How to Start Freelancing Online: What Rates to Charge

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There’s a popular saying that most freelancers are wary of, and it goes something like this: “Freelancers are paid per hour, per project…or perhaps.”

Although I don’t know who to thank for that sage advice, it’s a reality in the world of freelancing.

This is especially true for the online freelancer because of the physical divide. By necessity, every online freelancing relationship will be based on trust. Most of your clients will be offshore companies and individuals so unless (1) you work through a trusted outsourcing platform, or (2) the client is a frequent one, there’s no way to run after a deadbeat, er, client.

Of course, one way to protect yourself from deadbeats is to protect yourself from online (or, for that matter, real world) scams, but that’s fodder for another post. For now, we’ll discuss how to set rates that would guarantee that you get hired, first and foremost, and that you get paid, ultimately.

For a newbie to the online freelancing life, there are two ways to set your work rates: per hour or per project:

Per hour. Like what it says, the Buyer pays for every hour you work. Usually, the client will ask you to install a time-tracking software so that s/he can monitor what you’re up to during the hour you’re clocked in. Some of these applications can take regular screenshots—real-time pictures—of your desktop so you’d better be working on what you said you’re working on at that moment or else you’ll go into a dispute. (One time, I had to ask one of my client’s outsourcers to shave off some hours from his time log because he was working on something completely unrelated to what he was hired for.)

Per project. In this case, you’ll charge the client for all the hours you’ll be working on the project, from start to finish, in one lump sum. You won’t need to use a time-tracking software but the client will give you a target date or a deadline to finish the assignment. You’d want to charge a percentage of the whole project cost, a form of earnest money, before you start work and this is often covered in a contract.

Online freelancers have different ways of setting their rates. Some would take their usual hourly rate at a day job and mark it up to 1.5 or 1.7, adding overhead to the overall. Still others calculate how many hours they’ll be working on the job, including a few hours for editing or revision. There’s no hard and fast rule, actually.

There are though some factors that affect your hourly or project rate, to list a few:

1. Market conditions.

By far, the law of demand and supply is still the key—and often the deciding—factor in setting rates for a freelancer. Web programming experts command higher hourly fees than, say, a web writer—a coding geek can charge upwards of $20 an hour while a blogging ninja can hope to get paid anywhere from $3 (rates can go even way below that!) to $15 or more an hour. It all depends on what the client is willing to pay for the kind of skill or talent s/he’s wanting to get.

2. Industry standards.

Besides the price that the market is willing to pay, there’s also the industry’s yardstick for that particular job description. There are different pay scales for legal assistants, software engineers, accountants, and so on, ad nauseaum ad infinitum. The best way is to research the going rate for your industry first.

3. Knowledge and experience.

What you have studied for and can actually do—and which you’ve done for a far longer time—can give you better leverage over the competition. If I were the one hiring for an iPhone app developer, I’d go for the one who had actually created several in the last year over someone who’s relatively new (read: one app made).

4. Social security.

As a freelancer, you pay for your own benefits. Stuff like health insurance, pension fund, retirement, and the other doodads that those who work 9-to-5 jobs enjoy are paid out of pocket. You’re your own human resource development staff; you can choose to include this or not at all. (I’d rather you do.)

5. Savings and expenses.

Of course, you also have to factor in the cost of doing work into your hourly rate. It’s possible to work at home at a loss, you know. You have to pay for things like rent or mortgage, utilities, office supplies and equipment, promotional activities, and similar stuff from your online freelancing earnings otherwise it’ll be pointless trying to earn money from the Net. (And don’t forget to include the money you need to save for that trip or new laptop you’ve been planning for.)

While this list is certainly not exhaustive, these are the major items that you need to consider when setting your service or talent fee. You can always choose to wing it, but online freelancing pays better if you take the time to set this one important aspect of your web working life.

Lucky for you, I’ve found a free rate calculator online that could provide you with a rate you can play with. Mosey on to Freelance Switch and see how much your hour’s worth by clicking on the image below: