When you decide you want to hire a freelancer some things are pretty clear; you will need to post and advertise your job where you will state the skills you need, provide an idea of the timeline and establish a budget. But things can get confusing when it comes to deciding on how to pay freelancers. There are 2 main ways you can compensate your freelancer. You can pay him/her an hourly rate, that you negotiate at the beginning of your discussions, or you can offer a flat fee for the task at hand.
When it comes to an hourly rate for your project, the freelancer will invoice you for the time they work for you. A fixed rate project is a set price determined at the onset of the project. It is very important when deciding upon a set price that you define the scope of your project very well.
THE BIG CONUNDRUM ON HOW TO PAY FREELANCERS
How to pay freelancers is a big conundrum. Because if you think about it the incentive for both parties may seem opposed. If I choose to pay my freelancer by the hour, then the incentive for them is to go slow. If I choose to pay them by the project, then the incentive is to finish as quickly as possible at potentially the expense of the quality of the end product. This appears to be a no-win situation. These factors must be considered when paying freelancers. But don’t despair because now-a-days, with the rise of the freelance economy, freelancers have an important incentive. The increasing number of freelancers in the gig economy has risen the levels of competition to new heights that the freelancer’s incentive is, by and large, to do a great job in order to get your repeat business.
So here is some practical advice that will help you to decide how to pay freelancers:
1- PAYING FREELANCERS ON AN HOURLY BASIS
When your project is not clearly defined and you expect the scope of the work will change along the way, you should pay your freelancer hourly. If you go this route it is important to have good communication with your freelancer. You need to touch base and review the progress on a regularly basis to ensure your project is on the right path.
Paying your freelance hourly is also a good choice when you already have a well-established relationship and you understand how to work well together. There are many apps out there that will help you track the freelancer working hours. One such app is Time Doctor . With Time Doctor you can track the websites and applications while your freelancer is working for you and it tracks the keyboard and mouse activity, providing on-line and email reports on how much time is spent on your projects. They offer a 14 day free trial.
If you are new to hiring freelancers read our 5 must know tips BEFORE hiring a freelancer.
2- PAYING FREELANCERS ON A FIXED PRICE BASIS
Paying your freelancer a fixed price per project is a good choice when you are starting out with a new freelancer. Be sure to clearly define the exact scope of the project so that things run smoothly and there are no misunderstandings or surprise expenses. This takes a lot of preparation! Also note that when freelancers quote based on a fixed price they often put in a little padding to cover any miscalculations, so you may end up paying a little more. However, the premium you are paying may be worth it if you are averse to risk.
Keep in mind that if you decide to go the fixed price route, it is not a good idea to pay for the services up front. Instead, establish a timeline where you pay your freelancer at certain well established milestones.
3- PAYING FREELANCERS WITH A MIXED MODEL
We often work with freelancers at Workhoppers. We have used both methods to pay our freelancers. Our choice depends on the type of project and the relationship with the freelancer. However, our preferred method of paying our freelancers is kind of a mixed model. We don’t like surprises and prefer knowing the cost of our projects in advance. First, we negotiate upfront an hourly rate based on best practices in the market. Then, before approving any new project we request an estimate of the number of hours it should take. Typically, the outcome is bang on. Occasionally, the results are a little less or a little more hours. Either way it gives us an idea that we can budget for. This method of paying our freelancers works well for us.
PAYMENT TOOLS TO PAY FREELANCERS
There are many payment modules that secure the payment between freelancers and companies. Usually the freelancer has a method already established for payment. Some popular apps are:
- Deel: Should you choose to work with freelancers internationally, Deel enables international payment and ensures compliancy to local rules. Connect with Deel.
- Toggl: Free tool for minimum invoicing needs. One or two projects per month. They offer a 30 day free version which can even be connected to Freshbooks to generate invoices.
- Bonsai: Another popular time tracking solution that also incorporates invoicing and payment. They offer a 1 week free trial to take it for a test run.
- Paypal invoicing is also a good and simple option.