How to know what determines a freelancer’s hourly rate?

Suppose you are a business owner or want to start a business or a website and hire a freelancer for a particular project task. In that case, you are primarily concerned with not just their expertise, but mainly with the costs of it all.

In most cases, freelancers charge an hourly rate and rarely a rate per project. This gives them the freedom to manage their prices in a competitive market. Now, as much as it is helpful for freelancers to know their value, it is just as vital for you as a client/employer to clearly understand what your end of the costs will be.

In this article, we will offer a good starting point for you to try and roughly estimate the costs on your end in advance and prepare ahead of hiring a freelancer or starting a project.

There are several factors to consider before searching for a good candidate, to avoid being ripped off, foremost, and to know if someone with a high rate offers work with better quality than freelancers with a low hourly rate.

Location

Although a location doesn't determine a freelancer's skill or knowledge, it does affect how much they NEED to charge in order to have a sufficient income to have a good life. This is the reason why many freelancers from lower-income countries charge lower rates, especially at the beginning of their freelancing career.

The fact that people from all around the world can apply to a job in a higher income country, for example, can create a discrepancy between what the employer would pay a full-time employee or freelancer from their own country, which is one of the reasons that made outstaffing freelancers such a popular and affordable option.

Expertise

Now, this factor plays a huge, if not crucial role in the rates. The years of experience a freelancer has shows their expertise and guarantees that they will likely or surely provide excellent work at all times.

Yes, this is a crucial factor, but it is accompanied by many others that make someone the expert they are today. Expertise and experience are not the same but are very similar and complement each other.

Suppose the freelancer has many years of experience with something. In that case, it means they have reached that superbly professional level of expertise, already know the ins and outs of the business they’re in, and excel in that specific industry, so they will ask for higher rates. Not only this but expertise in the technology you hire for.

Let’s say you need a developer that is a master in a particular programming language or technology. This is the expertise you seek, which goes nicely combined with the number of projects the dev had with this technology in the past and the overall experience they’ve had with it through the years.

Industry

It is complex and very hard to determine an average freelancer rate because it first depends on what industry they come from.

Some professionals ask for a higher rate if what they do is in high demand. Usually, IT and tech are the industries with the highest rates, whereas design, writing, and other professions are in the medium-to-lower ranges.

For example, graphic designers might ask for one rate, while software developers for another, much higher rate. A proofreader might ask for a lower rate than these two mentioned above. The complexity of the work within an industry, and the demand for that industry or skills, are relevant factors to keep in mind. And to retain the best talent, you should know the industry they come from very well.

Demand for that expertise or skill

As mentioned above, the freelancer's industry is essential in defining the rate. There are huge differences between design, IT, writing, UX/UI, project management, and so on—despite all of them sharing some similarities, even minor ones like digital working.

It is not too difficult to notice if a skill is in high demand or not. Whether purposely or not, job ads pop out on social media and job platforms, and you can notice the highest paid and sought-after professions quickly, without much hassle.

These are just examples of a variety of different niches and industries. But as a rule of thumb, the more popular the industry or a specific expertise skill, the higher the rates will be.

Competition in the market

Similar to the industry and the expertise demand mentioned above, the competition on the market fits into this segment equally. But, we can describe competition from two perspectives here:

  • Competition between freelancers and their expertise
  • Competition between potential clients that seek freelancers with high-demand expertise

In the first instance, it is usually a skill or expertise that most freelancers on the market have mastered. In this case, most of them would lower their hourly rates.

In the second instance, it is likely a skill that is quite rare to find (with professionals delivering excellent quality work, of course), and clients are more willing and prepared to pay higher rates for these freelancers.

Proven track record

A proven track record combines more aspects within. It is like a resume, with a few extra additions that make it even more impressive.

For example, a proven track record means the freelancer did an outstanding, excelling, superb job on several types of projects, or even just one project that was finalized to an excellent degree for the employer. It was done meticulously, professionally, timely, and flawlessly.

The freelancer is incredibly proud of this type of track record, and this usually encompasses all their best work experiences combined through the years of freelance work. Expect higher rate suggestions from those with a stellar, proven track record.

Excellent user reviews

As mentioned above, part of the proven track record is undoubtedly the reviews of the clients toward the freelancer. The more (perfect, excellent, or above good and average) reviews you see on someone’s work profile (or through their recommendations in the portfolio and resume), the better.

With this, remember that their freelance job was excellent on all occasions, and you shouldn’t be surprised if the freelancer asks for a higher rate.

Exquisite portfolio

Here we won’t focus so much on the previous clients the freelancer had—all those factors are included in their resume, portfolio, and relevant track record.

However, it does matter what background you’re coming from as a client who searches for a freelancer. Are you in a business that has continuous and fast scaling and growth? Do you have a lot of competitors on the market, all relevant and big brand names?

The freelancers that have experience working with companies that are well-known, established, and can easily get the best employees out there, deserve to be paid better.

Availability and working days

Depending on the type of contract you establish with the freelancer, you can set the expectations regarding working hours, i.e., the number of hours expected on the project, or set the time zone, including whether the project will be part-time or full-time, fixed-rate, weekly or daily.

Still, it is almost an unwritten rule that freelancers manage their own time and working days, so in case they need to take a day off or a ‘sick day’ off work, they can of course do that, as long as it does not (heavily) impact the deadline of a project. But, at the same time, keep in mind that they do not have to officially demand a day off—the point of freelancing is work-life balance and time management that corresponds to that, as well as the project, on their terms.

Within this context, we must mention that the more availability you expect of a freelancer, the higher the rate could be.

Since freelancing is mostly about managing time (and often location) per individual choice, asking for more online presence or semi-fixed hours and days of work will likely affect the rates.

Urgency of the project

Despite not being usually mentioned as a significant factor in determining rates, a project's urgency can also influence the rates.

If a freelancer sees how the urgency limits the turnover time, they can raise your rate, justifiably, given the very brief amount of time left to complete the project. It truly makes a difference whether something needs to be done in a month, week, or even on a short notice, like one or two days, for example.

The takeaway

Hopefully, all the main factors listed above give you a clearer picture of all that affects a freelancer’s hourly rate.

With these factors in mind, you could develop any pricing strategy when you need to hire a freelancer, and you can know in advance what to expect or what is expected of you.

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