Freelancer’s Guide to Pricing: Retainers vs. Hourly Rates

Whether you’re just starting your freelancing career or revisiting your pricing strategy, you might be wondering about whether to charge a retainer fee or stick to hourly rates for your projects. Today, we’re breaking down the benefits (and some drawbacks) of utilizing each pricing model to help you feel confident when deciding how to charge clients for your freelance work.

What is a retainer fee?

A retainer fee is a flat fee the client agrees to pay for an entire project or for a set period—weekly or monthly—until a project is complete. Some freelancers request a portion of the retainer upfront and invoice the rest at the end. Others structure the full payment to be made upon project completion. Either way, make sure your terms are clearly laid out in a freelance contract.

What is an hourly fee?

An hourly fee is exactly what it sounds like—a set rate per hour that the client pays per hour of work. It requires tracking your time and sending invoices based on the house logged, according to the terms of your contract. It’s a flexible and common model for freelancers, especially when project scopes are less defined.

How do you calculate each?

Calculating Your Hourly Rate Fee

Here’s a typical freelance hourly rate calculator:

• Decide on how much you would like to make annually (factoring in your cost of living, taxes, and general business expenses).
• Divide this number by the hours you plan on working over a year (i.e., 40 hours x 48 weeks = 1,920, allotting four open weeks for vacation). The final number will be your hourly rate.

Example: $100,000 ÷ 1,920 hours = $53 an hour

Calculating Your Retainer Fee

• Estimate how many hoursthe project will take, including extra time for revisions or last minute changes.
• Then, multiply your hourly rate by the hours you’ve calculated that you intend to work. 

Example: $53 an hour x 40 hours = $2,120 

(for a total project over time or a 40-hour work week)

Freelance Retainer Fee vs Hourly Rate—Which Should You Choose?

No matter what kind of freelance project comes your way, it's smart to be prepared with pricing options for both retainer agreements and hourly contracts before you speak to a client. You should also be willing to negotiate based on the project scope and your boundaries.

Ask yourself (& be honest):

1. How much time am I realistically willing to give this project?
2. What would make it financially and emotionally worth it?

For more complex projects or difficult clients, make sure your rate reflects the extra effort you might need to put in.

Pros & Cons of Each Pricing Model

Hourly rate benefits:

• Flexibility to work on a project in your own schedule
• Potential to earn more depending on the number of edits and revisions the client requests
• For projects with an indefinite end or undefined scope, hourly rates are your friend. You could potentially make more as the project progresses.

Hourly rate drawbacks:

• Time tracking, calculating, and invoicing adds to your workload
• Clients may not agree to your hourly rate, leading them to seek out someone else for the job
• If you’re more experienced and efficient at completing the project, you could be under-earning. 

Retainer fee benefits:

• An agreed-upon fee removes ambiguity at the end of a project. You know exactly what you will be paid for the project from the start.
• If you are highly experienced, a fixed retainer might benefit you financially, as it may take you less time to complete the project and with fewer edits in the end.
• Depending on the hours and length of time used for this project, you can allocate unused hours to other clients, thereby adding to your income.   

Retainer fee drawbacks:

• Unforeseen issues that require you to make extra edits, or work toward different goals (this is where your contract saves you).
• You may underestimate the time required, causing you to work more for less pay in the end.

TL;DR

When deciding whether to request an hourly or retainer fee, use the project scope and client relationship to guide you. Make sure your freelance contract is crystal clear on the rate, deliverables, timeline, and number of revisions. Be open to negotiation, and ready to show your client how your pricing aligns with the time and value you bring to the table.

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