But talking about money can be awkward. Putting a price on the creativity, elbow grease, and thoughtfulness a dedicated freelancer will undoubtedly put into a project is no easy task. Choosing between paying freelancers a flat fee and a hourly rate can be like walking through a minefield.
However, experts have been chiming into the discussion. Some argue that paying freelancers flat fees make more sense than hourly rates. Learn why this approach to charging is better for freelancers and those who hire them.
A Flat Fee Puts the Value on Work
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“For me, hourly rates are too democratic—they treat all writers as equals, which we’re not,” writes Art Spikol on the Writer’s Digest website. Experienced freelance writers might be able to turn around a 600-word story that requires minimal editing within an hour or two. If they charge a fee of $35 per hour, they will earn up to $70 for that story. Inexperienced freelance writers, who need more time for research and editing, may take five hours to do the same project and charge the same. They would earn $175.
Essentially, the more experienced writers end up getting punished for their efficiency and skills. In addition, those who hired the freelancer end up spending more money on what may be less exceptional work.
An Hourly Rate Makes Budgets Near Impossible
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With an hourly rate, those who hire freelancers end up having a hard time knowing what the work is going to cost them. After all, one freelancer might take more time than another to complete the same work. In addition, no one can anticipate every hiccup that happens while working on an assignment. Sometimes, a dedicated freelancer will make extra phone calls or research in the name of being thorough.
With a flat fee, the client knows what the cost will be and can plan accordingly. Hourly rates leave the final price somewhat up in the air. Being able to know how much something is going to cost is key to managing a budget and refraining from overspending.
A Flat Fee Makes for a Better Working Relationship
Imagine a freelancer wants to be precise and goes the extra mile to track down the right sources and hard data necessary to complete a project. The extra work means more pay for the freelancer and more charges for the client. Maybe it’s worth it to the client. In that best-case scenario, none of this would matter.
More often than not, however, the additional charges can bring tension to the working relationship. The client wonders — usually out loud — whether the extra work was necessary or if the freelancer could have managed to get the job done in fewer hours all the same. The freelancer is then left to decide what to do. Does he charge for the total hours he worked? Does he dock himself pay to appease the client? The answers depend on the specific circumstance. Either way, the relationship gets damaged, and nobody is in a good position when it comes to future projects.
Psychology Comes into Play with Hourly Rates
Human nature can be unfair sometimes. Of course, freelancers who charge by the hour might unintentionally work less efficiently. Earning by the hour is going to be in the back of their minds while they labor. The thought of getting paid more might unintentionally play into their work habits. That kind of thinking is obviously detrimental to the client, who might end up paying more than necessary.
This hurts the freelancer, too, and not just because he may be hurting the relationship he has with this client. He is also spending more time trying to rack up paid hours when he should be seeking other jobs or working for other clients. In this way, hourly rates could hurt the bottom lines of both the freelancer and the client.
A Flat Fee Can Still Account for Valuable Time
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Psychology plays into the negotiations before a freelancer gets to work, too. When clients hear a project costs $45 per hour and will take about 10 hours to complete, they automatically start doing the math in their head. The freelancer is thinking, “Cha-ching,” and the client is thinking, “Now, my head and my budget hurt.” A flat fee of $450, however, is easier to grasp in the moment. The freelancer should still take into consideration the amount of time the project will take when determining the flat fee.
“As a freelancer, you shouldn’t be penalized because your skill level enables you to provide high value quickly,” writes Lindsay Van Thoen on the Freelancers Union blog. “The client is more likely to accept your proposal of $200 for a project (that you know will take you two hours) than they would be to accept a proposal for $100/hour.”
Freelancers May Lose Out on Pay with an Hourly Rate
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Tracking is a necessity when freelancers charge by the hour. Often, freelancers respond to emails or phone calls or make small edits and don’t count them toward the hourly rate. They think, “Oh, that didn’t take long, and it wasn’t a full half hour or hour, so I’m not going to worry about it.” But if they would track all the times they put in 10 minutes here and 20 minutes there, they would realize the time adds up. In general, this works in the client’s favor, but it can cause damage to the relationship. Certainly, the resentment will build if the client is constantly adding 10 to 20 minutes for which they never end up paying.
In the end, most freelancers end up charging both an hourly rate and flat fee, depending on the project and needs of the client. But paying freelancers the flat fee makes the process more straightforward and removes any surprises. Clients should recognize that flat fees are still negotiable, and they can always set limits on charges. As a result, charging a flat fee can help freelancers establish a good rapport with clients, which will pay off in the future.