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How to Set your Freelance Rate as a Software Developer

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Whether you are starting out as a freelancer or have been working as one for several years, determining your hourly rate is always a challenge.

Some people ask their friends about their rates, but that leaves you with a limited view of the broader market. Even online you can’t find specific data about what is a good hourly rate for a freelance developer or software engineer. And if you do find a blog or website, it usually lists a very broad range (from $30 to $150). But without any context, there’s not much you can do with that either. In short, determining your hourly rate is not that easy.

That’s why we wrote a blog about the factors that go into determining your hourly rate, and how you can go about setting yours. We’ll first talk about the factors that influence your hourly rate, and later share 3 ways to calculate your new rate without much effort. Let’s dive in!

What factors affect your hourly rate?

Let’s start with the factors that can affect your hourly rate. These include, of course, experience (the more experience you have, the higher your rate), technologies and programming languages that you use, but also, the current state of the market and the level of urgency on the client-side. We’ll explain these one by one.

Experience

One of the most important factors that helps you to determine your rate is experience. The more experience you have in a specific field, the higher your hourly rate will be. This does not mean that there is a linear relationship between the two. Generally you can’t use a rule of thumb like: “for every year of experience, I ask $5 more”.

Still, the amount of experience you have does give you an indication. For instance, most freelance developers with 15+ years of experience have hourly rates above $80, and an hourly rate of over $100 is no exception among this group. 

If you only have a few years of experience, the hourly rates are often a bit lower. Data from our freelance database shows that most freelance devs in the Netherlands with 0-5 years of experience earn around €75 (or $80) per hour.

Technology

What’s important for software engineers specifically, is the technologies and programming languages they use. Generally, it is easier for someone to start their career with programming in WordPress, HTML/CSS and PHP than for instance Python and Kubernetes. 

Two factors are relevant here: first, how “difficult” it is to train yourself in a specific technology or programming language, and second, how much demand there is for that specific knowledge and skill.

Still, you can draw some conclusions. For example, if you are a front-end developer, you are likely to charge an hourly rate of somewhere between $50 and $80 per hour, while a .NET developer will probably start at $70 to $100 or more.

Do you want to know more about how technology specifically affects your rate? Check out our other articles, where we shared the hourly rate ranges for:

Current state of the (freelance) market

As described, your rate also depends on what the market is willing to pay. At the time of writing, in many industries there are too few skilled employees and freelancers — and this also applies to software developers.

In other words, if you are looking for a new contract in such a market of scarcity, you will find one very quickly. And precisely because there is so much demand, you can also easily raise your hourly rate. 

Of course, the reverse holds true in the case of an economic crisis. For example, in 2013 the employment rate was much higher, which also affects freelancers. When the economy is not doing well, new assignments are not easy to come by — and you often have to accept a lower hourly rate.

Urgency

So far, we’ve barely touched on the client’s needs. But in many cases, freelancers are hired because there is a certain urgency. A specific project needs to be delivered quickly, and that requires extra hands. This may bring added stress, but the advantage is that you may be able to increase your rate for that specific project.

For example, year ago I took on a freelance contract for a multinational company, migrating several websites to e-commerce platform Magento. A year later, the same client had a similar project, that needed to be finished within a few months. I added $10 to my hourly rate, because they needed someone quickly and knew I could do the job. Surely the company could also hire a different freelancer for less, but they didn’t know the project yet and it would probably take too long.

So the moral of this story is: think carefully about how urgent the assignment is, and adjust your hourly rate accordingly.

Type of assignment / complexity

For some freelancers, the type of assignment and the complexity of the project plays no role whatsoever. Many freelancers just say: “My hourly rate is $75”, regardless of client, project or any other factor. 

The benefit here is that you make it easy for yourself. It’s clear and straightforward. But if you would like to earn more, there’s a benefit to changing your rate based on the contract in question.

Let’s say for instance that you to migrate some content using .NET. This job is not that complex, so you keep your hourly rate relatively low. Instead, when a large cloud migration project comes along, you increase your rate heavily — because it’s a difficult project that requires a true expert.

Now I hear you say: “But then I’ll just always do the difficult projects!” – and indeed, that’s possible. However, what if there isn’t a difficult project available? Will you then wait until one comes along? 

Instead, by being flexible and using a dynamic hourly rate, you can work with different clients and different budgets. Ultimately this gives you more choice, because you don’t immediately say ‘no’ if the assignment is less complex than you’re used to.

Location (your own)

We’ve started Lancebase in the Netherlands — and freelancers here are able to charge a good hourly rate compared to other countries. But chances are, you’re based somewhere else. Plus you have to consider the location of the client.

Let’s first start with your own location. In an ideal world, your location should not matter when it comes to determining your salary or rate. Wether you’re based in the US, India, Europe or elsewhere, you should be able to charge what your skills are worth.

In reality however, your location usually does impact what you can charge. If you’re based in a developing country, it’s more difficult to charge more — simply due to the expectations of the client. They expect your daily needs are cheaper and hope to pay less for your time than if you were based in the US for instance.

Location (the client’s)

In addition, the location of your new client is an important factor. Even between neighbouring countries, there are differences in what companies expect to pay a freelance software engineer. For instance, in the UK companies often work with ‘day rates’ — a rate of £500 is not uncommon.

In the Netherlands however, people always work with hourly rates. So generally you not only earn more in the Netherlands, but also if you work more hours, you get paid accordingly. 

That’s why it’s very important to keep an eye on where your client is based, and try to get to know the local freelance market a little bit. Consider for instance what are common hourly rates for devs in Europe, or in other places.

And if you know some countries where you think you can charge a decent hourly rate, then you can even start searching for freelance contracts from those specific locations!

Competition – what do similar freelancers charge?

We’ve already briefly mentioned demand and supply. A related factor is competition: how much do similar developers charge, who do the same work?

This is a factor that is quite important, because if your charge less than your competition, you’re earning less than you should. And if you charge more, then you need to have a good reason (e.g. you have more experience), or it will become difficult to find a new contract.

The best way to go about is, is to get several data points, so that you get a good idea of what others charge. One way to do this is to ask around in a freelance community. Another way is to use a rate database (like ours), or see if you can ask a recruiter to share this data with you. It’s only when you know what 5-10 other freelance devs, that you can adjust your own hourly rate accordingly.

3 Ways to calculate your hourly rate

Now you have an idea of what factors go into setting your rate as a freelancer. But how do you actually go about making the final calculation? 

We’ve found 3 ways you can use to calculate your hourly rate — let’s discuss these one by one.

Competition

As indicated above: an easy way to determine your hourly rate is simply to base it on the competition. Let’s say for instance you are a senior Python developer. You then ask a few colleagues or acquaintances who work with Python to share their hourly rate, and use this data to estimate yours.

After asking some freelancers you know, you have collected 3 hourly rates: €80, €90, and €105. You take into account the company you will be working for, your own experience, and the experience of these 3 freelancers, and you then estimate that you can charge as much as e.g. €95 per hour. 

As mentioned, it’s relatively simple to determine your rate this way, but it has some flaws. Usually it’s not easy to get many different freelancers to share their rates with you, and often their backgrounds are very different from yours.

Income you need

Another way to calculate your hourly rate is to use an online tool or calculator. There are many different tools that ultimately all do the same thing. Namely, they calculate your hourly rate based on the income you need.

For example, you can calculate your hourly rate with a tool from RimuutClockify, or the (Dutch) Chamber of CommerceThe advantage of such a tool is that it gives a very precise hourly rate. For example, say you want to earn €5000 per month with €12000 in expenses per year and €5000 in buffer per year, and your hourly rate (€102) will roll right out.

However, these tools do have some drawbacks. First, they are not specifically made for a particular industry. They can be used by you as a developer, but also by freelance copywriters for instance.

Secondly, such a calculator doesn’t say anything about how much your hours are ‘worth’ according to the market. You have to ask yourself: Can you charge €102 per hour to your new client? And that depends entirely on whether that suits your role, the market conditions, your experience, etc, etc.

So our advice is: fill out a tool like this, so you get an idea of what hourly rate fits with what income and standard of living. Use the outcome as a starting point, but don’t leave it at that. After all, there are many other factors to consider when determining your hourly rate.

Using a tool like Lancebase

In our research, we were unable to find other tools that help you determine your hourly rate. However, we did develop our own tool over the past year.

Our freelance rate database allows you to search through countless of rates of other freelance software developers, using specific filters. You can use many of the variables mentioned above (experience, technology, location, competition) to compare your own hourly rate with that of others. You will get a very clear picture of the current market, and you can quickly determine your new hourly rate.

Conclusion: 2 Tips

Of course it is nice to refer to our own website, but we really want to write articles that you can use. That’s why we have 2 more tips to share.

Our first and most important tip: Use a combination of tools and factors.

If you want a good hourly rate that really fits with your work and background, then you need to take different kinds of factors into account. So use the tools above, and start talking to recruiters and fellow freelancers. Try to get a good picture of the market, and talk to the client to find out what kind of job it is. This is the only way to find out what YOU are worth at that moment.

And then our second tip: don’t leave it at that!

Don’t set your hourly rate and leave it for a few years. The market is constantly changing! Maybe next year Python will suddenly not be so relevant, or more companies will start working with Nuxt.js. Or perhaps we will suddenly find ourselves in a new recession, or companies simply want to hire freelancers less often for some other reason. 

All these factors and more change over time. So if you really want to charge a good hourly rate, you need to stay on top of it. With every new contract or contract extension you enter into, you need to ask yourself: Is my hourly rate still appropriate? 

This is the only way to make sure you get an hourly rate that fits your background and the current market. Good luck!

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