Ask HN: Freelancer Rates in the US
Hello,
I have often been somewhat confused when it comes to hourly rates for freelancers in IT. While it is pretty normal to charge more than 60€/h here in Europe I’m always shocked to come across postings like these from the US:
https://soshace.com/jobs/python-back-end-web-developer-remot...
This is a remote python job for an intermediate or senior developer that pays 20-30$/h. And not the first one of that kind I came across.
That would mean a freelancer makes less than half the money as compared to a 9-5.
Is this normal?
100 comments
[ 3.1 ms ] story [ 112 ms ] threadSenior level rates in US range from 100-300/hr. I know it's a big range, but it comes down to speed, creativity, references, portfolio, fit for the project, availability.
As far as the half the money as a 9-5, it's actually the other way around-- as a freelancer, you need more money to compensate for things like insurance, taxes, risk that come with being an independent/freelancer. So they say to match a 75k salary, you need approximately 150/hr.
Presuming you meant $150/hr: indeed, and if you’re freelancing, you almost certainly don’t have that high a proportion of billable time. Prospecting, marketing, deliberate learning, and other overhead are all necessary parts of the deal and can easily take half your available time. I tend to do all that in downtime between contracts, so it’ll look like 25-35 billable hours per week but with maybe 25-30 weeks/year utilization. Others just overlap everything; works well with longer contracts.
Difference in point: how much of what you do leads to higher value at fixed cost (notably in time, how long does it take you to deliver), or same value for lower cost (same idea).
I'd wager that, for the one-man company mindset, you tend to think not task but process, automating progressively etc. (need-to-basis optimization, ad hoc 'frameworks' that speed up your particular niche projects, heck just taking work from client A and refactoring it for client B and building an informal "product" eventually from there, that's the story of all freelancers who've been at it for 5+ years as I see it)
How much of the past work (self and tooling improvements) is factored in present value? Can we decorrelate X years of history of a company and estimate its cost/value production simply YOY? I think not. I think the greatest (companies, freelancers) incrementally raise the bar— making the threshold for competition much too high for a newcomer, hence commanding much higher value.
[At the highest end of that spectrum, meet Apple. Even tech giants struggle to meet that bar, whatever goes in it (tech genius? marketing? craftsmanship? whatever. $ at the end of the day)]
Doing the [work hours × $rate × utilization] equation only says so much about what actually goes into your rate (years of being more efficient at "it", those things you do).
Say you begin at $75 in the US after a ramp up of 3-6 months to establish yourself on the market. You survive for 2 years like that, reach ~$100. You realize it's only $50 real, and your newfound expertise is priced higher in the salary job market. So you either raise your rates or go get that money elsewhere. That's why IMHO an "expert freelancer" market only makes sense north of $100-150 in the US (adapt numbers for any country, minus perhaps the "tech not sexy" effect e.g. in Europe where it's not better paid that other intellectual activities).
Right now, you are worth much more than whatever you did this year, and presumably (hopefully for market sanity) it shows in how much you earn.
So, yes, your description is accurate, though putting scare-quotes around "products" is necessary here. As folks grow in this profession, as I see it, there's three paths to success without ending up back in a W2:
* make _actual_ products (which is my own eventual goal), or
* find a way to productize their service (re-usable code blocks or processes, customized per client at a very high effective rate), or
* get really good at prospecting new contracts and end up hiring more individual contributors, eventually building an agency.
Of course, you could potentially mix and match, and service productiziation is a good step on the way to building products.
What's most in-common across those three options is that none of them reward you, the freelancer with aspirations towards growth, for billing by the hour. And I think that plays directly into your point of task vs. process: for a _task_ you'll need to consider _how long it will take, while for a _process_ your primary concern is _what it will achieve_.
So all this discussion of hourly rates is actually presupposing an arrangement that runs counter to the best interests of everyone involved--including, frankly, those of your client, because it incentivizes you to take as long as possible to deliver your work product. IMHO once you've crossed the line of "I am making enough money to not think about money when buying a non-special meal", it's time to think about your billing structure, even if you end up losing money short-term. Otherwise you really are signing up to use a very high-value skillset to live paycheck-to-paycheck.
(My prior description of my hourly rate is hand-wavey for two reasons: first, this, that I tend not to charge hourly--and second, that no freelancer in the process of frequently hitting their rates with a multiplier benefits from making a hard rate commitment in public.)
Another comment in this discussion described freelance senior software engineer rates as running $100-300/hr. I believe that, and higher--on an _effective_ basis. But I'd wager the higher end of that scale is day-, week-, or fixed-bid rates.
On a personal note: a lot of the struggle/low utilization on my end owes to having a baby in the home. A W2 keeps paying you the same when you don't sleep for six months, but that has real consequences when you have to find your own customers!
Anecdote incoming:
One of my short-term roommates was a programmer who did mostly SCADA-type stuff. He'd previously had a gig working for a utility contractor designing water/plumbing control systems, but for unrelated political reasons the project died he was able to retain the code (no idea if that was legal or permitted... but he had it). Flash forward to when I was living with him and he was doing freelancing work for a few counties and their related utilities, essentially implementing the same code for new clients. He eventually admitted he was only doing 30-40% new code, and mostly reviewing the existing systems.
Didn't seem to lack for work though, and had a few stacked clients / contracts going at once. Don't know his hourly rate but I'd assume he was going for at least $50/hr.
I totally see the counter-productivity in hourly billing. It's never sat well with me. In the end, clients want a final number more than some estimation of time × some price per period. It's just not cognitively the same to drop a final, single number (with conditions, a tight contract is also a benefit to both parties because nobody likes surprises).
There's also this argument about "price for the value it has for your client, not for the cost of your work". Which makes sense in a bubble but like most pop philosophy I feel it ignores that you're not alone selling the service, and agreeing to keep prices artificially high is generally called racket by most ethics, if not laws. (half-jokingly saying this, light-hearted but there is abuse in some domains)
The matter of the fact is nobody likes, again, paying twice the real cost of something for no good reason (today it's you billing, tomorrow it's you paying for accounting or legal or your freaking dental and car bills). There's a slippery slope there that I'm not willing to contribute to. I think it's just not sustainable, in this model businesses are soulless and die like crabs in a basket, and the customer + taxpayer (all of us, all of them) looses the most.
If I'm gonna bill high, it has to be because the work is genuinely harder or better, and I'm very much factoring "past years" in the how/why. It's hard to put in words, even between us technicals, let alone client profiles. It comes down to a scarcity fact: not many people can do it as well, and that's the price in dollar of the time of this small subset.
And indeed I don't think it's "$300 per hour" (that value is computed after the fact, it's a statistic!) It's one deliverable, reduced to a single number (from which you derive the others e.g. time frames, support cost, price of additional features, etc.)
It should basically be whatever a bigger business could earn selling the same product/service, minus overhead¹ and shareholder profits²— all for you, times some scarcity factor. If an employee makes an average $100K making it, we can see a freelancer making about twice as much for the same work (a factor of say 1.25 to 3-ish, this from my a#%, armchair intuition / business angle).
In actual geographical market forces, I see a lot more money going to whoever's established as one of the go-to's than an economist's account of what should be. Reality checks and all that. You need to know X, Y and Z (people, competition, client aggregator...) and go from there. Online is a bit more "opened", but far less than people would think. In a given niche, many people know many people. No niche = low multiplier factor (because low margin for all businesses, includng you), and low bonus (because low barrier of entry usually means less valuation as a market relatively to others).
Best advice I've ever heard: go to business consulting meetups and talks. These people totally understand that you come in with a skillset to offer services, that's the spirit. These people give the single most trusted recommendations, that's their actual job!
____
1: you also lose the larger skillset covered by a business team, I think overhead is actually worse for a freelancer if you don't outsource as much as possible (everything that's not your domain, may be better served, more efficiently too, by a professional of that domain).
Tangential but, this is my problem with all the pop-culture around entrepreneurship telling you to learn it all as if improvising ever was a good long-term strategy...
Recruiting solid, reliable, trustable suppliers; creating a synergy of behind-the-curtain business deals; these are much more valuable skills for sustainable success if you ask me. Learn to play with others, combine strengths and values.
2: this is where domain value plays in, e.g....
Freelancers have costs that W2 employees do not, like self employment taxes and the full cost of health insurance.
It pays to keep in mind that in order to deduct an expense, you have to pay the expense. So as a freelancer, when I pay for my computer, that's $1500 out of pocket. Then I don't pay quite so much in taxes. But I've still got $1500 less at the end of the year than if I worked at a business and they were paying for my computer.
$50K+ into your retirement is also great, but it's most useful for those who are making so much money that they can afford to put that money away and not touch it until they're 62. Some people can certainly do that, but I doubt that it's very common. Even FTE often don't max out their 401K. Here's a fool article that claims the average is rate is 7%: https://www.fool.com/retirement/2017/01/15/average-americans...
If you aren't able to max out your retirement account it means your QBI deduction is larger.
As with most things business/tax related, there's a lot of grey area and nuance here.
Maybe if you turned around and resold the system immediately. But I'm not gonna pay 1500 bucks for your 4 year old 133t machine that you spilled coffee and sneezed on.
And did you factor-in having to pay both halves of Social Security and Medicare? I believe that's another 15.3% [0]
[0] https://www.google.com/amp/s/turbotax.intuit.com/tax-tips/se...
I was assuming single/young (so low-cost insurance), I wasn't really thinking of family/children but that's a good point!
https://codegeek1001.github.io/salary2consultantcalc/
For every $30/hr posting on the net, there is another one for $100. I also personally know of folks who are making +$150 with Django. It really depends on who you work for.
Although you will see a lot more of `build Uber for $5K` type of one off jobs, there are some reputable companies who need more capacity on new projects.
If I were you I would cast a wider net and sample the market more.
For example, if you earned $150,000 as a contractor, but you incurred $30,000 in expenses then you would have $120,000 in potentially taxable income.
The tax code is very, very complex, though, and there isn't a simple answer to this question. There are a vast array of factors that would shift how much you pay in tax up or down, and this complexity is heavily exploited by lots of folks.
So health insurance is a cost ... albeit not the same for everyone, at some companies you pay surprisingly little and that is compensation ON TOP OF your pay...
Other places not.
It's really hard to get good 1:1 comparisons.
Taxes and etc in the US are widely unevenly applied depending on the situation compared to what seem to be 'more' standardized and predictable numbers, services, in Europe.
It’s also very easy to compare even if you are an employee, as health insurance premiums are shown in box 12 code DD of an employee’s W-2. And health insurance premiums don’t vary that much between healthcare.gov and ACA complaint insurance that employers subsidize.
What is clear is that there exists a healthcare expense in life, and so if you are paying for it via taxes in one region, you would have to figure out how much it costs in the other region where it’s not included in taxes to make the comparison more accurate.
You can use this table from the state of NJ to reasonably guess how much healthcare will cost you in a moderately high CoL area in the US:
https://www.state.nj.us/dobi/division_insurance/ihcseh/ihcra...
As for the differing costs of insurance outside of the freelancer world, I've found the costs in the US can vary wildly. Those tax boxes aren't the only way / shouldn't be the only comparison for US healthcare costs.
Some plans will cover some providers and some won’t, and rural areas will have issues with even having providers at all, but for most major urban/suburban regions, it should be comparable, +/- 10%, even 20%.
Either way, you know that healthcare costs are in the thousands and $10k+ per year per family, which is a lower bound you can add to calculating US tax rates.
Almost meaningless to talk about hourly rate without also providing the length of the contract.
In NYC and SF, you'd never fill your contract if you were trying to pay < 150.
If you're a contractor, your best bet is to focus on an industry to understand the needs of that industry better. Rather being a Python developer, you can be a contractor who builds usable solutions that happen to use Python.
Industry knowledge, referrals, good prior work and marketing are important. These $150/hr jobs won't fall into your lap unless you put an effort to position your lap that way :)
As much as we like to think technology is a meritocracy, at the end of the day, it always comes down to who you know. The charitable interpretation of that fact is that there aren't a lot of ways to gauge reputation, so it's mostly about who can vouch for you.
Source: I co-founded a software and design consultancy co-op (https://www.fountstudio.com/about).
For bigger multi month projects i would come down quite a bit, but for small ones i wouldn't budge.
Its not something you can pull off when new to freelancing and more importantly don't have connections / referrals.
Its a comparable price to what small agencies charge (or charged, haven't been working/living in Switzerland in years).
The US is great if you’re in top 10% of incomes, but if you can’t afford to take advantage of the money tax exemptions and credits, then it’s not any better for the middle 30% to 70% of income earners who don’t make enough for government assistance, but also don’t make enough to take advantage of the tax code.
The $20-30/hr job listing you shared will not attract any experienced Python developers. Experienced Python developers can easily secure jobs with $100K+/year salaries and benefits in any medium sized city. That job listing is searching for entry-level Python engineers who don't yet understand their value in the marketplace. It is not representative of standard freelance rates. The job listing requests a good command of the English language, so it's not even clear that they're targeting only Americans with the listing.
Generally speaking, the best paid freelancers do not find jobs via public job listings. They use their reputation and network in combination with their unique skillsets to find contract jobs with companies who need them.
The best freelancers also negotiate their rates for each contract. Their rate can vary significantly depending on how many other opportunities that have, the difficulty of the work, and other factors.
Personally, I don't know any full-time freelancers who charge less than $80-90/hr. Below this hourly amount, it becomes more financially beneficial to find a full-time job.
Unfortunately, it's difficult to find accurate information about freelance rates from the public internet. Smart companies will not post a high hourly rate on job listings because they could miss opportunities for candidates to negotiate lower rates. Smart freelancers will not advertise their typical rate because it will impact their opportunity to negotiate or change their rates in private conversations with new employers.
The optimal strategy is to constantly look for new contract jobs, raising your asking rate until companies are telling you "No" more than "Yes". This is how you will find your market rate.
The best bet is that these ads are aiming at developers from poorer countries where rates are much lower.
https://soshace.com/company/soshace
As you said, it allows negotiation in rate, and when you come recommended you already have a leg up on negotiation. After a while you tend to figure out what you're able to charge, and its highly dependent on the client.
Public companies, and especially startups will pay a higher rate. I tend to get around ~125/hr in my MCOL Midwest city (highest has been 150/hr at a startup). That's about where the limit is for me in my location.
Private companies tend to be more stingy. I normally can get ~110/hr out of them. I will never take less than 100/hr, and never have. When your network is big enough you don't need to take every gig and can say no if you don't like the terms. I have to turn down more gigs than I take as it is because I'm so booked up with work.
I would also add that rates are certainly location dependent. On the coasts I would expect a higher rate than I get in the Midwest just because of cost of living. Certain cities also are more accepting to contractors than others (mine is). All of this will have an impact on what kind of rates and gigs you can get.
1. Talk to people and sound like you know what you're talking about. In my (admittedly limited) experience, it's been "be opinionated, and be able to back up the opinions when challenged".
2. They mention opportunity for equity. You mention you only work for money. Sometimes they take you up on it.
3. Do a great job. They brag about you. This gets you more clients. But don't count on that. Ask for referrals.
4. Increase your rate as your utilization goes up.
I used to kill myself with 60 hour weeks a long time ago though. That wasn't smart.
I've never had to lower my rate. There were lean periods where I was "between projects" for a couple of months. I just considered this a much needed time off to catch up on my reading list.
Cheesy title notwithstanding, I found this book to be useful: https://www.goodreads.com/book/show/260218.Million_Dollar_Co...
Backoffice projects? Actually working on their main project? Maintenance of legacy systems?
Or basically, what kind of projects companies put contractors on as opposed to their employees/founders?
Either they can't hire fast enough, or they can't have the employees deliver fast enough.
Anyway, I don't know if there's a clear pattern.
Let me just list a few examples:
1. Large company. New CTO wanted a proof-of-concept. Big company with slow teams and processes. He got me to build it fast, and demoed it to the board, and got the leadership team excited.
2. Startup. CTO and the 3 engineers were mobile devs. They were raising their next round and wanted a web version of their product. Ended up building a full product that got them much bigger traction than they expected.
3. Startup. CEO and the investors thought that the team needed to focus on X. CTO thought that Y will actually get them product-market-fit. CTO asked me to build Y, and the CEO agreed, to preserve optionality. Turns out the CTO was right.
At some point, my fee was $40 an hour. I freelanced through a 3rd party who found gigs for me, and took their cuts. One day, I found out that they charged these companies $100 in some cases, while I was still only getting $40.
If that's how much I was worth, then it would be perfectly reasonable for me to charge just as much.
If you want more details, here is the full story: https://idiallo.com/blog/how-much-do-you-charge-for-your-wor...
I haven't written about it yet, but I'll add it to my list for this year.
197183, Russia, Saint-Petersburg, Polevaya Sabirovskaya street, 54А, office 335
I think as a general rule, if you're freelancing full-time and making the same as you would in a salaried job or even a little more, you're not charging nearly enough.
When you freelance, you don't get paid sick days or paid holidays, and there's considerable risk you might not have any billed hours of work for weeks at a time. This at a minimum is why you need to be charging more per hour than you'd make per hour at a salaried job.
A rate of 20-30$/h is pretty standard for developers "outside" the US.
For developers "in" the US, I think you shouldn't accept less than 50$/h. Regarding how much you could ask, I think that depends (besides your experience) of the city in which the client is.