Why Freelance Hourly Rates Are Higher Than Employee Hourly Rates

Once in a while we get questioned on why our hourly rates are so high?

Compared to an employee of a company who maybe getting paid $15 – $25 per hour. Why are we charging more than that? It’s a common question, but the answer isn’t as simple as you’d think.

But the short answer is hiring a freelancer and paying a higher rate per hour often saves you money compared to higher an employee. Plus our expertise is often more diverse so we can bring more to the table, or specialise in one area you’re lacking for the timeframe you require.

The Hidden Costs of Freelancing

There are a lot of costs we have to pay ourselves, that employers usually pay for their full time employees.

For example health insurance, retirement accounts, and other benefits that employers often cover.

Freelancers foot these bills themselves, pushing up their rates.

What about the time spent chasing new clients, negotiating contracts, or invoicing? That’s not paid time, but it’s critical for maintaining a steady income.

Plus, don’t forget the expense of self-employment taxes, which are higher than taxes for employees, as freelancers have to cover their share and what would typically be their employer’s share.

It’s clear that freelancing isn’t just about the base rate—it’s about covering all these hidden costs.

Understanding Freelance Job Nature

Beyond these hidden costs, you need to understand as a freelancer, you’re essentially running your own business. You’re not just performing a job; you’re also marketing your services, managing your accounts, and chasing payments. That’s a lot of extra work that employees don’t have to worry about.

Plus, there’s the uncertainty. Freelancers don’t have a guaranteed income; if we don’t work, we don’t get paid. And, we often face gaps between projects.

Value Freelancers Bring to Businesses

In addition to our flexibility and, you’re also paying for our unique expertise qw can bring to your business. Freelancers often have a diverse portfolio, offering fresh perspectives and innovative solutions. We’re not bound by traditional thinking or corporate policies, so we can provide out-of-the-box strategies that could propel your business forward.

Freelancers also help you manage your costs.

You don’t have to worry about benefits, office space, or equipment.

We carry their own overhead. It’s a ‘pay for what you need’ scenario, making business operations leaner and more efficient. Plus, they’re generally more invested in the project’s success, as their reputation is on the line.

Financial Risks and Freelancing

You should also consider the financial risks freelancers take, which contribute to their higher hourly rates. Unlike traditional employees, freelancers don’t have the luxury of a guaranteed paycheck. They’re constantly hunting for the next job, and there’s always a chance they won’t find it.

They also bear the full brunt of business expenses, from equipment and software to health insurance and retirement savings. There’s no employer to split these costs with, so they’re built into the rate you’re paying.

And let’s not forget about unpaid sick leave or vacation time. Each day not worked is a day not paid. So, when you hire a freelancer, you’re not just paying for their time and expertise. You’re also helping to cover the financial risks they’ve assumed.

Comparing Freelancer and Employee Benefits

While we assume greater financial risks, freelancers also miss out on certain benefits that you, as an employee, might take for granted. You’re likely offered health insurance, retirement contributions, and paid time off, while freelancers must cover these expenses themselves. We also lack job security, having no guarantee of steady work, and must constantly seek out new contracts. These costs and uncertainties are factored into a freelancer’s higher hourly rates.

However, freelancers enjoy more flexibility and control over their work. We can choose their clients and projects, set their schedules, and work from virtually anywhere. This autonomy can offset the lack of traditional benefits..


So, you see, freelancers charge more per hour not because we’re greedy, but because we’ve got to cover hidden costs and financial risks.

We’re not just ‘hired hands,’ but valuable partners bringing unique skills to your business. We don’t enjoy the same benefits as employees, which we need to compensate for.

So next time you’re hiring, remember, you’re not just paying for their time, but also for their expertise, flexibility, and the risks we shoulder.

Simon Quinn

Simon is the founder of Site Lift and Nifty Commerce, and a passionate Builder Builder Developer who also helps businesses grow with Google As and SEO. If you’re interested in help directly from Simon, you can get in touch.