One of the best parts of working for yourself is that you decide how many hours you work and how much you’re paid. But it also means you have to advocate for yourself — because no one else will do it for you.
Setting your freelance rate can be more complicated than negotiating a salary, since there are more factors at play. These steps can help you calculate what your time is worth, so you know how to set your freelance rate.
STEP 1: RESEARCH INDUSTRY STANDARDS
Check out the average rates in your industry to see what people doing similar work are getting paid. You don’t want to accidentally lowball yourself, or throw out a number so high that it stops negotiations in their tracks.
Tools like Glassdoor’s Know Your Worth allow you to compare your rate based on your industry, location and experience level. Comparably reveals real employee salaries, giving you an idea of what specific companies pay. Who Pays Writers lists rates paid at popular publications.
Scour LinkedIn, Monster, Indeed and industry-specific boards for job openings. Even if you don’t want to apply, check out what they’re paying. Take note and calculate an average.
It also never hurts to ask other freelancers what they charge. Consider putting the question to a Facebook group or networking platform that relates to your services or industry.
STEP 2: ACCOUNT FOR EMPLOYEE BENEFITS
If you’re transitioning to a freelance career from a full-time, salaried position, you may have broken down your salary to an hourly amount. But don’t assume this number should also be your freelancing rate. A great deal of your compensation from a salaried position comes from more than base pay. Employee benefits play a big role. And as a freelancer, it's up to you to cover these costs, so you need to take them into consideration.
The biggest benefits to consider are your health insurance plan and retirement savings, but you’ll also want to factor in transportation costs, time off, disability and life insurance, office supplies and office or coworking space.
STEP 3: DON'T FORGET TAXES
Taxes are handled differently for employees versus freelancers or contractors. As an employee, you receive a W-2 tax form from your employer, which means payroll taxes are automatically deducted from each paycheck and paid to the government through your employer.
As a freelancer or contractor, you’ll likely receive a 1099 tax form, which means you are responsible for calculating your own payroll taxes — they aren’t automatically taken out of your paycheck — and then submitting them to the government on a quarterly basis. It’s recommended that you set aside 25 percent to 30 percent of your income for taxes.
STEP 4: TRACK YOUR TIME
To make sure you're being paid appropriately for your time, you need to know how long certain projects will take. Start tracking how many hours it takes you to complete your work, so you can ensure you’re not selling yourself short. This will also help you know what to charge clients who operate on a per-project, rather than hourly, basis.
And don’t only track how long you’re working on the deliverable itself. Time spent answering emails, joining conference calls, sending and managing invoices all count as work you’re doing for the client and should be taken into account.
STEP 5: SEE THE BIG PICTURE
As a freelancer, you’ll have a variety of offers from the clients you work with. And you may want to change your rate depending on the client. Maybe a company’s mission is important to you and you’re willing to take less. On the other hand, you might want to increase your fee if a client has been especially difficult to work with. Get all of the information before you throw out a figure and remember that it’s a negotiation. You can expect they'll counter, so start high and go from there.