You are worth the money you ask for
Many young freelancers break in the fee negotiation and sell themselves under value. You, yourself, may not be used to seeing the actual figure required for you to succeed in your business. It could be 3 x what you were earning as an employee and in the beginning phases especially, with aspersions over your experience and diversity of deliverables, you may really struggle to commit to the amount you have calculated. But, you are worth the money you ask for, especially if it is a well thought out and calculated amount.
The biggest hourly rate error
In many guidebooks and freelance portals, it is proposed to take personal costs as the basis for the fee calculation. But we strongly advise against that. In a salary negotiation with your boss, you would not list your new car and house building as reasons for a salary increase ... Your boss and your client do not care what you do with your money. And, neither should your clients. Take this idea: you become self-employed after finishing your studies and you begin by calculating your personal costs. It is highly unlikely that these costs remain the same over, let’s say, the next three to six years of business. Like any costs, these will inflate and your personal circumstances will change. So you have to accommodate for that? Will it be so easy to ask your customers for more money for the same work, just because your needs have changed? Well, no. It is better to start with a realistic plan that accounts for the long term.
Calculation of the hourly rate as a freelancer
Let’s start getting a basic understanding of hourly rate calculations. This was dutifully handled in the German version of the Kontist blog , but of course, expats need this information as well. Let’s start with a basic concept.
As a calculation basis, we take the legal minimum wage of 8.50 EUR per hour (equivalent to a 40-hour week 1,473.33 EUR / month) and the current average salary of Germans. According to the Federal Statistical Office (Destatis), full-time employees in the service sector earn EUR 3,970.00 per month (Q2 2016) ( Source: Fachserie 16 Reihe 2.1 ). That would be at 30 days / 8 hours / 16.54 EUR per hour. But, as we all know, that is not an appropriate hourly rate for the self-employed. But, even some freelancer are barely charging this! So, let’s go a little deeper here.
You do not work every day (but if you are, see our article on life-work balance !). Even if you work at the beginning of your self-employment sometimes even on the weekend and do not go on vacation, so you should consider these free times in your calculation without compromise.
One calendar year has 365 days, which is about 52 weeks. So there are 52 Saturdays and 52 Sundays that are not worked on. Depending on the state and year, there are 9 to 16 public holidays. So the year has only 248 working days (13 holidays). It is indeed strange that we do not calculate our hours or fees like this, but again, we are not calculating for when we are simply alive and living - we are accounting for our working time.
Employees also have 25 to 30 days of paid vacation that freelancers have to earn in their working hours (we expect 28 days). Many of you maybe are not in this position, but wouldn’t you like to be?
In addition, employees also get paid the days in which they are sick in bed and can not work. This is usually not the case for the self-employed. According to the Federal Statistical Office, the sick leave is currently 10.0 working days per year. Now you will indeed have sick days unless you are super-human - just remember, the German winters are brutal! Effective work is thus only on 205 days per year (17,08 days/month) The average salary of 3,970.00 EUR is thus earned on 17.08 days. We arrive at an average hourly rate of employees of 29.05 EUR (3,970.00 EUR: 136.64 hours).