Elance Blog

Hourly Jobs vs. Fixed Price Jobs

One question we’re asked often is whether it’s best to work on jobs by the hour, or to set a fixed-price before the job begins. It’s a query we get from our freelancers and clients, regardless of whether they’re newbies or seasoned Elancers.


Although there’s no easy answer, here are some basic guidelines to follow:

If you need wiggle room, hourly makes sense.
The best thing about working hourly is it allows flexibility for changing requirements and scope. If you’re creating a brand new multi-media rich website from scratch, the road ahead is more than likely a wee bit uncertain. Variables can change as quickly as the weather, and when the work is hourly you’re both able to adjust on-the-fly.

Hourly is also best for ongoing projects. If you’re creating a weekly newsletter, hiring a team hourly allows flexibility to alter scope as you go along. Some issues may only have five articles, while other issues have ten. If you want to keep the team together, but not over pay or under pay, there’s never a problem with hourly billing. Somewhat related to this, hourly billing also allows clients to auto-approve weekly timesheets and simplify the process. Of course this feature is available to anyone using hourly contractors, but it’s particularly nice for repeating invoices.

Keeping track of hourly projects is also simplified with Elance’s Work View™ feature. With the Tracker feature in Work View, clients can view screenshots of work in progress, as well as read contractor comments about the hours they’ve billed. Needless to say, an open line of communication is always a good thing. Another popular benefit of hourly billing, for both contractors and clients, is that jobs can get started much faster – as in pretty-much instantly. There’s no need to map-out every detail of the project too greatly in advance, crossing every “t” and dotting every “i” before work begins.

Another advantage of hourly pricing is that for many new users, clients and freelancers alike, it’s often more comfortable starting out with a small hourly project to get the feet wet. Once people realize how smoothly the Elance platform works, then on the next project simply choose hourly or fixed-price by what makes the most sense.

If it’s etched in stone, fixed price makes sense.
Your best bet for jobs with a well-defined scope is fixed price. Let’s say you’re translating 200 Help Pages into French. Since each Help Page is approximately the same length, it’s fairly easy to guesstimate what the time demands are.

Naturally Elance gives you the ability to adjust the budget when things change (if the total count goes down to 100, or new pages have to be created from scratch in French?). So simply discuss the specifics the best you can, take the time to lay out everyone’s parameters in detail, and work out a reasonable figure.

One reason clients and contractors both like fixed-price is the Elance Escrow feature. Elance will hold the money and only release it when clients have reviewed and approved the work. And by pre-funding Escrow, contractors can also be assured the funds are there before they start work.

To strike a balance between hourly and fixed price, many Elancers choose the latter but include lots of milestones. This breaks up the large project into smaller tasks, allowing the freelancer to get paid when milestones are met.

Hopefully that answers your questions?
Again, the best form of compensation should be determined by the variables involved. As a general rule of thumb, when in doubt, choose hourly. This option seems to save time for everyone (no going back and forth), and keeps everyone cheerful. But the client and contractor should discuss things in advance. And remember, if you do go with fixed price you always have the option to switch to hourly mid-job. And vice versa, from fixed-price to hourly.

So in a nutshell, talk and see what seems right, then adjust if needed. Flexibility is built into the platform at every step.

 

Comments

In the Freelance Marketplace, my KNOWLEDGE is worth far more than my TIME. An experienced contractor can usually complete a project in less time than someone still climbing the learning curve. So at an hourly rate--all things being equal--the inexperienced contractor will earn more than the experienced one simply because it took longer to complete. In the corporate setting where all employees are known commodities with documented track records, an hourly rate makes some sense There the inexperienced employee will earn less per hour on the same project than the highly experienced employee. However, this does not work in the Freelance world; especially if the Project is awarded to the qualified bidder with the lowest hourly rate. There is no fair way for the Client to compare the experience and track record of one contractor with another. So I totally disagree with the rule of thumb: when in doubt choose hourly. In the Freelance World, hourly rates often lead to disputes because neither party can be sure they are getting the best value. A fixed price based on measurable milestones keeps the playing field level and allows the Referee to make an equitable call if either side fails to meet the terms of the agreement.

I agree. What type of work do you do?

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Shraddha Sharma

A more experienced person can always set more hourly rate.

You mean "a higher rate"?

*Did* you mean a higher rate?

http://en.wikipedia.org/wiki/Muphry%27s_law

Hourly jobs are more preferable , there is alot of flexibility in it for both client as well as Contractor.

From a client's perceptive, flexibility in many times is not an option, see the post above your post.

Rafael

PS, In English, one would say:
– Hourly projects are preferable; and not: "jobs" since projects are not jobs; and "more" is superfluous.
– The word is not "alot", allot is used as follows: "give or apportion (something) to someone as a share or task". Where as: a lot means more or many, such as a lot of flexibility.

Hope this helps.

I do not bid on hourly jobs because there is more opportunity for disputes. It took you HOW long to do THAT? After a comment like that, I would feel under pressure to work fast, and I never do my best work under pressure.

Clients who would ask that question typically have unrealistic expectations for a fixed price job as well.

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WithReagards,
Vivek

Hourly is great if you are consulting or if project's requirements are changing constantly. I do agree that it's quite difficult to measure the performance for the client, but it depends on many factors and on the client's desire to measure.

I do agree that a more experienced professional will often make more money on a fixed price project. But in this case you should keep a close eye on customer's requirements: customers love to change requirements and ask for more, just need to make sure you add new milestones on time.

Hi,
I am Searching For Freelancing job on IOS Game Developer....If you have any requirement Please contact me on +919610042122...
WithReagards,
Vivek

I do think both have their merits. Personally I prefer fixed. As mentioned, some clients get scared off by, in their eyes, a high rate. Sometimes someone with a low rate will take twice as long or they have no expenses. It's hard for a new client to judge. Looking at the clients previous sales can help tell you if they know what things cost. I bid on a job once and I thought I was giving a fare bid. Turned out I was the low bidder and got the job. After I started the job I noticed that this entailed more work than what was bid on. On the phone we talked about it and it was agreed to increase the payment and they were very pleased with the final product. Hourly would not have worked here...I worked hard without the pressure of the clock ticking. So, milestones and pricing Can change with fixed pricing.

I think hourly job is benefit both client and contractor. If client want to see contractor work then client check easily Elance tracking report. Beside contractor payment guaranteed.

Hourly jobs are more secured & preferable and better for both client as well as Contractor.

A very talented and fast worker prefers fixed price.

Exactly

Hi,
I am Searching For Freelancing job on IOS Game Developer....If you have any requirement Please contact me on +919610042122...
WithReagards,
Vivek

If the contractor is experienced he values his time a lot and judges the project according to his hourly rate.
In case of fixed price development turns into a bargaining about the project price instead of a real depiction of efforts, the developer makes to complete the project.
As much as I understand the fear of a client to go over budget with uncertain hours amount - a realistic time line can do the trick, as well as some control over screenshots for which the customer is billed.
From my standpoint fixed price is far more a matter of trust between the client and the contractor.

One more point is that it's quite difficult to overprice and overextend the contract under hourly rate - I'm not talking about just "working slowly", I mean that with a hourly rate you can't finish a contract that has 30 days time line in 1 week and still get the payment for 30 days.

So hourly contracts give a realistic depiction of developer's speed, skills and effort, while a lot of clients can't provide a specification detailed enough to comfortably work with a fixed price.

In my point of view hourly contract is a way of bigger responsibility and requires a high skilled (and high rated) contractor, while a fixed price issues are often with the missed deadlines.

For writing jobs, fixed price is definitely my preferred way to go, because of the way I like to work - in short bursts, with time off in between to go and do other things. My heart always sinks when I see a good RFP and it turns out to be hourly rather than fixed price.

Personally, I prefer hourly as often you are outbid for a project in fixed price. I am willing to work for the minimum wage of just over £6 GBP. As I am a very experienced typist and can work very quickly and accurately this would probably mean that it would be most effective for the employer as it would be cheaper than quoting a fixed price. At over 80 wpm typing work will be fast and expertly done.

I think

a.) it depends on the freelance work you do.
b.) it depends on the nature of the work, its frequency, duration, etc.
c.) it depends on your skill level and how you like to work.

As a freelance writer and editor, I prefer a fixed rate. I agree with others who say the more experience and skill you have in these areas, the faster you work. Therefore, an hourly rate is a detriment to your schedule and overall earnings. For example, if I have an hourly client I might be forced to work on his project all day, just to rack up a decent day's earnings. But if I have fixed clients, I can potentially complete/work on multiple projects per day, increasing my productivity and earnings overall.

On this forum, I seem to be seeing international freelancers from lower GDP countries prefer hourly, which makes sense b/c they are generally less experienced (at least in writing English), highly value stability and require less money in the long run.

The last thing I want to say is that while I am starting out on Elance, by no means do I intend to continue to source the majority of my clients from it. A piece of advice for everyone, create your own website and start sending out emails and pitches to prospective clients out in the real world. They pay is much, much better.

Because of the nature of Elance, it really does cater specifically to small business owners with small budgets and new writers who are willing to take relatively low fees to build their portfolio.

Usually I've found the person hiring wants a fixed price and I want an hourly price. Requirements are rarely 100% clear and even if they were it would still be my guesswork to figure out how long a project will take me. With a fixed price any of my errors cost me. With a variable price, any errors or lack of clarity in the job description cost the person hiring.

As a newcomer to eLance, I would suggest hourly. I have a $3,000 project in the hopper paid by milestones. I paid 2/3, billed for the last 1/3 with an unfinished, unusable project to show for it. Pretty discouraged about that. Should have been a simple project to modify an existing website template. Any Suggestions?

A potential way around losing work if the project is not completed by the contractor is to establish each milestone to have a functional deliverable. If you develop your projects with an evolution in mind there is more security. For example by milestone: Design, then bare bones development, next a completed framework, then add function 1, followed by function 2. Each phase is a small completion that can be transitioned to another contractor if needed.

It is my way of applying the agile method: http://en.wikipedia.org/wiki/Agile_software_development.

i prefer hourly jobs.i have done my graduation,post graduation,m.phil in c.s.if jobs are given to me i will do my best for the low amount.

Honestly, You won't believe me a jewish client offer me $USD990 per hour so what can you say? I am still shocked until now..

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Personally I believe there is no 1 rule about this.
There are jobs suited for fixed price and others for hourly basis.
Experienced freelancers should be able to judge and distinguish what jobs goes where.
Jobs with specific requirements and a certain workflow path can be set as fixed price, e.g. creating the design of a theme/template, a logo, or writing 10 articles for an online magazine.
Freelancers of these jobs can easily estimate the needs and include in the fixed price their efforts and their expertise and talent to complete the job.

But there are jobs that cannot be estimated in front for fixed price.
Cycling and repeating and long-lasting projects would be best suited for hourly basis jobs.
This allow flexibility and easy-going relationship between client and freelancer.
Otherwise, having all the time to estimate and create milestones for each new task, requires resources, time and energy spent.
Of course all relationships should be based on mutual trust.

Actually in any case, what freelancers and what everyone is being paid in this life is his time and expertise.
Either hourly or fixed price, freelancers consider the time that they have to spent on a job.
I want to be paid for the combination of these and the full service package I provide, as well as I always work fast to complete the job either fixed or hourly.

For example, in fixed price jobs, who doesn't count that this project will take 50 hours of work to complete ?
Also, I can't understand why someone should feel pressure when working on hourly basis, and not pressure when working on fixed price job that should be delivered within 1 day and within a specified bid, which finally might be seem unrealistic ?
Personally, I don't feel pressure neither way, I just feel confident about my services and responsible to deliver results that will satisfy my clients. And I always offer the best and the most that I can.

Considering some statements, that inexperienced freelancers would need longer time to complete in an hourly job, I would say the following:
In any case, everyone could face tasks that is not so experienced with, or should invent or create from scratch or learn new things.

In my case, I am inside an hourly basis job and need to research or get more information about a new technology, I don't track down time for this, except if other conditions are met, like having before inform my client about the situation and suggest him other solutions or outsource the current task but client will agree to pay me for this particular task including my research hours.

Also, inexperienced freelancers are better suited for fixed prices jobs. As they could possibly have more time to work and deliver.

And regarding the evaluation by the project holders, I believe that project holders should be somehow able to evaluate the delivered work, one way or another. In any case, they are free to choose from freelancers with established portfolio and history, judge from their profile and previous feedback, judge on the price offered and the proposal and the communication with the freelancer.
So, if a client only consider the cost, then he is free to choose the lowest price either fixed or hourly job, without evaluating anything else. This is his responsibility to go.
Freelancers responsibility is to provide their service at the quality levels they have set and according to their experience and expertise.

Conclusion, both types can work depending on the type of job. There is no good or bad choice. Their different features allow us to choose the type of work that is best suited according to each project.

And finally is the communication, the level of trust and confidence and the reliability between both parties, the major key for successful projects.

Hourly Rate is best for both parties.

I am a college student looking for a part-time job and came across Elance. Is this worth my time?? How hard would it be to earn enough money just to pay my basic bills??? Any advice would be helpful.
Thanks

There is also a way to protect clients by hourly rate.?

Elance could use the same method as fixed rate but all you have to do is;

When each time the hours are deducted from the client the money will go to a special account in escrow each week and when the both parties are happy with the job or work then the total amount of money will release to the freelancer.

I other words I selected a freelancer to work for me by hourly rate so when the first 8 weeks past the bill will appear and the client approve and pay, this amount of money will be deducted from the client and put into a fixed and untouchable account, Then the next 8 weeks come the same process until the work is declared completed or both parties are happy then the client can select work completed and the money is totally released to the freelancer.

If not they will have a dispute but the money will still be there an untouchable from both parties only ELANCE CAN decide what to do and the money will be in power to ELANCE.

This is a simple process and if you want I can help by phone to UNDERSTAND a secure and simple step. WHY ELANCE did not think in this before? It seems that this website was built buy a unprofessional developers that you find on Elance or ODESK.

Telf: 713-3028183

Marlontm

I can explain it on phone for you!!!!!!!!!