How Much Should I Pay a Freelancer?

Freelance rates are a complex and nuanced thing that can’t really be summed up in a single formula. But we’re going to do it anyway.

To start, you need an idea of what you’d pay a full time employee. If you’re not sure, ask some colleagues or friends in the industry. Site like PayScale can help, but aren’t great for many creative jobs. Using that number, we can come up with a formula to get a baseline for freelancer rate:

(Annual Full Time Salary / 140 ) + equipment costs and expenses = Freelancer Daily Rate

Without equipment or expenses, it ends up being about double what you’d pay a full time employee. 185% of the daily breakdown of a full time employee’s salary. That isn’t an arbitrary number, it is arrived at by dissecting the work and compensation of a freelancer in contrast to full time employees.

100% (base salary) + 35% (lack of benefits) + 10% (unbillable time- invoicing, consultations, etc) + 40% (lack of job security, time spent finding new clients)

By breaking it out like this we can see why freelancers need to receive a higher daily rate than full time employees to be compensated equally. We can also see that if you have a long term project (3+months), you may be able to secure a small discount. Additionally, it helps distinguish between freelance and part time- which is an important distinction. More than just a filing a 1099 instead of a w2, a freelancer is defined by their constant search for their next project. A part timer, in contrast, is compensated at a lower rate because they can count on consistent hours on a weekly basis, have no unbillable time and, in many cases, receive benefits.

Expenses, such as rentals, travel, and materials are much easier to calculate because they are passed along directly. Certain expenses, such as local commutes and parking are not typically billed for unless the costs are unusual or covered for full time employees. When freelancers provide their own equipment, whether they bake the cost into their rate or charge a separate fee, the equipment cost will typically be slightly lower than the standard rental cost of that equipment from a third party.

While many freelancers enjoy the lifestyle and have no inclination to settle down anywhere permanently, there is a class of freelancer that would simply never be able to have a full time job. They’ve reached a level of pay that would no longer make sense for anyone to shell out long term.  Occasionally this is due to very expensive equipment and the skill to operate it, but more frequently it is talent, experience, and a well marketed reputation.  They usually work less often than the average freelancer and are often more discerning about what jobs they will accept, regardless of compensation. There is no formula for their rate. They charge what they like and when clients want their special brand of magic, they pay it.

As much as we simplified the rate formula here, it’s a number that is completely between client and freelancers. Some freelancer’s prices are flexible, some are firm. These formulas should get you in the right ballpark, however, and show why freelancers charge what they do.