The Difference Between Hourly Rates, Retainers And Flat Fees (And When To Use Them)

Hourly rate, retainer or flat fee.

Which do you use for your freelance business?

Every freelancer I talk to usually has a different opinion on the topic, which tells me this is one of those areas where you need to determine what works best for you.

While all three options have their benefits - an hourly rate guarantees you get paid for the hours you worked, a retainer provides ongoing financial security and a flat fee usually means fast work - it’s important to understand how each one operates and the best time to use them.

Let’s start by defining each option:

Hourly Rate

A set amount billed based on the amount of hours used to perform a service.

Retainer

A fixed monetary amount billed on an ongoing monthly basis for services performed, regardless of whether you go over or under your projected hours.

Flat Fee

A lump sum provided for services performed, regardless of hours spent to achieve the goal.


Now that you understand the difference between these three options, let’s break down when it’s best to use them.

Hourly Rate

  • One-time projects or working with new clients are good times to use an hourly rate. If they end up coming back for another project or want to continue working together, that’s a good time to negotiate a retainer or flat fee.

Retainer

  • Consistent, on-going work is the best time to work with a retainer. If you’re actively contributing to a client every month within a set amount of hours (give or take 5-10 hours), a retainer is a great option. It allows you the security in knowing how much income you’ll bring in every month, while also having the flexibility to work with other clients.

Flat Fee

  • A project with a single goal or structured services work best with project fees. For example, if the goal of the project is to lead media relations for a product launch that will only take one month to complete, consider negotiating a flat fee. Structured services that follow the same process for every client (i.e. - logo design, website development, video production) also work great with a flat fee.

Which approach do you use for your freelance business?


AUDREY ADAIR IS THE FOUNDER OF ‘THE SCOPE’ AND A GLOBAL FREELANCE COMMUNICATIONS PROFESSIONAL. SHE STARTED ‘THE SCOPE’ TO PROVIDE RESOURCES AND COMMUNITY TO FREELANCERS AND THE SELF-EMPLOYED. CONNECT WITH AUDREY ON INSTAGRAM, YOUTUBE AND LINKEDIN.