Pricing methods in freelancing vary, and there may not be a universally right or wrong approach. The correct method is one that “suits you or doesn’t.” Hourly pricing is one of the most commonly used methods, much like project-based pricing. In this post, I’ll share some observations about this pricing method, focusing on its drawbacks or reasons why I don’t prefer it, along with some quick notes for when you might consider using it.
We don’t just rely on time
Sure, work requires time, and you get paid for it. But the professions we work in, especially the creative ones like design in its various fields, photography, writing, and more, don’t just rely on time or effort. They rely on thinking, focus, creativity, or innovation, which all require experimentation. And experimentation takes extra time.
You might experiment with an idea, complete it, then realize it’s not suitable, so you start over. No matter how skilled you are, the time this takes can’t be predicted or known. You might spend hours working without producing anything tangible worth presenting.
Add to this the experience you’ve gained from the many projects you’ve completed over the years, or even from courses and books you’ve learned from, which have given you a certain speed, skill, or creativity in testing ideas. In my opinion, all of this can’t be expressed with a specific hourly rate, even if you adjust it from time to time.
Hourly pricing reduces efficiency
Yes, those who work conscientiously and honestly will do so whether they are freelancing, regardless of the pricing method, or working a regular job. But even assuming that, over time, you’re likely to struggle with boredom and routine, which will shift your focus to the passing hours and perhaps their count, rather than on achievement, quality, and efficiency.
Speed with quality in your work encourages you to take on more projects, which in turn increases your personal efficiency. This means more clients and projects. If you’ve tried both scenarios and made a simple comparison, you’ll notice the difference in the amount of work you complete in the same amount of time.
It complicates building a good relationship with your client
Most clients might prefer hourly pricing because it allows them to add modifications or enhancements to the project without much concern, or because it reduces the risk if the freelancer is unknown or new. You might also think it’s simpler, easier, and better. But this pricing method will create a sense of doubt and discomfort for both of you. Often, after some time, you’ll find yourself trying to account for every second of your time, unsure of what’s wasted or actually productive. Your client will begin to feel that too much time is passing for small tasks, or you’ll find yourself overwhelmed by accumulating tasks.
Without generalizing completely, most clients with this type of pricing don’t establish long-term, comfortable working relationships. The exception might be if you charge a low rate that puts your client at ease, knowing that the total hours worked will cost less than a flat project fee, or if both you and your client are highly experienced and professional in your dealings.
Difficulty in setting an hourly rate
While setting an hourly rate and applying it to a project seems simple, straightforward, and offers more comfort compared to a flat project rate, the real challenge lies in determining the correct hourly rate for your work.
If you estimate it randomly or base it on someone else’s hourly rate, you’ll fall into the trap of either overpricing, which doesn’t represent you and isn’t suitable for your client, or underpricing, which is unfair to you and will lead to dissatisfaction later. In either case, the rate you set becomes difficult to change later.
If you try to calculate it precisely, such as by estimating your monthly needs, adding the cost of your equipment, experience, downtime, and other boring factors we hear about to estimate an hourly rate, you’ll end up with complicated and sometimes illogical calculations, leaving you dissatisfied with the final rate.
Then there’s the difficulty in adjusting this rate
As mentioned earlier, setting an hourly rate and sticking to it might not be simple or easy, especially at the start of your career. But let’s assume you’ve arrived at your rate, whether through industry norms or through extended negotiation with your client, who also bases it on their experiences and the feedback of others.
The real challenge will be later on, when you try to change this rate. Adjusting your hourly rate is much harder than adjusting a project fee that you think might be too low for the time and effort required. Usually, this rate becomes the benchmark by which you’re valued, and changing it means convincing anyone who has previously worked with you or was referred to you by a former client, leading to endless negotiation.
It increases your sense of dissatisfaction
Hourly pricing often leaves you feeling unsatisfied. If the work is routine or easy, and your client is flexible and understanding, you’ll feel comfortable. But if the work is complex, tedious, and requires significant expertise or focus, you’ll start feeling uneasy about not having taken the project as a flat fee, or about the rate you set for your hourly work. There’s also the constant struggle with your conscience over how focused and diligent you are with the time you’re billing your client.
Yes, this sense of satisfaction or lack thereof doesn’t just apply to hourly pricing. But the problem lies in the continuity that hourly pricing creates, unlike project-based pricing where even if you estimate the fee a little low, your discomfort ends when the project is complete. This also allows you to adjust the project fee if the scope increases unexpectedly.
It creates a false sense of job security
You might think that hourly pricing provides more security, similar to a salaried job. In other words, a client who always works with you, or for a long period, guaranteeing a steady income over a relatively long period (a month, two months, or even a year, for example).
Of course, this mindset is incorrect because sustenance and its ease come from God, regardless of the nature of the work or its structure. In my opinion, relying on this pricing method and sticking to it might cause more harm in the long run. If the working relationship with your client continues, everything goes well, and the contract isn’t terminated after a while, this method will prevent you from taking risks, experimenting, and working with new clients, unlike project-based pricing, which will be better for you financially, mentally, and professionally in the long term.
Loss of referral marketing
Perhaps the most important and effective marketing method for you as a freelancer, which you should always focus on, is client referrals, or “word of mouth.” Hourly pricing significantly increases your chances of losing out on this.
The feeling that hourly pricing leaves with the client is closer to the feeling of an employee in a salaried job. How many clients recommend an employee they work with to another company or organization? You can infer this perception from the way tasks are added, requested, timed, and followed up. Yes, this varies from client to client, and there’s no universal rule, but it certainly plays a significant role in this, at least in my opinion.
Yet, it might suit you in certain situations
For example, I find that hourly pricing is suitable for a freelancer at the beginning of their career to build real work experience or as a bridge to transition from a salaried job to freelancing, or even to take on projects that may not suit them and fit their client.
It might also be more suitable for routine adjustments and tasks. If you’ve worked on a project with a fixed fee and timeline, and later on the client requests modifications or additions that aren’t clearly defined, this pricing method might be effective and efficient in that case. I also find it more suitable for certain fields like programming work.
Quick notes if you decide to use it
• Always clarify to your client that the hourly rate you’ve set applies to this project and this situation; it’s a variable rate.
• Estimate the expected hours for the project before starting, whether for yourself or for your client, and train yourself to accurately assess this.
• Consider using a program to monitor and record your work and what you do, both for yourself and your client.
• Use effective programs and apps for task management, tracking hours, and organizing and archiving your work completely.
• Agree with your client on a specific sequence for completing the work or a set of tasks for each week, for example.
• Don’t let task reprioritization become a daily distraction, except for emergencies that might halt the project.
• Continuously adjust and refine your hourly rate, increasing or decreasing it, and inform your clients of the reasons behind these adjustments.
• As a personal recommendation, occasionally try project-based pricing, and don’t rely solely on hourly pricing.
In conclusion
As this post suggests, I personally don’t prefer hourly pricing. This doesn’t mean it’s bad or that working with it is wrong, but I find it less suitable for long-term freelancers and their personal development. Yes, there are certainly situations where it’s quite appropriate.
What I highly recommend regarding this method is using it personally, estimating an internal hourly rate for yourself. For example, estimate the amounts you typically earn from projects, divide them by the time spent on them, and come up with an average hourly rate. The goal is to use this rate to estimate projects where determining a fixed cost is difficult, so you can estimate the hours required, multiply by this rate, and arrive at an approximate project value.
Finally, as always, everything mentioned above is based on my opinion and experience and isn’t necessarily correct or applicable to everyone.