Calculate your freelance rate
Calculate minimum wage
Becoming a freelancer starts with calculating the right rate. The rule of thumb for determining your own pay is in fact simple. You start by calculating the minimum wage at which you want to work. You do this by starting with an overview of the fixed costs you will incur. Fixed costs you always incur, even without working. For a graphic designer, for example, that could be the monthly bill from Adobe be or the cost of a decent computer. Salespeople, on the other hand, are more likely to include the cost of their vehicle. If you choose to work from home, you may want to think about including the furnishing of your study space in the cost. These costs go as far as you want, so it's important that you make as complete a list of your expenses as possible.
Next, you estimate variable costs. Compared to static fixed costs, variable costs are dynamic and vary from job to job. These costs might include the fuel for your car or simply the gallons of coffee you pour in to keep your concentration up. Although these costs are largely assignment-specific, you will certainly benefit from an estimate of these expense items. More freelance experience will give you a better understanding of the costs you incur.
Gross net: calculate net pay
Okay, the cost has been measured. Now what? In this step you figure out how much you want to earn on an annual basis. A net monthly salary of, say, 1 700 euros means an annual salary of 20 400 euros. To this amount add the total expenses. Because as a self-employed person or sole proprietor you have to bear your own social security contributions, you should keep in mind that after tax deductions and social security contributions, you are left with 50% of your salary. Of course, this varies depending on the form of partnership under which you freelance, but 50% is a good estimate. Therefore, we recommend doubling your net pay along with your expenses to avoid unpleasant surprises.
Working nine to five?
In step two, we calculate the number of days you will work per year. A driven freelancer lives by the "work hard, play hard" principle. That is why it is important not to overlook your vacation to Ibiza. Out of 260 working days in a year, it's best to calculate 20 vacation days. A failsafe of 5 to 10 sick days is not a luxury, unless you've gotten enough vitamin sea in Ibiza of course. As a freelancer, it is also not always obvious to always be at work when you want. Finding relevant projects remains one of the biggest challenges of freelancers. Of course, the larger your freelance network, the easier it is to draw from your own circle. A digital network like GiGHOUSE can guarantee you more projects, but we'll keep that sales pitch to our ads :). Moral of the story: be realistic in the number of days you will work.
An example
We calculated the gross wage to be earned and we decided the number of days we want to work per year. If you divide these two together you get the minimum wage. The real sherlocks already figured it out, of course, but if you divide this amount by the number of hours you want to work per day, you calculated the minimum wage you want to work at. Are you still following along? It all sounds more complex than it really is, an example to illustrate this:
Freelance copywriter Ellen would like to earn 1800 euros per month. She incurs 2000 euros of fixed costs per year and charges 100 variable costs per month. She charges 20 vacation days per year and takes into account 10 sick days.
(Net annual salary to be earned + total cost)x 2 / Number of days you want to work = ((1800 X 12) +( 2000 + 1200)) x2 /230= €215.65
Then divide this amount by the number of hours you want to work per day and you have calculated your own minimum hourly wage.
What factors will help determine your freelance rate in 2019?
Now that you know the bottom of your own freelance rate, you can raise your pricing step by step. The steps you take are those of: 'industry, seniority level, type of assignment, client industry and the rate of your fellow freelancers.' An overview:
1) Customer sector.
Your clients' budgets depend greatly on the industry in which they operate. Always keep a close eye on your client's assets. The budget of a small SME in pharmaceuticals will be higher than the budget of a non-profit association. This is not to say that you should go below your budget for less wealthy clients. You just need to recalculate your margin.
2) Industry in which you operate
Do you provideHR advice to multinationals or provide translations for an SME's new website? Here too it is best to link back to your own core business. In the absence of recent figures on freelance market prices in Belgium anno 2019, we take a look at our northern neighbors. This overview (by industry) will get you started.
3) Experience
The more experience you have with certain skills or how long you have been in the industry matters when setting your price. A senior profile can use its experience as leverage to charge a higher fee than a junior profile. A golden tip is Ericsson's rule. Which says that 10,000 hours are needed to become an expert in a particular skill. Often in business, the milestone of 5 years of experience is what counts most. When you can present the client with relevant references that indicate your level of experience, you give a clear view into your pricing, so do it!
4) Competitive freelancer
At the very last stage, it may be useful to compare your rate with that of other freelancers. We would like to emphasize that this should only be done at the last stage. After all, you know what you are worth and what you need to earn to get out of your costs. It may be tempting to measure yourself against the rate of others but then you are basing your salary on someone else's cost estimate. So use your competitors as a benchmark and not the norm. Still, to give you a quick idea of current rates, we'd like to give you the following. In 2014, the average freelancer in Belgium charged an hourly rate of 56 euros. For 2019, relevant figures are again missing for Belgium. In the Netherlands, clients pay an average of 46 euros per hour to hire a freelancer. There, the average is several euros lower than here.
Freelance tips
Congratulations, you are now armed with all the information you need to set an informed price. We'd like to offer two more tips that will help you guard your rate:
1) If the client finds your price too high, it is best to offer to reduce the number of tasks or to work fewer hours over the same task. This way you can be sure that your costs remain covered and show that your price is non-negotiable.
2) Recalculate your rate at least once a year. A lot of factors that determine your rate are dynamic. Let your rate evolve with it!
