How do I come up with an hourly rate for a contract programming job?
June 29, 2006 8:37 AM   Subscribe

I need to come up with an hourly rate for a contract programming job, and have no idea where to start.

I was approached to do a contract programming job, and while I have a ton of programming experience, I have no experience with contract work. How do I approach the rate quote?

I'm happy to hear either specific answers as to how much I should charge/hour, or helpful tips like "this site is great for figuring out market rate"

some specifics-
  • Job involves Perl, Perl DBI, SQL, and some database design to parse and provide some intelligence to interpreting webserver logs
  • I have about 8 years experience as a Perl programmer, 5+ with everything other technology involved in the project
  • Job is with a startup e-commerce company, and I'm estimating the work could be completed in about 10-20 hours
  • I'm in the U.S., and so is the job
posted by mcstayinskool to Work & Money (12 answers total) 3 users marked this as a favorite
Best answer: Take what you would make per hour if you were salaried. Multiply by 2.
posted by matildaben at 8:43 AM on June 29, 2006

This isn't programming specific, but this link shows how to figure your hourly contractual rate with regard to your necessary annual income and costs of independent contracting and supplies.
posted by superfem at 8:53 AM on June 29, 2006

Best answer: Matildaben's suggestion is a good one.

Additionally, double your time estimate. I don't know anything about this project, but novice contractors (even ones who are experienced in their actual tasks) tend to be extraordinarily optimistic for a lot of reasons.

Give yourself time for that one problem that "shouldn't happen", time to cover client relations, and to deal with all the other associated tasks that you aren't used to.
posted by Tacos Are Pretty Great at 8:54 AM on June 29, 2006

I agree with matildaben and taco. I'm a freelancer and I learned the hard way to always double estimates and to ask for more money up front.

So if you think it's worth $12 an hour and will take you two hours, tell them you want $24 an hour and it will take you about four hours (but always be sure to specify your time is an ESTIMATE).
posted by misanthropicsarah at 8:59 AM on June 29, 2006

FTEs generally have about 100% overhead, so I third the times-two suggestion. That's a rule of thumb for budgeting within a business - benefits, indirect costs, etc.
posted by kcm at 8:59 AM on June 29, 2006

Additionally, double your time estimate.

And take that and double it. When I first started out doing independent web development, I always underestimated the time involved. I still do it now, but to a lesser extent.

In addition to underestimating the time it will take to build and debug, a huge amount of time can be spent communicating with the client and making revisions based on minor misunderstandings.

Make sure that you have a detailed specification of what you're building and that the client knows anything not on that spec will be billed hourly.
posted by justkevin at 9:07 AM on June 29, 2006

Best answer: I used to charge 1/1000th of my annual salary per hour.
posted by davcoo at 9:12 AM on June 29, 2006

There are several ways to set your rate:
1. Doubling/tripling your hourly wage
2. Using a daily rate for consulting
3. Setting consultant fees by the project
4. Setting fees based on performance
5. Setting rates strategically using real-life data
6. Charging what everyone else charges

I recommend using a combination and then taking the average. There's a (self) link in my profile to an article that goes into length about how to do the calculations, if you need help (and why you shouldn't use #4). For your own peace of mind, you should work at using real-life information to set your fees, but I think you're going to find that this should align with what everyone else charges and a multiple of your hourly rate in a real job.

However, once you've done all that, you're going to find that you need to make sure you have a really good contract, project scope, time management and client management skills. No matter what fee you set, your profits are going to be heavily influenced by those factors.
posted by acoutu at 9:13 AM on June 29, 2006

I don't know how it is in other markets, but one of the chief problems I've had in Dallas as a freelancer is the rate charged by talent agencies.

A lot of the talent agencies will hire just about anybody on and farm them out to clients as freelance help. They pick up a lot of hacks (you would be astonished at how many people download a copy of Flash, build a marginally pretty but horrendously bloated site, and bill themselves out as Flash designers) and kids right out of school, so their rate tends to be really low.

I (as somebody involved with Flash for 6 years and in advertising design for 7) generally do better work, have more experience, and work faster than 95% of the freelancers I've met from these agencies, but I find myself having to compete with them price-wise.

If "Talent Agency A" can place the above sort of freelance scrub in a cube for $40 bucks per hour, new clients expect me to either match that or hover damn close to it. Never mind that in the span of a day, I get 5x as much work done - and to a higher standard.

That's a good bit less than half my typical hourly rate when salaried, and leaves me feeling like I'm severely undercutting myself (which I guess I am).

Once that pay scale is established, it's quite hard to bump myself up to a real hourly rate.

Moral of the story: You might be wise to look into what freelance placement agencies in your area are charging for "your" services.

Definitely ask for 50% up-front, have a scope-defining contract, and estimate adequate hours, however.
posted by kaseijin at 9:42 AM on June 29, 2006

Oh, and it should go without saying that, in said contract, you should include payment scheduling...and get it signed before doing any work.

Getting payment from clients after the job is done can be a harrowing experience.
posted by kaseijin at 9:45 AM on June 29, 2006

kaseijin speaks serious truth...especially that part about having to compete in price with hacks.
posted by Thorzdad at 10:23 AM on June 29, 2006

My grandfather practiced architecture for many years. He had a formula:

1) Determine how long it'll take you, and multiply by your hourly rate.

2) Double that, because you've forgotten something.

3) Multiply by 1.5, since your client is going to be an unreasonable prick half the time.

As for an actual hourly rate, charge $75/hr. It sounds high, but by the time you're halfway through the code, you're going to wish you'd charged $150.
posted by Netzapper at 11:37 AM on June 29, 2006

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