Negotiating the minefield of how much to charge and judging the morals of working for nothing.
This is the time of year when new graduates are waking up to the fact that they’ve finished their courses and are starting to get worried about that big question: what do I do now? You have your portfolio sorted and resorted, but both jobs and freelance work are thin on the ground. And if you do get a sniff of a freelance project you’ll be faced with that incredibly vexing question, that boring but important one that hardly any colleges seem to talk about… yes, how much you charge for your time. Set the figure too low and you’ll be working like crazy for not enough reward, but set it too high and you’ll be left twiddling your fingers instead of working at all.
People have different ways of working out a freelance charge rate, but there’s one method – mentioned in a MacUser feature a few years ago – that is dead simple and as foolproof as you want to make it. The first thing to do is decide how much you need to earn in a year. I mean the total, gross, complete amount, covering everything you need to spend, including your tax. Tot it all up; your rent or mortgage, all bills, your overall software and hardware costs (as a yearly average), food, beer, holidays, National Insurance, and so on. It will come to a fair bit more than a regular employee salary for the same work, but that’s because freelancers are responsible for rather a lot more too. For the sake of argument let’s put this at £40,000.
Okay, next, divide this figure by 1000. Why 1000? That’s how many chargeable hours you can expect to work in a year as a freelancer. There are roughly 2000 working hours per year, allowing for a couple of weeks off and going on 8 hours a day, but as a freelancer you’ll spend a good half of that in non-chargeable activities – invoicing, pitching for work, learning new tricks, fixing technical problems, and so on. Admit it. So, 1000 billable hours per annum. At £40k the divided result would be £40, which is your hourly rate. Simple!
You may not be aiming for the full-time freelance life, but all this applies just the same even if you only do the occasional bit of private work on the side. Time spent on these projects is time taken from your regular work or leisure time, so work out your hourly rate just the same as if this was your sole occupation.
If you did your sums properly that figure is the lowest you should charge per hour, not your average, so aim higher to begin with if you think you’ll need to negotiate. If you charge less than this figure you’ll be aiming for less than your annual target income, and if you work for less than you need to earn you’re giving away your time to someone else.
To recap: gross annual income / annual chargeable hours = hourly rate. If you prefer, multiply the result by 8 (hours) to get your day rate. I do find that talking about day rates helps discourage financial micromanagement by clients, but it isn’t always appropriate. Alternatively, you could use your rate to work out a project fee and just talk about that. But be confident about how long the work will take and add a bit for safety. Oh, and while you’re at it put at least 20% of whatever you make into a savings account or you’ll be in big trouble when the tax bill rolls around.
Of course if you set your sights too high in the first place you may just be charging more than the market can bear. In which case you may find yourself doing rather a lot of nothing. Make sure you know what typical rates are in your industry and see if this fits your needs. If it doesn’t (and you can’t see a way of justifying higher prices to your clients) then you’ll need to do one or more of the following: streamline your costs, work more efficiently, or find another line of work!
What about giving someone a cut-rate price as a way to get your foot in the door? It can be hard to keep a clear head when this subject is brought up (it is almost always suggested by a client), but remember that the price you give at the start sets the bar for you and often for others too. It can be really hard to change something once it is established. If you turn around after a few months of charging one level and ask for more, the client may well look around for other mugs… sorry, ‘young professionals’, eager to offer their talents at the same cut-rate prices. If they can’t afford you now, what will change that in the future? It isn’t easy to turn down work, but remember the phrase ‘if you pay peanuts you get monkeys’? You don’t want to be someone’s monkey, do you?
What if you’re not interested in the freelancing life at all, you just want to gain some experience and get a regulart job in an industry? Doing private projects can show a potential employer that you’re capable and skilled, but what really helps here is a track record of working alongside others rather than on your own. There’s a cruel Catch-22 problem in many industries, in that you can’t get a job in something until you have experience, but you can’t get the experience without first getting the job. Ouch. This applies to journalism, design, production, marketing, publishing – most Media work in fact, and elsewhere as well.
This brings us onto the hugely thorny topic of work experience and internship. Internship is basically volunteering somewhere in order to gain some experience. Yes, working for nothing, or basic travel and food expenses. It gives companies access to enthusiastic new blood at near-zero cost. And it is this that, understandably, makes many people decidedly uncomfortable. Is it right that industries rely in part on the efforts of unpaid interns? Of course not, not if that’s an economic crutch. But the more responsible companies do try to make the experience rewarding and useful, and it does give someone more weight on their CV.
The thing about internships is that this is literally and, specifically, legally a form of volunteering; if the intern is given any kind of contract, even implied through things such as being required to come on specific days and times, or a fixed sum rather than reimbursing receipts for travel and food, that’s a ‘contract of work’ and the individual should – must – get minimum wage. This can be hard for companies to grasp, but it is a legal tightrope that has to be walked. This is covered in detail in a document by the Volunteering England organisation, and it should be required reading for anyone offering or accepting an internship. You can find a PDF version of this at http://bit.ly/volunteeringinfo.
One hidden failing of the internship process is that it favours people with strong support mechanisms; those living with or funded by parents or a partner, for example, rather than those taking care of themselves. This can automatically exclude whole groups of people. Another problem area is the ease of abuse. Anyone volunteering for internships should be given every chance to learn about the roles and industry they’re in, but they can too easily be treated as grunts; cheap labour to sort out boring tasks. That, in my opinion, is what makes unpaid internships morally questionable, more than the lack of pay. Fortunately, not all places do this. Organisations that value interns and support them consciously by giving them relevant experience and an on-the-job, coal-face education – something just as valuable as a basic wage for people trying to break into an industry – those places are handling the moral question fairly well, in my opinion. It isn’t always easy to tell if that’s what’s on the cards, but some careful questions should help.
Finally, a ‘boring Uncle’ bit of advice. Whether you’re aiming for the flexible but frenetic freelance life or are positioning yourself for regular employment, there’s one thing that people value above all else. A professional attitude is, long term, the most important quality anyone can have. That’s what makes clients pay reasonable rates and come back with more work, and that’s what makes employers offer jobs. In short, that’s what will make you rise to the top. Dull but worthy Uncle advice over.