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Fixed Price versus Hourly Rate – The Debate Continues

The age-old debate among freelancers continues, with newbies particularly keen on trashing out the ins and outs of the fixed price v hourly rate discussion.

At face value, one would think that hourly rates favor freelancers while fixed rates provide better value for clients, however, there are several ways of looking at the two approaches.

Fixed Price

When choosing the fixed price option the freelancer sets a price for an entire project. Doing this involves many risks, especially regarding unforeseeables like additional client requests, revisions and the often hard-to-predict duration of the product itself.

Hourly Rate

Hourly rate jobs are often open-ended and somewhat undefined. This is often seen as advantage to freelancers, however, as we will outline later, this may not always be the case. In most cases, clients opt for fixed price jobs because they can restrict spending and ensure completion within a reasonable amount of time.

A Freelancer’s Perspective

At first glance, hourly rates favor the freelancer for the following reasons:

•    Guaranteed good hourly rate
•    Less pressurized working conditions

On the downside, most freelancers fear missing out on assignments because hourly rate projects are less favored by clients.

This is the traditional view of fixed price – hourly rate, however, you may look at the issue in a different way.

Scenario A

Supposing an experienced content curator takes on a complex 2000-word writing assignment. She may opt for an hourly rate of $50 or charge a $300 fixed price rate for the entire job. Because the task requires an ample amount of expert knowledge, the client is happy to hire her on either basis.

For argument’s sake let’s further assume, the client wants to play it safe and opts for the fixed price rate, and the writer agrees. Because she is so knowledgeable and experienced, it takes her a mere 4 hours to complete the task – leaving her with an hourly rate of $75. It is unlikely the client would have agreed to pay that kind of cash and by choosing fixed rate, she ended up earning more.

This may perhaps be an unusual scenario; however, experienced writers and designers may well be able to carve out higher earnings by choosing the fixed rate route.

The age-old debate among freelancers continues, with newbies particularly keen on trashing out the ins and outs of the fixed price v hourly rate discussion.

Scenario B

This time, the freelancer is attempting to achieve a similarly high hourly rate and proceeds along the same lines as in scenario A. Unfortunately, this time, the client is exceedingly picky and asks for not just a few but no less than ten reviews. With every review, the hourly rate drops. At completion, she calculates an hourly rate of $20 which is far less than she normally charges. In this scenario, choosing the hourly rate would have been far more favorable.

A Client’s Perspective

From a client’s perspective, fixed rate assignments are preferable. The budget is controlled and the client can squeeze as many edits or reviews as she/he wishes. Without having to choose the lowest rate freelancer, the client is assured of having a project completed within time and budget.

Hourly-rate hires are only considered if the client negotiates exceedingly low rates or wishes to work with the freelancer on a near employment basis. Hiring freelancers on this basis saves clients ample amounts of cash in income tax, social contributions, and all other employer-related charges.

Perceived Value and Freelancer Reputation

Freelancers are in a tricky position. On one hand, they need to be seen to provide value for money to the client, and on the other hand, they should never sell themselves short. Working for ridiculously low rates may be acceptable for complete beginners, but any freelancer worth her/his salt must charge adequate rates to be respected if nothing else.

The perceived value to the client is also crucial. If a freelancer charges high rates and completes a task within an exceedingly short space of time, the client will feel duped. If a freelancer takes on a large project and charges very little, the client may perceive the freelancer to be second rate.

Seeking Fairness and Good Working Relations

The age-old debate among freelancers continues, with newbies particularly keen on trashing out the ins and outs of the fixed price v hourly rate discussion.

Regardless of which of the options is chosen, the “deal” must lay the foundation for a good working relationship. The client must feel that she/he is getting a good deal, and the freelancer needs to feel compensated for her/his time, effort, and expertise.

Only if both parties are satisfied with the condition can good relations flourish and a project be brought to a satisfying conclusion.

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By interactivated • on June 13, 2017

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