When I graduated from college and began looking for full time work, I made ends meet by doing freelance contract work. Mainly I did web design and development. The biggest obstacle I ran into (besides finding work) was determining how much I should charge after I found it. There are several methods of billing clients for contract work, but for this blog post, lets say you and your client agree that you’ll be paid hourly. How much should you charge? It’s very hard to find a good answer for this on the internet. But I’m gonna’ break down what I’ve learned into a relatively simple formula.
The first thing you need to do is define what you are doing then figure out the equivalent title for your job in the salaried world. So let’s say you are building a website for a local small business. In the salaried world your title would likely be “Web Designer”. Now you need to find out how much other Web Designers are being paid. If we use salary.com and look up Web Designer, we find that that Web Designers in our area get paid somewhere around 51k to 70k per year.
Now you need to pin down a number in that salary range. Lets say, like I was, you’re fresh out of college. In the salaried world your pay would probably be close to the 51k side of the spectrum. So let’s stick with 51k per year. Your first impression may be to take that 51k and divide that by the amount of working hours in a year. But there are a few perks that come with that 51k that need to be taken into consideration. Things like health insurance, vacation time, sick leave, expense accounts, and et cetera.
Let’s say we want 3 weeks of time off for vacation and sick leave. There are 52 working weeks in a year. We need to subtract 3 of those from our year to cover our time off. So we’re left with 49 working weeks.
Next we need to cover health insurance costs. Let’s say we found a policy for $200 a month. Multiply that by 12 months and we get $2,400.
Finally lets consider hiden expenses that a salaried employee may take for granted. Things like pens and paper, toner, and binders. For a nice round number lets estimate we need 5k per year to cover things like this.
So now we just need to do the math.
$51,000(salary) + $2,400(health insurance) + $5,000(supplies) = $58,400
49(weeks) * 40(hours) = 1,960(hours)
$58,400 / 1,960(hours) = $29.80 per hour
It’s pretty simple when you think about it. But it can be difficult to figure out where to start when you’re new to freelancing. I hope this is helpful to someone. Leave me a comment if you have any philosophies of your own for calculating an hourly rate for your work.
** UPDATE **
** 8/8/2006 **