The Freelancer’s Dilemma – Charge By the Project or By the Hour?

Editor’s note: This is a guest post from Leona Henryson, Commercial Director at Essay Supply.

The “Great Debate.” For freelancers, it’s not about climate change, elections, or any of the myriad of other social, economic, or political issues facing the planet. In their niche, the debate is whether to charge by the hour or by the project.

And it’s a debate worthy of having, because, here are a few stats on the growth of the freelance economy:

• There are over 53 million freelancers in the U.S. alone, and they contribute over $715B to the economy.
• In the UK, over 1.4 million state they are freelancers, a number that has grown 34% over the past ten years
• And in Europe, freelancing as a profession has grown by more than 45% within just a one-year period.

With this kind of growth, it is understood why freelancers have big decisions to make about how they are paid. Do they charge by the hour or by the project?

The Project-Based Die-Hards

Here’s the argument. Charging by the hour has two major drawbacks they say:

1. It will limit earning potential, because you will work less efficiently than if you charge by the project. If you charge by the project, on the other hand, you are incentivized to work quickly, finish the project and collect your fee.
2. Clients are more comfortable with a per-project fee. Suppose, for example, that you are a freelance writer, and your client wants a white paper on a specific topic. You already have lots of expertise on the topic and know that you can finish it in a couple of hours. You project-based fee is $500. If you charged by the hour, that would calculate out to be $250/hour, and the client would surely balk at such a high rate. It’s a psychological thing for the client.

The Hourly Rate Diehards

Those who insist that an hourly rate is far preferable argue the following:

1. When a freelancer bills by the hour, he is far more in control of his time and payment
2. Often, the scope of a project may change – it’s often called “scope creep.” If a fixed rate has been given up front, more time is now spent without additional compensation. Suppose a freelance web designer has estimated that it will take 15 hours of his time to create the website. He has a fixed hourly rate. Then, the client wants revisions. The hourly-rate freelancer can then provide an estimate of additional time and amend the original contract to include these extra hours.

Finding the Middle Ground

Probably the biggest mistake freelancers make is to make the decision to go one way or the other without exception. In fact, what freelancers should be doing is analyzing each client need and determine project or hourly cost from there.

Here are some scenarios/guidelines for when and how to charge, based upon the project and your patterns of work. The goal, of course, is to bring in the most revenue from each project for the amount of time and effort you expend.

A Long-Term or Ongoing Project

A freelancer can go nuts trying to figure out what to charge for each piece of this long-term work. The problem is that all of the details of each piece have to be analyzed and a fee assigned. Far better to charge by the hour.

Client Is Unsure of Scope and Timelines

When a client presents a project without specific scope or completion timeline, a freelancer will have to “go with the flow” as the project moves along. In these instances, the client may add to the scope. If a flat fee has been provided, this leaves the freelancer doing extra work for nothing. An hourly fee is far better with this scenario.

When a Freelancer Works Fast

People have a variety of paces at which they work. Those who tend to work at a slower pace will realize more revenue if charging by the hour. Similarly, those who work at a faster pace will want to charge by the project.

Charging by the Hour Can Make Rate Raises Difficult

When freelancers set a per/hour fee, they can “lock themselves in,” especially when one client recommends them to another. On the other hand, if charging by the project, each client can be told that a number of factors are considered when determining a price. It is easier to raise your fees if charging by the project, because that “raise” is not as transparent.

Clients Don’t Understand the Complexity of What You Do

This is often the case with freelance designers/developers, but can also be true for less “complicated” work, such as writing. Consider, for example, a client who wishes a blog maintained with fresh posts on a regular basis. In the client’s eyes, a writer simply sits down and writes. In reality, that writer must spend time researching topic ideas and the popularity of those topics; he must research the popularity of keywords; he must study what competitors are writing about; and he must work to identify target audiences and their needs for information, entertainment, etc.

Finally, that writer sits down and crafts a piece of writing. Even if they work fast and pump out posts quickly, their skills are valuable and worth a reasonable rate of pay. One post may take an hour; another may take three.

The same is true for writers who work for write my essay writing services. They charge by the project rather than the hour, no matter how long an individual piece may take them.

You Want to Motivate Yourself to Work Faster

Freelancers who charge by the hour tend to take more time to complete a project. This can sometimes irritate a client who thinks they are not working quickly enough. And that could actually be true.

If you charge by the project, you are far more incentivized to work faster to get it completed and move on, perhaps spending more time marketing to new potential clients. Only you know how you work best, so this is an individual decision. But it’s something to think about.

The Best of Both Worlds

There is nothing “written in stone” that says a freelancer must make a decision to charge by the hour or by the project. In fact, that’s what freelancing is all about – having the freedom to determine pricing based on the market, the specific project, and the client. The key is to evaluate each project and determine which pricing option will bring in the most revenue. If you can produce value quickly, charge by the project. If you know that producing value will take some time, charge by the hour. Just be certain you are within the parameters of what the “market’ will allow.

Leona Henryson is a freelance writer and UX designer at Essay Supply. Also, she is a contributing writer for various blogs. When she is not writing or designing, she is swimming, hiking, and, weather permitting, snowboarding.