

Ask HN: Do frelancers cost/earn/value more than regular employees? - csbartus

Hi,<p>I&#x27;m in the freelancing business since last autumn and still I can&#x27;t figure out how to price my services. Many times even the clients tell I&#x27;m underpriced.<p>To figure out the complete picture I need advices on the following questions:<p>1. Are freelancers better skilled than usual employees?<p>Many of my friends go to freelance after working for a company. They say being employed is a good start to enrich your skills and learn your segment&#x27;s business culture then you can do better on your own.<p>2. Are companies hiring freelancers because of their expertise?<p>Here I&#x27;m thinking about companies which have to decide to hire somebody even temporarily, or, to hire a freelancer.<p>They probably think like: let&#x27;s employ somebody in-house and do the job as usual, or, let&#x27;s hire somebody professional and do the job quickly.<p>3. Do freelancers cost less than an employee for a company, including taxes?<p>(In Europe) If a company has to pay X for an employee it means it will cost X + Tax1 after all; and the employee will receive X - Tax2 after all.<p>If a company pays for a freelancer it will cost X after all; and X - Tax3 for the freelancer (with Tax3 &lt; Tax2)<p>Do the companies are willing to pay X + Tax1 for a freelancer or just X?<p>4. Does freelancers charge more than the normal market rates for the same skilled employee?<p>For example in NYC&#x2F;SF a developer&#x2F;designer costs $2,000 &#x2F; week according to market rates.
Are companies aware freelancers might cost more?<p>Thanks for your patience,
Csongor
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wikwocket
Here is a simple algorithm, espoused by many of the experts here on HN:

\- With each engagement, increase your rates by 20-100%.

\- Continue doing this until clients stop hiring you.

Note that if you deliver consistent measurable value, people will never stop
hiring you.

Basically, you are over-thinking it. You don't need to do complicated math to
determine your skill level relative the average employee, the salary of an
average employee, or the TCO of an employee to a company. The only thing that
matters is:

    
    
        1) Can you deliver value?
        2) Can you DEMONSTRATE to a client that you can deliver value?
        3) Can you demonstrate sufficient value to make a $X000 engagement a good idea?
        4) Realize that X can be whatever number you can think of.
    

For more detail, here is one of the definitive posts on the topic:
[https://news.ycombinator.com/item?id=4245960](https://news.ycombinator.com/item?id=4245960)

~~~
_delirium
> Note that if you deliver consistent measurable value, people will never stop
> hiring you.

Assuming your freelance engagements are fairly regular (e.g. a few weeks each,
not a few years), that scheme seems unlikely to be able to work _indefinitely_
, since you're proposing an exponential price-increase scheme! For example, if
I start out charging a mere $10 per engagement, and raise my price 50% each
engagement, then by the 50th engagement my rate will be about $4 billion,
which really limits the potential customer base.

~~~
wikwocket
I admit that my point about perpetual engagements does not literally apply if
you raise your rates multiplicatively, but I truly think that people will
never stop hiring you if you keep delivering value, pretty much independently
of your rate.

The better you get at delivering demonstrable value, and the more domain
knowledge you can show off, and the more your network grows within an
industry, the more clients will come knocking on your door. And they will be
less and less price-sensitive.

~~~
swissnamir
the question is how you quantify/measure the value you create vs. the fees you
charge

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kohanz
_1\. Are freelancers better skilled than usual employees?_

This is an impossibly generalized question to answer. It completely varies on
which specific freelancer and employee you are talking about. I don't fathom
there is a strong correlation between skill and freelance/full-time status.

 _3\. Do freelancers cost less than an employee for a company, including
taxes?_

Again, totally depends on the particular situation. How high are the
freelancer rates? How expensive is a a full-time employee at that company
(salary, benefits, etc.)? You'll be able to find both cases. In my experience,
full-time employees are viewed as more cost effective "in the long run",
especially when you take into account the difference in knowledge retention &
continuity between employees and contractors. It really depends on the needs
of the company.

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crpatino
You have to think it from the point of view of the potential
employer/customer.

Why do they want to hire a freelancer in the first place?

1\. Maybe they have 50-100 hrs of work per month that requires skillset X. If
none of their existing employees can do X, they will hire a freelance just to
avoid the hassle of having an employee sitting on his hands most of the day.

2\. Maybe they have a project demanding 50-100 hrs of work per week, for the
next 6-8 months, then they expect to drop maybe to 3-5 hrs per week of
maintenance/operations. They will hire a couple of freelances to implement the
project, with the explicit purpose of letting them go at the end. They may
consider keeping a proven-good freelance on a retainer (small fixed fee,
little or no work) for maintenance, employee training, emergency issues, etc.

3\. Maybe skill X is something that is not seen as a core strength for the
customer's company. It does not matter if they have demand to consume enough
of X to keep one or more full time employees busy. If they see an advantage to
file as a variable expense (instead of payroll), they will do so (they may be
charging a different department in the same corporation for it, or using money
from a government grant, or some other technical detail like those).

Those are the reasons that come to mind, but there surely must be others.
Please note that none of the reasons listed implied that freelancers are more
skilled, experienced, or cheaper than employees.

As a matter of fact, there is a market for freelances across all skill levels
(barred crass incompetence). It is just a matter of figuring out what level
fits best for you, and then project a professional image that reinforces that
level.

My perception is that this is what your customers are trying to tell you. Your
image is "cheap" compared to the value you end up bringing to their
businesses. If you increased your prices, you probably would end up having
more work (because you would no longer be perceived as
cheap/rookie/unreliable). You may need to use more clues, like dressing up a
notch, or redoing your webpage/contact info to project a more mature image.

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_random_
They are in London. Typical pattern here is hiring a contractor to implement
and then using permanent employees to maintain.

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sharemywin
A good rule of thumb was add 40% for paying an employees benfits. Now, you
have a starting point for an hourly rate.

