Guider

The short answer: your price needs to cover far more than the hours you spend with the client. Holiday, quiet periods, fees and pension aren't included in the monthly salary you'd see in a job ad, but as a freelancer you have to build all of this into what you invoice. This guide covers how to choose between an hourly rate and a fixed price, what your price must cover, and how to present it to the client without your voice shaking.

#Hourly rate or fixed price: how to choose

An hourly rate works well when the assignment is hard to scope in advance: ongoing consulting work, support, development where requirements shift along the way, or collaborations that continue month after month. The client pays for your time, and the risk of the work expanding sits with the client, not with you. The downside is that an hourly rate caps your income: you can only invoice for the hours you actually work.

A fixed price works well when the deliverable is clearly defined: a logo, a website with specified content, a translation of a particular text. The client knows exactly what it costs, and you're rewarded for working efficiently. The risk shifts to you: if the work takes longer than expected, your real hourly earnings drop. So always base a fixed price on your own time estimate plus a margin, and spell out in the quote exactly what's included and what costs extra.

Many freelancers combine the two: a fixed price for well-defined packages and an hourly rate for everything outside that scope. This gives the client predictability and protects you from free work creeping in.

#What your hourly rate needs to cover

An employee gets holiday, sick pay and pension without thinking about it. As a freelancer, you bake all of this into your price. Holiday and time off: the weeks you're not working, you invoice nothing, but the rent still has to be paid. Quiet periods: almost every freelancer has months with fewer assignments, and the price during the good months has to carry the quiet ones too. Unpaid work: quotes, meetings, bookkeeping receipts and marketing are all work that no client pays for directly.

Fees and taxes: part of the amount you invoice goes to fees before any of it becomes salary. On the salary portion, employer contributions are paid, typically 31.42%, and income tax is deducted after that. If you invoice through a light entrepreneurship company, its service fee comes on top. The amount you invoice and your actual pay are therefore two different things, and your price needs to be set based on the salary you want to be left with.

Pension: an employee often gets occupational pension through their employer. As a freelancer, you need to think about your own long-term savings, and there has to be room for that in your price. You don't need to calculate it exactly from the start, but the principle is simple: a price that only covers today's bills is too low. Add equipment, software and insurance on top, and it's easy to see why a freelance price is always higher than the equivalent hourly wage for a similar employed role.

Don't forget VAT: when you invoice businesses, you add VAT, in most cases 25%, on top of your price. VAT isn't your income, it's passed on, but it should always be clearly shown on the quote and invoice.

#Work backwards from the income you want

The easiest way to find the right level is to work backwards. Start with the monthly salary you want to take home. Add everything that has to be covered on top of that salary: taxes, fees, holiday, pension savings and your work-related expenses. Now you know how much you need to invoice per month. Then divide that sum by the number of hours you can realistically invoice, not the number of hours you work. A large part of a freelancer's week goes to things that can't be invoiced, and the calendar is rarely fully booked every single week of the year.

The result often feels high the first time you calculate it. That's normal, and it's exactly why many new freelancers charge too little. Don't compare your hourly rate to an employee's hourly wage: compare it to what an agency or consulting firm would invoice for the same work. There, your price is almost always lower, and that's the client's real alternative.

#Communicating the price to the client

Always present the price in writing in a quote, even for small assignments. State the price excluding VAT for business clients and note clearly that VAT will be added. Describe what's included, how changes are handled, and what payment terms apply: common terms are 7, 14 or 30 days. A shorter payment term is entirely reasonable for smaller assignments, so don't be afraid to suggest one.

Tie the price to the value for the client, not to your time. A client is buying a finished website that brings in more inquiries, not a number of hours in front of a screen. Avoid apologising for your price and avoid lowering it at the first sign of hesitation. If the client wants a lower price: reduce the scope rather than cutting your hourly rate. That way you keep your price level, and the client gets to decide what matters most.

#Raise your price as your experience grows

Your first price isn't your last. Review your level regularly, for example before each new larger assignment or at the turn of the year. When you're fully booked, getting referrals and delivering faster than before, that's a clear sign the market values you more than your price does. Raise it for new clients first, so you can test the level without risking existing relationships. And if you invoice through a service like Truster, you also skip the admin around salary, tax and fees, so you can put your energy into exactly this: doing great work and charging what it's worth.