Set sustainable rates for your freelancing gigs and achieve your financial goals.
You’ve taken your first steps into freelancing, and even have a prospective client or two on the cards. But their first question has stopped you dead in your tracks: what are your rates? It’s something that never concerned you as a full-time employee, but as a freelancer, it’s critical. You — not the HR department — are ensuring you get paid a well-deserved salary and you don’t want yourself to lose out.
Unfortunately, setting rates effectively is not as straightforward as looking up standard fees online and calling it a day. Freelancing rates vary widely, and some clients exploit the variety available to underpay or drag their feet on payments.
Here’s a guide to setting rates that guarantee you fair payment and a fulfilling and sustainable freelancing venture.
Crunch the numbers on your goals
Start by figuring out how much you want to earn. This target figure should include your expenses, both personal and professional. Also factor in the salary that you want to pay yourself, any taxes and insurance.
Do include any CPF contributions too. It is compulsory for freelancers who are Singapore Citizens or Permanent Residents to top up their MediSave accounts if their yearly net trade income is more than S$6,000. The contribution rates start from 4%, and vary according to age and income. You can check the rate relevant to you on IRAS.
Crucially, also focus on why you wanted to freelance in the first place. Did you choose this path for the flexible schedule, or work-life balance, or to focus on your passion areas? Perhaps you were underpaid at your full-time role and thought you could better your income as a freelancer? Whatever your reason may be, keep it in mind as you move towards the next step: factoring in how many days and hours you want to work.
Based on your goals (let’s say, to work fewer hours each day, or take one to two days each week for personal pursuits), come up with the rough number of days x hours you’d work per year. Deduct public holidays, weekends (unless you prefer working then, relatively undisturbed), vacation and sick days, and you’ll get an idea of the total number of hours in a year you’re game to work for.
Once you’ve worked out the above figures, you’re ready to calculate your Minimum Acceptable Rate (MAR). In other words, the minimum hourly rate you’d work for. You can arrive at this figure by dividing your target earnings by the number of hours you’d work per year. As freelance rates usually cover a range, your MAR will form the lowest threshold you’d be willing to accept. Mostly though, you should gun for higher.
If you previously held a full-time position, calculating the hourly rate you used to earn can also help give an idea of the starting ‘market value’. Bear in mind, however, that salaries for full-time positions broken down per hour are usually significantly lower than salaries based on hourly rates. This is due to other benefits provided to full-time employees.
Research the average market rates
With your MAR figured out, you can then check out the range of rates typical for freelancers in your industry. Websites such as Glassdoor have estimates posted by other freelancers. A quick Google search should also turn up examples of what others charge.
Take a closer look at whatever details may be available. The context of the freelancer’s experience and the project’s requirements will help solve the problem of how much to charge for a similar project.
Decide how to set your rates
Now that you know the lowest rate you’ll accept, and have a sense of the payments that freelancers in your industry charge, you can move to deciding on how to set your exact rate. There are a few common ways to do this — each one’s suitability depends on your industry and the nature of the project.
This rate works for types of work with clearly defined hours, such as service jobs or emceeing. For other kinds, however, especially the creative and knowledge-based, it may be tougher to quantify the value contributed merely by the hours spent working on it.
A rate that is set per project, it gives you room to ask for a rate that includes non-quantifiable factors. These cover aspects such as the nature of the client, the value the project can potentially reap for the client, and your experience and expertise.
Not to be forgotten is the value of the project for you, which may not necessarily be monetary. Even if the job won’t pay well, it may be an opportunity within an area that you’re passionate, or keen to learn more, about.
Or you may want the experience of working with a big-name client even if for a smaller payout, as it could lead to other opportunities down the road. Even in such cases, however, make sure not to underpay yourself or subject yourself to unpaid work just for ‘exposure’.
You may also want to consider your future working relationship with the client. If it seems likely that the client will return for future jobs, it may be worthwhile to accept a smaller (but not unreasonable) initial fee.
That brings you to your next option, which can apply to recurring customers. Such clients are beloved by freelancers, as they bring in predictable income. Their projects can become a staple of your schedule and income, allowing you to plan around them when seeking out other opportunities.
You may want to offer them retainer agreements with package prices based on their needs – usually per week or per month. It’s a win-win — you get regular clients and they get lower rates.
Negotiate rates and terms
You have in mind the magic figure. Now you just have to get the client to agree and sign on the dotted line. But this in itself may take some finesse. Due diligence and careful negotiation should help you close the deal and ensure you get paid in a timely fashion.
Clarify your client’s budget
Depending on how keen you are to work with a client, you might want to take their budget into account. You may have a figure in mind, but if you’re not sure they will be amenable, check if they have a budget before proposing your rate. Or, state your rate first, but let them know you’re open to discussing it if necessary.
Clearly define your scope of work
Make sure your invoice or agreement captures the agreed-upon scope of work. This will be helpful in case the client has additional requests or broadens the scope when the project is in progress. You can either have provisions in your agreement for the rates for additional works, or discuss the rates as and when these crop up.
Guard your income through payment terms
Requiring a downpayment before the project begins can help to lock in your client’s commitment, and maintain your income, especially for longer-drawn projects. If you do require one, determine what percentage of the full payment it should be (usually up to 50%), and include it in your agreement.
When finalising the payment terms, make sure to state the final deadline for the client to make full payment upon completion of the project, and late fees to deter any tardiness.
Keep the bigger picture in view
As freelancing gigs are usually irregular in nature, there will be times when more come in and, at other times, less. When setting your rates, remember that whatever you earn in that period will contribute to the total amount averaged over the year. This will help you keep your perspective in balance — a boring yet decently-paying gig, for example, may allow you to take up an interesting opportunity that pays less.
And don’t forget your lifestyle goals. If, say, you embarked on freelancing in order to free up your schedule, it makes sense to not only evaluate projects based on their possible rates, but also the amount of time required.
In conclusion, freelancing is about working on your own terms, to achieve your goals, be it financial, professional or personal. You succeed in setting your rates if they bring you closer to your goals. The key is to work out the income you require, and the lifestyle you want to pursue. From there, you’ll get a sense of the rates that will support you in these. The rates will usually comprise a range, from which you can pick and choose depending on the characteristics of the project/client.
Stay flexible in adjusting these rates as you go along to suit your changing needs and aspirations, and to reflect your growing experience and expertise as a freelancer.
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