The perfect hourly rate for freelancers
Published on: 12 May 18:04
Besides of selfpromotion and customer acquisition, freelancers have another big challenge: the determination of the perfect hourly rate. In the beginning, you tend to undervalue yourself because of the lack of self-confidence, money and experience. The more experienced and known you get, the more you can demand for your service. But how much can you charge at the most, without losing customers? And what minimum hourly rate should you request for not exploiting yourself?
91,05€ per hour
According to the studies of freelancermap, the hourly rate of freelancers (especially in the area of IT) increases steadily. 2009, the average hourly rate was 70€/h, in 2014 76€/h and in 2018 already more than 90€/h. There is still no data for 2019 because the study is usually conducted in August. Anyways, the average hourly rate of last year in Germany was 91,05€/h. The emphasis is on average, because it depends on the place you live. For example in Germany, there are differences between the states concerning the hourly rate. In Hamburg you’ll get paid 93,13€/h, whereas in Saxony you’d only get 70,30€/h.
In what consists the hourly rate?
91,05€ per hour sounds like a lot of money compared to the minimum wage of 9,19€/h in Germany. Full-time staff gets 1945€ net per month in the average, which is equivalent to 14€ per hour. Nevertheless, considering all the expenses freelancers have to cover with their income on their own (employees are supported by their employers), the hourly rate needs to be a lot higher – at least around 50-80€. But in what consists an hourly rate actually?
- Gross salary
- Personnel expenses
- Overhead costs
The gross price is composed of the net price plus value added tax. Imagine you’re a designer. As an employee you’d get 30.000€ net per year. 30.000€ divided by 365 days divided by 8h per day results in an hourly rate of 10€, fairly little. But nobody works 365 days a year! 104 days are weekends, 30 days holidays, 11 days are public holidays in Germany and let’s add 14 days for being ill and doing a training. Accordingly, we’d have 206 days left à 8h, resulting in an hourly rate of 18€. Done? Not yet. 50% of their time, freelancers have to spend writing offers and bills, doing selfpromotion, accounting and customer acquisition, etc. So, 100 days remain for making all the money you need for your living. 30.000€ divided by 100 days à 8h results in 37,50€ per hour. But that’s still not enough. You have to consider all the personal expenses you have, like for the social insurance, health insurance, pension provision, and so on. So you will have to add 10.000€ per year and, in consequence, earn 40.000€ in 100 days. But don’t forget, that you won’t get paid for being ill, on holiday or in a training. You also have to pay the expenses for your material and office. Let’s add another 30.000€ for those overhead costs. 70.000€ in 100 days results in an hourly rate of 87,50€ without profit! Actually, freelancers should earn 1,5 times more than employees for being able to live the same living standard. By charging “only” 50€/h you’d earn as much as a full-time employee getting the minimum wage.
Everyone has different expenses
Don’t get discouraged by the calculation made above, because not everybody has the same expenses. Some freelancers have way lower costs of living, because they live abroad, don’t have to feed a whole family or still don’t make provisions for old age. Besides, as a beginner, you don’t have lots of experience yet and you’d rarely find customers willing to pay a high hourly rate to a newcomer. For women in the IT industry it’s even harder: they get paid 7€ less per hour on average. Eventually, only experts can charge an hourly rate of 91,05€, whereby it also depends on the field of activity:
Ultimately, the hourly rate depends on different factors: age, sex, experience, area, living costs, etc. You are the only one to know how much you need for your living. If you’re not sure, figure it out via this calculator.
How to raise your hourly rate
- Even if you start with a low hourly rate, like 30€ per hour, you can add more with the following factors:
- Education: Did you study marketing, webdesing, computer science or something similar that has to do with your area, you already have more experience than someone without any education in that field. Therefore, you can add, let’s say 10€ to your hourly rate and charge 40€/h in total.
- Experience: Your experience increases with your age and makes you seem more competent. Every year you can add another 10€ to your hourly rate without guilty conscience. The right customers will pay it!
- Succes: Did you have a client who really liked the job you did because it boosted the sales? Ask for a review! Start collecting all your little successes and present them when you feel like having to “justify” your hourly rate.
- Specialisations: You’re an expert in your niche? That’s a reason to add another 10€ to your rate!
- Special skills: You speak three languages fluently and, thus, can help your client with translations? You are a good photographer and editor and use your unique pictures instead of taking them from unsplash, pixabay & co.? You can definitely increase your hourly rate by another 10€.
For being able to make a living out of a reasonable hourly rate, you need a lot of courage. In order to strengthen your self-confidence, you can do some trainings in your area. They are worth the investment, because in the long-term you’ll make more money due to your additional knowledge. Don’t be afraid of declining offers that pay under minimum wage, but don’t get discouraged by not earning 91,05€/ either. Everybody has other expenses and has to gain experience first. Over time you’ll learn to calculate your personal optimal hourly rate and to represent it!