Hourly Vs. Flat Rate: Pros and Cons
June 10th, 2010 by Tweet
In this post, I will discuss my experience regarding the pros and cons of hourly and flat rates. If you are still in the starting stages of your freelance career, and trying to decide what you are worth and what to charge, then check out my articles, 12 Tips on Pricing your Web Work and Tools to Help you Estimate Price for your Web Work. In this article, I will go to the next step and see which is better, charging a flat rate or hourly, and why the one you choose might depend on the particular project, your work style, and or client. Therefore, I have come up with some elements to consider when trying to decide whether to charge hourly or a flat rate; so you, as the web developer or designer, can once again be confident when you name your price whether it be a flat rate or hourly, and the client can be sure about what they are getting for the price. Feel free to add some additional tips, and please comment! I hope you find this advice useful!
Hourly Rates
Pros:
1. You are assured that you will get paid for your actually hours of work.
2. You get paid even if the project is changed or ceased for any reason.
3. It allows you to work on more than one project at a time, or even split your work between two projects.
4. It can be accurately counted and tracked.
5. You can bill throughout the project, so you are more confident in getting paid.
6. You have the trust of the client, and build a great long standing relationship.
Cons:
1. You are not guaranteed a minimum payment for a certain project.
2. Customers may doubt the hours you give them.
3. Harder to know what the final payment for a project will be, and what the final cost to the client will be.
4. You have to be very meticulous in tracking your hours, and be consistent.
5. The rate is based on hours, rather than the value to the client.
6. Does not reward extremely experienced and efficient workers, because they may do the same work in half the time of another freelancer.
7. People expect the price to be cheaper.
8. Client my not understand that every time they organize a meeting with you, it is time that you loose and thus need payment.
In general, I recommend hourly rate for clients you have a solid relationship with, or ones that you consistently do contract freelance for.
Flat Rates
Pros:
1. The client generally knows the cost of the project from the start (unless there are changes to the scope of the project) and you know what you will get paid.
2. It makes the client happy to know the total cost of the project.
3. You work harder in order to complete on time.
4. You do not have to worry about keeping time, and only worry about the project itself.
5. You are guaranteed a certain payment, even if you work efficiently and finish the job quickly.
Cons:
1. You are taking a risk that the job will take longer than expected, and you will end up getting underpaid.
2. If you set the price too low, you are stuck with the responsibility to do the project for your client, even if it is more work than you thought it would be.
3. You will have to be ready to respond to the the client that requests additional requirements outside the budget. (which happens A LOT!)
4. You might be taken advantage of by the client who constantly wants to expand the projects specs, but not expand the rate.
5. You risk doing all the work and not getting paid in the end.
Conclusion
In conclusion, your own experience and/or specific situation will assist you in determining which payment option is more appropriate for you and your client. After you have a few projects under your belt, you will know how long it takes you to do certain projects, thus can more accurately determine what your flat rates should be, or to know when a hourly rate would be more advantageous. Generally, I recommend to use a combination of the two methods, and by knowing the pros and cons of each, you will be more confident to determine which method is best!
Teylor Feliz is a well-known XHTML/CSS/JavaScript enthusiast from Santo Domingo, Dominican Republic. He has more than 10 years experience in the computer programming and development world, including 2 years teaching computer science. He is currently living in Louisiana, where he plans to complete his degree in Computer Science, and begin a Masters in the field.
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Great synopsis of a lot of articles I’ve read recently on the topic.
If I can, I try to bid per project, but add a clause in the contract that allows me to bill hourly for any changes to the project scope. Protects me and the client in the long run.
-J
Hourly will just get you conned. Flat rate with 50% up front!
Good post, Teylor. I also agree with the comments above, as well.
A flat rate, plus an hourly rate if the project goes beyond set parameters. Plus a deposit is necessary because it not only shows the client’s level of commitment to you, it allows you to get any resources lined up and schedule the project accordingly.
Retainers are also beneficial for many reasons as a 3rd payment option.
We all want to be paid fairly for our skills and it’s important to find what fits best.
Chris
Great article. Form my experience there are very few pros to fix rates. At least for the person doing the work.
Thanks for your imput!
Normally I use Flat Rate prices and I include in the contract that if the client wants something to be done which is outside of the initial budget then it will be charged and the timeframe can be changed.
Very good idea! Thanks for sharing!