“What’s your hourly rate?”
This was not the first time Reeba was being asked this question. This was not the first time she felt at a loss answering the question.
An employee is paid a salary, a fixed remuneration per month. But a consultant or a freelancer – who is an independent professional is paid at a pre-decided hourly rate. And that’s where the whole trouble starts – in the mind with thoughts flying around in your head – “Can you simply quote a figure out of your head – the fanciest figure you can think of? What if the hourly rate you quote is too high for the client? What if it is too low for you? Where do you begin? And where do you end?”
Questions, questions!
Worry not, here’s a simple answer with a formula that has worked for so many years for so many independent professionals.
How to calculate your hourly rate?
Your hourly rate is a combination of your market rate and your ideal rate (your worth). It has to be calculated practically and based on certain parameters. This is how you do it:
1. Find out your monthly remuneration based on your last salary or the industry's current full time salary for the job that you do.
2. Divide it by 20 days (these are the days you work in a month in a full-time job) then divide it by 8 hours. You will get your man/woman hour rate.
3. Then estimate the time you spend on each job. Maybe for example 15 hours on writing for a website.
4. As you get this, multiply the rate with the time in hours. You will get the fees. You charge those fees.
At times, clients will want to know your hourly rate alone and will pay you by that hourly rate for the number of hours you have consulted them. So, if it is 12 hours a month and your hourly rate has worked out to Rs 500 per hour, then the total at the end of the month works out to Rs.6000. Do remember to mention taxes extra, if any. Every company will deduct TDS (Tax deducted at source) this is income tax deducted at source which is a standard practice and very much legal. Do not create a fuss about it. Later, when you work on your income tax deductions and income and expense statement the end of the year, you can claim a refund based on how your statement looks. Your CA will work out the tax details for you.
Let’s be more financially aware and create a win-win for our clients. Let’s remember that you are the only one who can decide your worth!