Discussing Freelance Rates
Lately I had discussions again about freelance rates for developers here in Berlin. “Freelance rates are so high! I rather have a full time employee.”. Well, are freelancers really that expensive? Let’s calculate the expenses of a full time employee and compare this to a freelancer, shall we?
Expenses for a fulltime employee
Currently the yearly wage of a software engineer here in Berlin is around 50k EUR gross, seniors earning around 10k more. This is what the employee will receive gross, minus tax and insurances. The employer has his own share that he needs to pay in addition. That would be around 21% on top.
Let’s assume a yearly salary of 55k EUR for the employee, the employer would have to pay:
55.000 EUR * 1.21 = 66.550 EUR
Plus all the extras:
- technical equipment
- training & personal development
- conference tickets
- office supplies like paper
Surely some also apply to freelancers if they work at the customer site.
Equivilent daily and hourly rates
To compare a bit better let’s calculate the equivilent daily and hourly rate.
Working days per year in Germany:
total days per year: 365 Saturdays per year: 52 Sundays per year: 52 Public holidays: 10 Vacation days: 25 Sickleave: 5 Total working days: 221
So the daily rate would be:
66.550 EUR / 221 days ~ 300 EUR/day
If we have 8 daily working hours we get an hourly rate of:
300 EUR/day / 8 hours/day = 37.50 EUR/hour
“But freelancers charge way more than that!”
That is true, and they do it for
a good reason. This is an hourly rate of someone working
productively for 8 hours EVERY day! Generating value for the company every minute he or she is at work. We all know that
this is not the case.
Productive hours only
So the question arises:
How many hours can we work/develop productively? Great that this question was asked already on the internet in several places.
Turns out that most people think they can program for about 4-6 hours per day. 6 being really good.
Development is brainintensive work and we cannot program all day long. Most of the time the best ideas come also during a break while relaxing. But would you pay a freelancer for relaxing or doing unproductive work?
You pay a freelancer for productive work that brings value to your company.
So, if a freelancer would/could invoice 4 hours of productive work every day he would have to charge
double the calculated hourly rate to receive as much as a full time employee.
And this is for working every day, and even a full time employee is not productive every day. He may get side tracked by other “shiny things” that employers at the end pay for. But this is a different story…
Worth the money
don't be surprised when freelancers ask for 60 - 90 EUR/hour.
At the end of the day it is the result that matters and not about how many hours someone worked. It is the value that a person brings to the company - so, if a skilled, motivated freelancer can give that why not pay them accordingly?
They are surely worth it!