In the age of digitalization and the flexibilization of the workforce, freelancers are becoming increasingly important. Companies of all sizes are relying more on the expertise and flexibility of independent professionals to implement specific projects efficiently and effectively. For freelancers themselves, the question often arises: How do I calculate my hourly rate appropriately, and how does it compare to the competition? This blog post is aimed at freelancers in the IT and engineering sectors who want to learn how to realistically calculate their hourly rate and position themselves in the market environment.Â
According to the Freelancer Compass, independent experts are in higher demand than ever before and also earn above average. In 2023, freelancers receive an average hourly rate of 100 euros. 77% of freelancers see the hourly rate as an important factor in choosing projects andÂ
But what exactly is behind these numbers?
How Much Does a Freelancer Earn?
Freelancers not only enjoy the freedom of self-employment but often also a lucrative income. The income range for freelancers is broad and determined by various factors such as industry, qualifications, experience, and, last but not least, the order situation.Â
According to the Freelancer Compass by freelancermap, based on data from over 3000 individuals, freelancers, freelancers, and the self-employed surpass the 100-euro mark for their hourly rate for the first time on average. On average, they now earn 100.26 euros per hour, an increase of four euros compared to the previous year. The monthly net income has also increased to an average of 6300 euros, showing that freelancers can effectively pass on price increases to their customers. The study also shows that the income gap is widening further, with 50% of respondents earning over 100,000 euros gross annually. Despite the generally positive attitude, inflation and recession are dampening freelancers’ mood, with lower satisfaction with the economic situation and order situation compared to the previous year.Â
KEY POINTS
- Freelancers achieve increasingly higher incomes with an average hourly rate of over 100 euros.Â
- Â The calculation of the hourly rate takes into account expertise, operating costs, and market value.Â
- Specializations, especially in IT and consulting, lead to the highest earnings.Â
Composition of the Hourly Rate for Freelancers
The hourly rate of a freelancer is the result of a thorough calculation that reflects both his expertise and the accompanying costs of his activity. Each freelancer sets his hourly rate individually, based on factors such as qualification, experience, and the specific role in the project. An experienced specialist will usually demand a higher rate than a beginner because he delivers greater added value.Â
In addition to professional competence, freelancers must also consider entrepreneurial costs such as marketing, accounting, and insurance. These are included in the hourly rate, so companies benefit from a transparent and predictable cost structure.Â
The duration of the project also influences the hourly rate. For longer projects, the rate can often be set lower, as they offer the freelancer more security. The flexibility shown by a freelancer – whether in terms of work location or working hours – also flows into the hourly rate design.Â
An important factor not to be underestimated is the working atmosphere. A positive image and good working conditions can have a favorable effect on negotiations. We at ElevateX support the placement of qualified freelancers and ensure that the hourly rate reflects market conditions and the quality of the work. This results in costs for companies that are justified by the efficiency and expertise of the freelancers.Â
What Are the Highest-Paid Freelancer Jobs?
The landscape of freelancer jobs is diverse, and pay can vary greatly depending on factors like skills, experience, industry, and location. Yet some areas regularly emerge as particularly lucrative. Data from the latest Freelancer Compass shows that certain specializations command particularly high hourly rates.Â
IT and Software Development
In IT and software development, hourly rates are often well above average. Specialists in areas such as SAP, cloud computing, and specific programming languages can demand particularly high hourly rates. The trend towards digitalization is driving demand for these skills even higher.Â
Consulting and Project Management
Freelancers working in consulting or project management, especially in the fields of IT, finance, and corporate strategy, can also expect above-average hourly rates. Their ability to assist companies in navigating through complex projects or optimizing their business strategies makes them valuable assets.Â
Engineering and Technical Professions
Freelancers in technical professions, including engineers, architects, and specialists in renewable energies, benefit from the global focus on sustainable development and technological progress. Their specialized knowledge in these rapidly growing areas can lead to above-average hourly rates.Â
Creative Professions and Digital Marketing
Creative freelancers, such as graphic designers, video producers, and digital marketing experts, are experiencing growing demand for their services, especially in the area of digital content. While hourly rates here may be somewhat variable, freelancers with unique skills or specializations in niche markets can be very successful.Â
According to a study by freelancermap, SAP experts are the top earners with an hourly rate of 119 euros, which represents an increase of 3 euros compared to the previous year. The field of consulting/management is on par. They are followed by leaders in fields such as IT infrastructure, development/tech/data.Â
Marketing/communication and engineering are in the middle range of the scale, with an hourly rate of about 86 euros.Â
At the lower end of the scale, we find graphic/content/media with the lowest hourly rate of 72 euros.Â
Compare the Costs for Freelancers and Permanent Employees With Our Cost Comparison Calculator!
How to Calculate the Freelancer Hourly Rate?
To calculate the freelancer hourly rate, it is important to consider all relevant costs and the desired profit. This process helps not only in pricing one’s services but also in developing a sustainable and profitable business model. Here is a step-by-step guide on how to calculate your hourly rate as a freelancer:Â
1. Determine Working Days
When calculating your freelancer hourly rate, it’s important to realistically plan how many days a year you will actually work. Not every day brings work; weekends, holidays, vacation, sick days, and training days must be considered in your calculation.Â
Over the year, there are 365 days. Of these, 104 days are weekends. In addition, holidays (averaging 13), vacation days (we assume 28 days), sick days (around 10 days), and days for further education (about 5 days) reduce the number of your working days.Â
After subtracting these days, you are left with about 205 effective working days in the year. This number is crucial for determining your available working hours and thus realistically setting your hourly rate.Â
It’s important to include these factors from the beginning in your planning. This ensures realistic and sustainable working conditions in your freelancer everyday life. You prevent later pressure when you would have to work on weekends and forgo vacations during good order situations.Â
Your work time planning at a glance:Â
- Calendar days: 365Â
- Weekends: 104Â
- Holidays: 13Â
- Vacation: 28Â
- Sick days: 10Â
- Training days: 5Â
- Effective workdays/year: 205Â
This overview helps you accurately calculate your annual working hours and determine an appropriate hourly rate as a freelancer.Â
2. Determination of Annual Costs
First, annual costs must be determined. These include both business expenses and personal living costs. In this example, we assume monthly fixed costs of 1,000.00 euros, which include:
| Â | Â |
Business Costs | Private Costs |
Office rent or costs for coworking space membership | Private rent |
Telecommunication costs | Energy costs such as electricity, water, and gas |
Office supplies | Expenditures for food |
Tools or machines | Vacation budget |
IT equipment, software subscriptions, and other tools | Costs for work clothing |
Fees for a business account |  |
Costs for training measures |  |
Travel expenses |  |
Marketing expenses |  |
When calculating your hourly rate as a freelancer, however, not only fixed costs must be considered but also important factors such as profit, social security, and unproductive time. Unlike employees who receive a workplace and social insurances from their employer, freelancers must bear these costs themselves. The difference between revenue and income, as well as the need to financially prepare for downtime such as sick days, vacations, and training, plays a crucial role.Â
We use two scenarios here: one for a minimum wage and one for an average wage, which according to the Federal Statistical Office (Destatis) for full-time employees in the service sector is at 4,105.00 euros per month. Both scenarios are calculated for the above-calculated 205 effective workdays in the year.
In addition to the monthly fixed costs of 1,000 euros for business expenses, when calculating the freelancer hourly rate, social security contributions of 18.125% on the gross salary and 30% unproductive time for activities such as customer acquisition and office organization are also taken into account, resulting in an adjusted hourly rate.Â
Category | Minimum Wage | Average Salary |
Monthly Gross Salary | €2,080.00 | €4,105.00 |
Monthly Fixed Costs | €1,000.00 | €1,000.00 |
Social Security (Employer’s share) | €377.00 | €744.03 |
Total | €3,457.00 | €5,849.03 |
Hourly Rate (For approx. 136.64 h per month with 205 effective working days) | €25.30 | €42.08 |
Hourly Rate (for 70% productivity) | €36.14 | €61.15 |
The hourly rate specified before adjustment is based on an average monthly working time of 136.64 hours, resulting from 205 effective working days per year. When considering an additional 30% ‘unproductive’ time spent on administrative tasks such as client acquisition and office organization, an adjusted hourly rate is calculated. This rate reflects what freelancers must actually charge per productive working hour in projects to cover their ongoing costs and achieve a reasonable income. Consequently, freelancers must charge approximately 36.14 euros for a minimum wage and about 61.15 euros per hour for an average wage.
This detailed presentation of costs and the calculation of the hourly rate clearly shows that freelancers must carefully calculate their prices not only to cover their expenses but also to achieve a satisfactory income.
Freelancer Hourly Rate Compared to Employee Salary
The decision between hiring freelancers and permanent employees strongly depends on the specific needs of a company. Freelancers offer flexibility and specialized expertise for short-term projects (6-24 months) and are often more economical without long-term commitments like salaries and social benefits. They enable quick solutions, especially in areas with long staffing times such as IT. However, their hourly rates vary, and they may offer less continuity and integration into the company culture.Â
Permanent employees, on the other hand, cause predictable monthly expenses through fixed salaries and additional benefits. They are better suited for long-term projects and tasks, offer stability, and the opportunity to integrate into the company culture, leading to long-term motivation through career development. However, the total costs are higher in the long run, and there is less financial flexibility.Â
A cost comparison shows that permanent employees can be cheaper for long-term projects or continuous work, while freelancers are more cost-effective for fluctuating workloads and sporadic projects. Additional costs for employees and administrative efforts must be considered.Â
 A practical example with a backend developer illustrates that employees may appear cheaper at first glance, but the total costs, including recruitment and unproductive times, must be considered. For short-term projects or difficult-to-fill positions, hiring freelancers can be more economical as they provide specific skills and are quickly available, minimizing the negative impacts of an unfilled position.Â
Now you can compare the hiring costs of freelancers and employees with our ElevateX cost calculator!Â
Conclusion
The freelancer hourly rate is more than just a price for time. It is the result of a complex calculation that takes into account many factors and forms the financial basis for independent activity. In today’s flexible workforce, freelancers, especially in IT and engineering, are a key resource for companies. The Freelancer Compass shows that the average hourly rate has surpassed the 100-euro mark for the first time, highlighting the financial attractiveness of freelance work. Specializations, especially in SAP and consulting, achieve the highest hourly rates.Â
Earnings are variable, but specialized freelancers can earn above-average incomes.
Freelancer hourly rates reflect not only the work but also the ancillary costs that employers would otherwise bear.
At first glance, freelancers seem more expensive, but considering all costs, the ratio can look different.
