How to Set Your Hourly Rate as a Remote Freelance Developer

As a remote freelance developer, setting your hourly rate can be challenging. Market rates vary greatly depending on your location, years of experience, skills, and the stage of the company you work with. 

Many freelancers will start by looking at salary information for full-time employees. But there are a few issues with this. For one, full-time, salaried employees aren’t totally comparable with what a freelancer should charge. That’s because freelancers don’t typically receive bonuses, benefits, or vacation, so they should factor these considerations into their pay. And salary information is pretty opaque: many companies withhold salary information from job descriptions, and efforts to increase pay transparency have been largely ineffective. 

So how do you set your freelance rate? In this guide, we’ll walk you through three steps to work out a fair and competitive income, how to communicate it with prospective clients, and share tips for how you can increase it over time. Whether you’re just starting out or you’re a seasoned freelancer, this article will provide you with the knowledge and tools you need to set a rate that reflects your capabilities.

Step 1: Assess Your Skills, Experience and the Role

Your rate should reflect the specific skills you have, the industries you’ve worked in, and how many years you’ve been doing it. Gather the following information to piece together your story as a remote developer and the highlights of your career. 

Professional and Academic Experience

Start by asking yourself broad questions about your work experience, such as:

• How many years have you been working in the industry?
• How many years have you spent as a junior, mid-level, and senior team member? 
• Were you in a leadership position for any or all of these roles? 

Here, you can also consider more nuanced elements, like the size of the companies you’ve worked with. For instance, if you have experience with big tech companies like Google or Dropbox, or if you’ve worked more with startups or small businesses. 

It’s also worth thinking about any academic training you have. For instance, have you completed a college or university degree in your field? Have you received any certifications or taken courses in advanced skills development? While formal education isn’t a requirement for freelancing, some companies do look at this.

Technical Skills

Next, take some time to dig into your specific technical skills, for instance:

• What are the frameworks, tools, and libraries you’re familiar with?
• What is your level of expertise with each?
• What types of projects have you worked on? What was your role and contribution to each?

Try to be as honest as possible with yourself in drawing out the breadth and depth of your technical skills. Here’s a skill matrix for programmers that may be helpful in evaluating your experience. 

Soft Skills 

Consider what soft skills you’ve developed and how they may factor into your performance and overall value to prospective clients. For example: 

• Communication: Are you able to communicate effectively in English? Understanding the nuances of verbal communication in meetings and writing clearly with clients and team members in English is a crucial skill for ensuring that everyone is on the same page and that project goals are met. 
• Adaptability: The software development industry is constantly evolving, and being able to adapt to new technologies and approaches is important for staying relevant and competitive. A willingness to learn and embrace change can make you more attractive to clients and help you charge higher rates.
• Independence: Are you able to think creatively, problem solve and be productive with very little direction and oversight, or do you require that tasks be thoroughly defined by someone in order for you to complete them?

Adjust Your Rate Based on the Role

Once you’ve evaluated your qualifications and experience you can conduct market research, which will help you align your skills and experience to pay. 

With that said, when applying for a new job, it’s important to have a clear understanding of the role. This includes the specific responsibilities, required skills, and experience needed to succeed in the position. If you have 10 years of experience in the industry, but less than a year in the technology or the specific role that the position is asking for, it may be necessary to adapt your rate to reflect your inexperience in that area. It’s important to be honest about your level of experience and highlight your transferable skills and willingness to learn. Employers are often willing to invest in talented individuals who show a strong work ethic and a willingness to develop new skills.

Step 2: Conduct Market Research for Freelance Rates 

Now that you have evaluated your own skills and experience, it’s time to conduct market research to set your rate. By researching average rates for freelance developers in your specialization, you can get a full picture of what you should be charging.

To conduct in-depth market research, consider the following factors:

• Technical Specialization: Research the standard of average rates for freelance developers with your specialization. You can look at online job postings, check professional networks such as LinkedIn, and refer to annual income reports.
• Geographical Location: How much do developers with your skill set typically get paid in your country? Companies will expect to pay you a rate that is in line with what other developers in your location charge. So setting your rate with this in mind will make you more competitive. 
• Seniority and Experience: How much do developers with your level of seniority and experience get paid? You can find out by looking at job postings and talking to other developers. Consider if it varies depending on company size. This will help you understand the factors that impact earning potential in your target market. 

Keep in mind that rates for remote developers vary not only based on technical expertise, experience/seniority, and geographical location but also on the market. The current state of the market and the demand for your skillset will always impact how much an employer is willing to pay you. If your skillset is in high demand, you may be in a favorable position to charge higher rates than usual. Or, if the demand for a skillset is low, you may need to be more flexible with your rate to remain competitive.

The research you conduct will inform an estimated rate range for your services, which will be important to help gauge whether your calculated hourly rate aligns with the market’s standards and demand.

Step 3: Calculate Your Hourly Rate 

Now that you’ve gathered all the necessary data, it’s time to calculate your hourly rate. 

Start by Calculating Your Minimum Hourly Rate

The first step is to determine the minimum hourly rate you can charge to cover your expenses and make a living wage. You can use your current pay as a baseline to calculate this number, or you can use online rate calculators to do the calculation for you. Just be sure to adjust the inputs to accurately reflect the number of hours and weeks you plan to work.

For this example, let’s assume you earn $5,000 per month, or $60,000 annually, working 40 hours per week for 50 weeks of the year (to account for vacation).

Converting Monthly Salary to Hourly

To calculate the minimum hourly rate, use the formula: (Monthly pay * Number of months per year) / (Number of working weeks * Number of hours worked per week)

(5,000  * 12 / 50) / (50 * 40) = $30

Therefore, for a monthly pay of $4,000, with 50 working weeks and 40-hour weeks, the Python Developer’s minimum hourly rate would be $30 per hour.

Converting Annual Salary to Hourly

To convert an annual salary to hourly, use the formula: (Annual salary) / (Number of working weeks * Number of hours worked per week)

(60,000) / (50 * 40) = $30

Therefore, for an annual salary of $60,000, with 50 working weeks and 40-hour weeks, your minimum hourly rate would be $30 per hour.

Factor in Additional Freelancer Expenses

In addition to your base rate, it’s important to factor in other expenses such as taxes, retirement contributions, health insurance, employee perks (such as gym memberships, travel subsidies, and bonuses), office supplies, equipment, and vacation time. 

To account for these additional freelance costs, you should add another 10-15% on top of your minimum hourly rate. For instance, if your minimum rate is $30.00, 15% of that would be $4.5, bringing your final hourly rate (including additional freelancer expenses) to $24.50. 

However, the percentage you should charge may vary depending on your location and what work benefits are typically offered in your region. Therefore, it’s essential to research and talk to other developers in your area to determine a fair rate. If you’re invited to interview for a role, our team can also assist you with this.

Your Desired Hourly Rate 

Once you have calculated your minimum hourly rate and added in additional freelancer expenses, you’ll arrive at your desired hourly rate. However, before finalizing your rate, it’s important to evaluate it to ensure that it aligns with market standards, reflects your value, and meets your personal expectations. 

We recommend that you calculate your rate in your local currency and convert it to USD for a more accurate comparison with rates in other markets. If you find that the final rate you calculate is higher than the average rate in your area, we suggest adjusting it to a rate that’s closer to the average to remain competitive. Or, if your rate is lower than the local market, consider splitting the difference between your local currency and your client’s currency.

Communicate Your Rate to Prospective Clients

Once you’ve determined your rate, it’s time to communicate that with prospective clients. As a Scalable Path freelancer, for instance, you’ll post a desired hourly rate on your profile. This will attract clients looking for the skills and experience you have that are aligned with your pay expectations.

Example: How Scalable Path freelancers communicate their rate

Scalable Path developers are responsible for choosing their own rates when they create a profile. In the “Skills” section of the profile, we ask developers to list and rate their expertise in a given skill out of five stars. 

The self evaluation not only helps our team understand more about your experience and skill set, but also gives you an opportunity to define and set a rate that reflects your value in the market. It’s also a useful tool to refer to if you need to explain or justify your rate and clearly show why you charge what you do. On top of skills, you can include information about experience, education, and work samples to help reinforce your rates.

What to do If Your Rate Isn’t Being Well Received

If your rate isn’t well received by clients, or you’re finding you’re not getting offers, it may be that your pay expectations are too high. If this happens, consider revising your rate with the following questions in mind: 

• Does this rate reflect your skills, experience and value?
• Does this rate reflect the industry standard?
• Does this rate reflect the standard and cost of living in your location? 

How Should Your Rate Change Over Time? 

As a freelance developer, you’re in charge of what you earn to a large extent. That means nobody is going to give you a pay raise unless you increase your rate yourself.

Your rate should increase over time as you gain more experience: years worked, breadth and depth of technical skills, and your soft skills. This includes communication, self-management, and client management. While these may seem less important than technical skills growth, don’t underestimate them! Clients are often willing to pay more for a developer who can work independently, solve problems, and deliver functioning software without needing to be told exactly what to do – because managing someone takes time and effort.

When considering an increase in your rate as a freelance developer, it’s important to approach the decision thoughtfully, taking into account market trends, your own circumstances, and the impact on your client relationships. 

Our general recommendation is to evaluate your rate and skill set regularly, on an annual or biennial basis. This will give you an opportunity to reflect on your progress and professional development over time. Your rate increases will factor in the same points you used to set your rate, like seniority and technical skills, but should also account for inflation. Additional factors like inflation or a change in location should also be considered. 

Regularly Conduct Self-evaluations

Regular self-evaluations are a good practice to assess when it might be time to adjust your rate. 

In many ways, you’ll conduct a self-evaluation in the same way as you set your rate originally. This time, however, you’ll also look at market trends and inflation. 

Given the outcome of your evaluation, do you feel you’ve developed enough to increase the cost of your services? 

Resources to Help You Increase Your Hourly Rate

If it’s not the right time to raise your rate, you can invest in your growth and increase the value of your services over time. Here are some ways to sharpen existing skills and learn new ones to keep up with the most in-demand roles: 

• Stay up-to-date with industry trends and best practices: Demonstrating your ability and initiative to adapt to changes and learn new skills is a great way to level up in your career. 
• Network with other professionals in the industry: Building connections and seeking opportunities can open doors to collaborate on projects and learn from others. You can do this by joining developer communities through discord channels, virtual meetups and conferences. 
• Pursue additional training and certifications: This can help showcase your commitment to continuous learning and development. 
• Work on soft skills: develop your understanding and working knowledge of project management skills like Agile or Scrum, as well as interpersonal and English skills. 

For additional support in developing your skills, we recommend taking courses or online learning platforms, seeking advice from other freelancers or industry experts, and taking advantage of resources from our blog, like 

• Online Learning Platforms and Resources for Software Developers
• How to Improve Your English Skills: Tips from a LATAM Developer

Final Thoughts: Setting a Fair and Competitive Hourly Rate

As a remote developer, it’s important to find the right rate to position yourself for success. While factors like skills, experience and industry norms are important for understanding your rate, ultimately it comes down to the market and what you can negotiate with your employer. If the demand for developers is high, you may be able to ask for a higher rate, and conversely, if the economy in contracting and jobs are scarce, you may not be able to demand as much. However, starting out, it’s important to gain experience and build a good relationship with clients. Getting your foot in the door and proving your value can be a good strategy.  Then after a while (we suggest waiting 1 year) you can ask for a reasonable raise and gradually increase your rate over time.

Ultimately, charging the right amount is crucial for maintaining a healthy work-life balance, delivering quality results, and ensuring your long-term success as a remote developer. By finding the balance between a fair rate and market competitiveness, you can establish yourself as a valuable asset to any team. So, take the time to evaluate your skills, understand the market, and invest in ongoing professional development to position yourself for success as a remote developer.

If you’re new to Scalable Path and are a skilled developer looking for new opportunities, we invite you to apply as a freelancer on our platform. Our goal is to connect talented developers like you with top-notch clients who need your expertise. By joining our community, you’ll have access to a wealth of resources and support to help you succeed in your freelance career. We look forward to working with you!