How To Set Billing Rates For Freelance Projects

Setting your billing rates for freelance projects can be intimidating. Most people aren’t used to determining how much they will get paid. In this post, we tell how freelancers should set billing rates to be financially successful with freelance projects in the long term.

billing rates

For employees, bosses typically set a baseline that is increased over time through raises and promotions.

As a freelancer, you can set your rates and determine how much money you’ll bring in. However liberating it looks, it can be overwhelming if not done right.

a girl is thinking and looking to the right

In particular, freelancers should check ✅ if they know how to:

  • define what hours are billable
  • choose between time or project-based payment schedules
  • zoom out to the annual salary
  • calculate expenses
  • understand what build their professional value and worth.

Without considering all of these factors, a freelancer may end up selling herself short or not setting high enough rates, which can put a blockage on both financial and professional growth.

Thus, before you set your rates for the next freelance project, read on to know how to accurately set your billing rates and charge so you get paid on time.

What Is The Difference Between Billable Time And Non-Billable Time?

Billable time is the time you put in that you can be compensated for. Simply put, these are the hours that your clients are paying you for directly.

The cartoon below shows the unquestionable importance of defining the billing rates properly at the early stages of any project.

cartoon showing the employee building the house of cards and an employer is asking if the time of this work is billable

Non-billable hours include other work tasks for the business or firm that can’t be billed directly to clients.

Some tasks that are usually considered billable hours include:

  • Answering client emails
  • Attending client meetings (in-person and remote)
  • Time spent working on deliverables or direct services the client is paying for (creating social media posts, writing a blog copy, etc.).

Going over your monthly expenses, setting up a schedule and a calendar, or reorganizing documents would all be examples of work that you cannot bill a client for.

Naturally, choosing automated solutions for billing purposes and tracking time saves a lot by reducing your communication overheads and enabling you to get accurate calculations of work time.

Here are some dos and don’ts for billable time:

  • DO track all of your time (and expenses) accurately and with great detail. Do it automatically with a reliable free time tracker app.
  • DO maximize deep work and minimize distractions to keep full billable hours.
  • DO use automation tools for billing to minimize non-billable hours.
  • DO set a billing period and send invoices regularly according to this schedule.
  • DON’T procrastinate – this eats up your time, and none of it is billable.
  • DON’T forget to bill for client-related admin work, like emails, calls, and project organization.

Many freelancers choose not to bill at an hourly rate.

Even if that’s you, keeping track of your time is still an essential part of managing your time spent on work, becoming more efficient and productive, and minimizing tedious and time-consuming work.

Knowing how long it takes you to complete a project is helpful knowledge when trying to understand your project efficiency and a solid foundation for setting project-based rates with accuracy.

Try To Figure Out Your Contract Details In Advance

contract details

There’s one thing you should do before you consider your rates – discuss your contract terms, so you know what else you’ll need to consider when pricing out quotes.

A good freelancing contract will be transparent and share all of the most important details you need to understand, including:

  • Scope of tasks
  • Timeline
  • Expected cost structures
  • The cost of tools you may need to use to get the work done
  • Other fees.

It’s good to have a basic personal contract drafted that contains the terms you prefer to work within.

That way, you can set a precedent for what you expect, and it gives your client a good idea of how you work before actually getting into a project.

For example, you might choose to add higher fees to your project but are willing to prolong the time of receiving the payment.

Or, you may prefer to get paid sooner, offering a small discount to clients who pay within ten days. These are just a few examples of how you can initiate control over how much you’ll get paid before even offering a quote.

If you can offer a lower risk for the project, a tighter turnaround, or higher-level work, these are all great ways to boost your rates.

When forming a freelance contract, clients exchange a level of risk for the project with the money they are paying you.

The more they’re paying, the less risk there should be. If you can assure them of your work and contract security, you’ll have more power to increase your rates, and they’ll still feel confident in your abilities.

Here's an example of a freelance contract you can use.

When Freelancers Need To Use Time-based Billing Or Project-based Billing

signing the contract

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Now that you can define what qualifies as billable and non-billable, as well as the importance and power of freelance contracts, let’s explore when you should rely on time-based billing and when you’re best served with a project-based pricing model.

Before getting any deeper, first, ask yourself how big and demanding the project is that you’re considering taking on.

In general, the larger the project, the more you should consider project-based billing.

This gives the client a better idea beforehand of what the project will cost (as opposed to waiting until the end once all hours have been added up) and offers you, as the freelancer, an opportunity to build things like edits, mistakes, and organization into your base price.

If the client asks, this cost should be able to break down into justifications for time spent in addition to other fees, but you don’t necessarily want to start with a time-based price.

Upfront project billing eliminates risk, and removing risk offers great value. So, in a sense, offering upfront project-based pricing in itself provides more of an opportunity to raise prices.

On the other hand, if you’re being asked to begin a project without a solid understanding of how large it is, how much work it requires, or how long it will take you, billing by the hour can give you more leverage and protection.

The last thing you want is to underestimate your rates and the time commitment and wind up not getting paid what you’re worth.

One thing you’ll want to keep an eye out for is scope creep. Scope creep refers to the evolution, changes, and growth of a project’s scope after the scope has already been determined and the project has begun.

For example, let’s say you’re creating social media posts for a client’s platform. Your scope includes 12 social posts per month. You create these social posts every month on the 15th for the upcoming month.

On the 20th, the client sends you a few articles they’d like featured on social media for the next month, but you’ve already created your 12 posts. This is scope creep.

Your options include:

  • Doing the extra work and not getting paid for it
  • Differing to include the new content in next month’s batch as part of the next group of 12
  • Adding the new posts to the current lineup only after bringing up the added work and associated costs.

To manage billing for scope creep hours, always bring it up to the client before doing the work. Don’t begin unless you know they are willing to pay, or you risk not getting paid for the additional time and work.

How Freelancers Calculate The Annual Salary

calculating the income

An excellent way to set your rates is to zoom out to your annual salary and then break it down into a reasonable hourly or per-project rate. According to statistics the freelance salary ranges from $13000 to $167000:

median salaries of freelancers

First, to determine your salary, do some research on the market rate of your services as if you were a full-time employee on an in-house team doing the same work you do as a freelancer.

This gives you a rough range of what you can expect to be paid.

Then, you also want to consider your lifestyle goals and expectations. If the numbers you’re finding online feel a little low for you, don’t be scared to ask for more. These are usual medians or averages, not definite figures.

Using benchmark salaries from full-time employees is an excellent way to create a baseline rate expectation. For example, if you’ve found that the median copywriter’s salary is $58,655, then you could do some math to figure out that a decent hourly rate might be $35-40 an hour.

If you’re thinking of becoming a graphic designer, then you can expect to be paid around $55,642 per year. If you want to earn more, then you can adjust that rate from there.

Having this baseline understanding of what employees are getting paid for the same work you’re doing will help to ensure you don’t set pay rates below you.

Freelancers' Working Expenses: Time To Calculate


Being able to calculate your working expenses is the most critical part of defining your working freelance rate. If you’re not considering all the money you’ll have to pay out, then you’re not getting an accurate understanding of the income you’ll really be making.

Follow these steps to calculate your expenses:

  1. Make a list of every expense you can think of, even the tiny ones. Don’t forget things like pens, paper, office décor, travel, branding, marketing, or even coffee on work trips. It all adds up.
  2. Add your salary to this list of expenses. This is the amount you’ve determined you need to make each year to maintain the lifestyle you want.

3. Add income taxes to this list. . This amount will vary depending on where you live, how much you make, whether you’re single or married, and what kind of deductions and write-offs you can add.

Add all of these annual costs up, and you’ll be left with a solid figure for your yearly income.

Note that not all of this income is salary – but by looking at it this way, you’re calculating how much you should earn to pay yourself what you want AND pay for all of your additional costs rather than subtracting these costs from your salary.

Too many people come up with a salary they’re happy with and use that as their guide, not realizing all of the expenses they’ll have to take out to keep up their line of work.

Instead, add this salary to your expenses so you can still get paid what you want without having to worry about things like taxes and overhead expenses eating away at it.

Increase Billing Rate By Creating Value

animated image of people

Arguably the most critical thing you can do to create billing rates you can proudly stand behind is creating and understanding your value.

Too often, freelancers don’t believe in themselves or their work, which leads them to set too low rates and hold them back from growing financially and professionally.

When you know the value you bring to the table and discover ways to increase this value to your clients, you’ll be able to justify every rate you set with confidence.

Things like showing up early and staying later or having specialized experience in a niche that other freelancers don’t have to justify a higher rate.

You just have to find what makes your skillset unique and 'appealing' from the professional point of view.

There’s no need to get defensive about the rates you've set for your service. Don’t feel like you have to justify everything, though. Stand behind your rates, knowing that is truly what you’re worth, and only justify it if you are directly asked.

Have you been thinking about increasing your rate but feel nervous about doing so? Act early rather than later. You may have to justify this decision later on, so instead, go into it with the higher rate you wanted in the first place.


Joining the world of freelancing requires a leap of faith but it is empowering due to the fast expansion of the freelancer market globally.

There’s much to learn about the administrative side that intimidates newcomers, like setting your project rate.

The best way not to feel overwhelmed, make better-informed decisions and set a rate with confidence is to:  

  • understand what salaried employees make in the same or similar role
  • add expenses associated with work and project performance
  • break it down into an hourly rate
  • use historic time tracking data to estimate the scale of the project.  

These are hosting factors in setting informed project-based rates you give clients.

In case you want to learn more about freelance rates, there is a wealth of information from industry experts like Glassdoor and the American Institute of Graphic Arts, and the Editorial Freelancers Association professional organizations.

Author🌟 Bio:

Darya Jandossova Troncoso is a photographer, artist, and writer working on her first novel and managing MarketSplash digital marketing blog. In her spare time, she enjoys spending time with her family, cooking, creating art, and learning everything there is to know about digital marketing.