Freelancing: Fixed Contracts vs. Hourly Contracts

While last month I gave an overview of what freelancing is, this month I would like to go over the differences between fixed contracts vs. hourly contracts. This article aims at helping you pick which is right for your freelance business.

What is a Fixed Contract?

Fixed contracts are where you discuss with your client to agree a single fee for completing the job you’re hired to do. If it takes you 1 hour or 6 hours to complete the job the fee doesn’t change, it is fixed. Personally I feel fixed contracts work out best for both the client and freelancer, it’s how I mostly work.

A situation that’s came up with me a couple of times with lower end clients – and it really pisses me off – is when a client brings my hourly rate into the discussion. We’ve agreed a fixed price contract, why are you bringing my hourly rate into it?! It’s usually in an attempt to get me to work for cheaper, but I turn it on their heads by saying something along the lines of “so you’ll pay me a fixed rate until the hours expire at which point you’ll start to pay my hourly rate?”

An example of the concept above is if I take a fixed rate job on at $500 and my hourly rate is $50, I’ll do up-to 10 hours work, note that I can complete the job in under 10 hours and still get my $500 but if it takes longer than 10 hours then they’ll pay me $50 per hour after. This takes them a step back. The problem is that the client doesn’t completely understand what a fixed rate contract is.

Sure, the length of time it’ll take to complete the job is one factor in determining what the fixed rate is but there are other factors such as:

Level of Skill Required

If a job requires a lot of skill and you know only a few people have the expertise required, you should charge more.

Likeliness of Revisions

When you’ve been freelancing for a while you’ll learn that sometimes things don’t go right first time or there’s been a misunderstanding/miscommunication along the way and the client would like you to change things, but don’t be afraid to tell the client if they want too much changed.

When the Job Needs Done By

If the client needs the job done urgently you should bring that into consideration.

There are also other factors you should consider, which I’ve listed below as they can apply to both fixed and hourly rates.

What is an Hourly Contract?

An hourly contract is where you agree to an hourly rate with your client, kind of like a 9-5 where you’re told what your rate is. If it takes you 1 hour or 6 hours you’ll get 1x or 6x your hourly rate which may seem like “Yes! This is what I’ll do” but with hourly contracts you are limiting your earning potential as there is only a set number of hours you can work. Meaning if you’re working 8 hours a day for one client that’s only one job that you can work on for those 8 hours whereas if you’re on a fixed rate you could have completed 2, 3, 4+ jobs in that time.

Other things to consider whether discussing fixed or hourly contracts is:

What is your competition charging?

You can usually find out what your competition is charging by visiting their website or you can call them up and pretend to be a potential client.

Is There Potential for More Work?

If the client is likely to have more work for you, usually I don’t mind dropping my rate a little.

Will the Job Lead to Bigger Opportunities?

If your work is going to be shown to industry leaders you may find yourself being offered opportunities to work for them.

How Valuable is Your Service to the Client?

Different jobs have different values to clients but all jobs are important. If you’re working on something that will greatly increase their revenues your fee should reflect that importance.

How Much Do You Need the Job?

Pretty self-explanatory, but don’t undervalue yourself too much here because if the client comes back to you in the future when you’re not as in need of work and your rate is much higher it can be difficult to negotiate.

How Interesting is the Job to You?

Probably slightly controversial, but how interested you are in the job will affect your work quality so you may need something else to balance it out. For instance, if you’re working on a boring job you’ll want to charge more to make your motivation the payment, but if you’re working on an interesting job you won’t need that extra boost of motivation.

If you’re doing menial work that almost anybody can do then I agree that an hourly rate is best, but if skill and expertise are required then I would highly recommend a fixed rate.

Where do you stand on fixed contracts vs. hourly contracts? How do you determine your fee? Drop you answer in the comments!

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About Iain Meddicks

Iain Meddicks is a father and music industry entrepreneur from Glasgow, Scotland. He is the founder of SendBeatsTo and CrazyPellas Music Community and has a passion for web technologies.

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