Price per project or price per hour?

Catherine Every

Every Word Ltd

I read an article recently that gave tips for businesses hiring freelance workers for the first time.

The article gave plenty of sound advice, but I was intrigued by the last tip:

Keep an eye on time-tracking reports
As freelancers are often paid per hour, project managers need to be able to identify any unusual deviations in time tracking reports. If the same task was taking 10 hours in the past, why is it taking 30 hours now?

If I were hiring freelancers for the first time, this would set all sorts of alarm bells ringing about budgets spiralling out of control.

If this is you, I’d urge you not to worry. I’d like to unpick the premise a little and say things may be less problematic than you might think.

The first thing to say is that I’m not sure I’d agree that freelancers are often paid per hour. Many freelancers will prefer to agree to a per-project price rather than an hourly rate (when it comes to copywriters, for example, 62% prefer per project pricing).

Why a per project rate is often better

You might be concerned that a per-project rate will lead to over-inflated costs, but this is not necessarily the case. To a greater or lesser extent, a per-project price will include an element of how long it will take to complete so it will have some relationship to a day rate so the 2 approaches may not in fact be very different. (I say to a greater or lesser extent because value-based pricing is becoming increasingly common.)

As freelancers, we’ll advocate a per-project price because it’s better for you. You know exactly how much something will cost up-front so you can manage your budget more easily. The concern of strange time-tracking reports is removed.

Plus at the end of the day, it actually doesn’t matter to you how long a freelancer spends on a job (as long as they deliver when they say they will, of course). It just matters that they deliver something that will deliver on your objectives. You aren’t paying a freelancer for their time, you’re paying them for their expertise.

It’s also better for us. The better you are at something, the quicker you’re likely to be. With a per hour price, experienced freelancers may end up being penalised for being good at what they do.

When a per hour rate may be the answer

Of course, a per project rate isn’t always the best solution.

If you know that a project is going to be a little nebulous and you aren’t quite sure what’s going to be involved or how long it will take, a daily or hourly rate may be a good way to go.

It respects your freelancer’s time and they’ll appreciate your honesty that you don’t want to run the risk of them under-quoting. (It also saves you from the risk of them over-quoting to cover themselves, leaving you not getting value.)

When you have established a good relationship with a freelancer and know you have enough work coming in for them to work with you regularly, it can work to ask if they can set aside a certain number of hours a week or month for you. You’ll then send them whatever needs working on and they’ll do the work, sending it through as they complete it.

A couple of notes of caution on this. For example, background reading and research take longer than you think. You could pay for a day and see no immediate output, even though it will be clearly reflected in the end result. (I would guess that this was what happened in the 10 hours / 30 hours example above.)

If you’re thinking of a retainer-style arrangement like this, you should also expect your freelancer to put a contract in place that says they’ll charge you for their time even if there wasn’t work available for them to do. Many freelancers will show a great deal of flexibility.

For example, they will agree to work on a project next week, even though you’d initially said it would be ready for them to work on this week. But they do need to have a backstop in place at some level because they may have turned work down from other clients on the expectation of work from you. You should also expect them to put a notice period in on both sides, to protect both of you.

Freelancers are a valuable, flexible resource

Ultimately, if you need an expert to work on something you can’t do in-house any longer, a freelancer is the answer you’ve been looking for. If you’re new to managing freelancers, the Entrepreneur Europe article has valuable tips. But the point about per hour pricing need not necessarily be the stumbling block you originally thought.

What do you think?

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