If you are looking for a freelance programmer (whether for web development or for developing desktop software) you will soon find out the average hourly rates on the market. But you might ask why so much, and how can the considerable variation in hourly rates asked by developers be explained?
In this article I will look at hourly rates partially from the freelancer’s perspective. By getting more insight into their world you will get a clearer picture of the reasons behind hourly rates.
Freelancers sell their time (charge per hour) or do their job on a “fixed-price” basis. Even if they do a fixed-price job they will calculate the price with time in mind. If they are pricing a job too low then they get less than expected per hour; if they charge too high they can be priced out. When quoting a fixed cost most of freelancers will think of how much they earn during the time of the project.
When setting an hourly rate a freelancer has to take a number of factors in consideration:
- What are the going market rates?
- How many hours can be billed per year?
- What income level is he aiming at?
Freelancers have an overhead of “running a business”. Besides the skill they are selling, they have to do marketing, admin work and invest a fair bit of time to update their skills. It would be very difficult for a freelancer to sell more than around 1000 hours a year.
Based on billable hours a freelancer has to set their rates high enough to earn a salary comparable to full time employment. For the UK, salary trends in the IT industry can be researched at itjobswatch.co.uk. For example according to this web site a PHP developer would earn around £30k a year. This means that to get an equivalent income working as a freelancer he has to charge around £30 per hour for his time.
Most people agree to a much smaller income when they move to freelancing. Freedom of work and the new status serve as compensation for forgone income. However they still have to cover their expenses, which means that like all freelancers, their personal financial status and location will play a role in the rates they set for their time. Regional variations can be considerable in the UK between the southern and northern regions.
There is a market ingredient too. Hourly rate has to be within reasonable market brackets. I would say, from my experience the range for a PHP developer is between £12 and £45 per hour. At their edges prices can affect the ability of a freelancer to get a job. If they charge too low potential clients would suspect a lack of experience. Selling at higher rates freelancers substantially shrink their market, as buyers are not very easily persuaded that there is higher productivity behind higher rates.
I think programming, for some reason, is still looked on as brick laying job, where you cannot get substantially more efficient when you gain more experience, which is completely wrong of course.
I find that there is considerably more variation in hourly rates of freelancers/consultants specialising in other business areas such as management consulting, copywriting and PR consultants compared to programmers.
For beginners, it is very common to charge for much fewer hours than they really spend. They might consider that learning new skills on a new job is not something a client should be billed for.
Top freelancers really have a dilemma. They might be ten times more efficient and useful compared to a beginner, but there is no way they can set their rates to 10 times as much. So if they stick to market rates they will not be earning much more than their less productive counterparts. The only way for them to earn more is either to lie about real effort required by quoting/reporting more hours, or hide the effort by quoting a fixed fee.
It is very unlikely that a client will buy a service from highly productive web developer at 10 times market cost. But the same client is likely to give work to a better experienced freelancer if his fixed-price estimate is approximately in line with estimates of other developers.
The resume of this article is that you should look at hourly rates per se, but consider the factors that contribute to the rate a freelancer is advertising his labour at. Sometimes it is worth paying considerably more to a highly skilled and experienced individual. At the same time lower rates should not deter you straight away. Research the person first and then come to a conclusion. Asking direct questions about the rate will also work.
Sometimes people think that hiring a freelancer is cheaper than to work with an agency, but I recommend to stop and calculate here. For example, experienced PHP development company can easily stay in freelancers payment range.