Should a freelancer have an hourly rate?

Knowing what to charge for your work is one of the trickiest issues to face a self-employed person. Price your time too low and clients might undervalue your work, go too high and you might loose out against cheaper competitors. Some things to consider when setting your hourly rate:

How much experience do you have?

A professional with years in their chosen field is going to be able to charge more for their services than a new graduate fresh from University who are just starting out. Freelancers at the beginning of their career are probably not going to be able to charge as much as someone with years of experience in their field. Your level of knowledge and expertise will effect what costs clients will be willing to agree to.

Is it possible to undercharge?

It is certainly possible to undervalue your work. Find a level of pay you are comfortable with and test the market. You can always adjust your rates when you have found your client base. Your skills are valuable and you might be bringing something unique to your customers. You need to earn enough to cover your expenses, pay your tax and be able to continue your business, so realistic pricing from the start is a sensible decision to make when you work for yourself.

How can you calculate your desired wage rates?

There are lots of Hourly Rate Calculators online which allow you to either find out how much you earn per hour from a salary, or to calculate what you need to charge per hour or per day to achieve your desired income. Even if it is not always possible, it is certainly prudent to have an ideal figure in mind so that you have a goal to work towards. Ask others in your field what they charge and negotiate with clients about what they expect to pay. Another good tip for freelancers is to try to get paid up front for contracts. Once you know how long jobs will take, then it becomes more straightforward to offer a package to your clients.

How much to you want to earn?

Estimate what your living expenses are likely to be and break down what you need to earn to cover them. Include your bills, your financial commitments, your business expenses and anything else you need to pay for. Decide how many days per year you want to work; don’t forget to take out weekends and holidays. For example, the average working year comprises 225 days and the average salary in the UK is £26,000. This gives you a day rate of £115.55. If you want to break this down further to calculate an hourly figure, simple divide your day by the number of hours you would ideally like to work. Some people are able to work an eight-hour day, but this is not a hard and fast rule and you may be more flexible in your working hours. This sort of calculation is only a guideline.

Should you charge a day rate or an hourly rate?

How you structure your billable hours really depends on the kind of job you are doing. If you are pitching for small jobs, for example on a freelancing website, then you need to think about what your competitors are charging, what looks like a reasonable figure to your clients and about the amount of money you want to earn. Day rates make more sense for larger, more time consuming projects. Think carefully about what the client is asking you to do. Think about what the project will involve. Consider how long the project will take and the scope of the job. If you are able to work from home then you need not build in time for a commute to the office. Once you have decided if you want to charge by the hour, the day or for the whole project you should draw up a contract with your client that agrees on these terms.

What online salary calculators are available?

There are various online wage calculators that allow you to easily break down the hourly rate gained from a salary. These tools also help to calculate the rate of tax that will result from a given wage. Also consider National Insurance contributions, pension payments, student loan payments and other costs that you might need to cover with your wages. You can also start from an hourly rate to find out what you would like to earn from your employment.

What should you pay your employees?

Every employer has the responsibility to pay their workers for the hours that they contribute. In the UK there are laws about the amount that constitutes a minimum hourly wage. Employees must be school leaving age to qualify for the national minimum wage. Those over the age of 25 qualify for what is called the National Living Wage. The minimum wage rates apply to those aged 24 and under. The government web portal can provide up to date figures on these wage rates. You must be registered with HMRC in order to pay employees. Consider the automatic deductions made from wage packets including National Insurance, pension contributions and student loan repayments. When you have paid your employees you must produce a payslip, either on paper or digitally before or on the date that they are paid. Their pay and deductions must then be reported to HMRC in a Full Payment Submission (FPS).

What is the national living wage?

The National Living Wage (NLW) is the amount that employees aged over 25, whether they are casual workers, temporary or on a contract, are all entitled to by law in the UK. The actually rate will depend on the worker’s age and whether they are an apprentice. When the government increases the rate of the NLW, the employer is obliged to increase the amount they are paying their staff. These regulations for hourly pay need to be taken into account when you recruit new workers and they should be built into your Annual staffing budget.

At the recruitment stage it required to advertise the salary that the post will offer, even if the post is part time or offering casual hours. The employee will then have to calculate their hourly rate using an hourly rate calculator.

On an apprenticeship scheme, there are different rates of pay for people under the age of 19. Apprenticeships combine work with education and training. Such schemes usually take between 1 and 5 years to complete, depending on the career that is being entered into. All the details of these rates of hourly pay are available on the UK government web portal at gov.uk. Apprentices must be paid an hourly rate for their work and for their training, which is usually made up of one day per week.