This is how IT freelancers calculate the optimal hourly rate

If you work well, you want to be paid accordingly, this applies to both permanent employees and freelancers. In contrast to employees, who receive a fixed salary, freelance experts set their own fees.

The calculation involves many questions and factors: How do I make ends meet, what is a reasonable price for my customer and how do I not undersell myself at the same time? Thomas Maas, CEO of freelancermap, shows why it is crucial to set up precise planning and calculations.

Keep an eye on all costs

If you want to determine your optimal hourly rate, you should first create an annual schedule and break down your expenses. That’s just the starting point, because the hourly rate should not only cover the costs, but of course also make a profit. For this reason, it is advisable to always include a financial and time buffer, for example for income fluctuations due to project slumps.

The Schedule

As is well known, life as a freelancer also entails unpaid vacation days, which is why it is all the more important to plan these in advance and not to let them fall by the wayside. Sick days should also be taken into account. In order to always be up to date, further training is essential for every freelancer, because the competition never sleeps. This leaves around 45 percent of the month for actual working hours. The average seasonal schedule might look like this:

• • 104 days weekend

• • 13 public holidays

• • 25 days vacation

• • 12 sick days

• • 24 days training

• • 24 days project acquisition

• • 163 working days

• • and thus 14 working days per month

Expenditure

To determine the hourly rate, you have to get a precise overview of the costs and expenses that have to be covered. Freelancer spending includes both personal and work-related areas and varies from person to person. In addition, there are the insurance policies, which include not only the compulsory insurance, but also the recommended supplementary insurance. It’s best to break this down as follows:

• • Professional expenses (rent for office space, work materials, internet and telephone, etc.)

• • Personal expenses (clothes, groceries, everyday necessities, etc.)

• • health insurance (mandatory)

• • Long-term care insurance (mandatory)

• • pension insurance

• • unemployment insurance

• • accident insurance

The Factors

There are various factors that influence the hourly rate: the industry, the position, your own specialist area, age and professional experience. The data from the freelancer compass shows, for example, that aerospace is the industry leader and that freelancers here earn an average of 106 euros per hour. While consulting is the best-earning specialist area with an hourly rate of 111 euros, managers take first place in terms of positions with 106 euros. And if you have more than 19 years of professional experience, you can charge an average hourly rate of 100 euros. Based on these data and categories, the optimal hourly rate can be determined.

The optimal hourly rate should correspond to your own abilities, cover all costs incurred and, above all, make a profit. A precise calculation, an overview of all relevant factors and extensive knowledge of the current hourly rates on the market are good means of arguing for your optimal hourly rate in the next negotiation.