Yes, freelancers are paid more than employees. According to a study from the U.S. Department of Labor, the median income for self-employed top fields is $191,977— almost double the median income for full-time employees in the same field ($101,350).
As a freelancer, you have the pleasure of picking and choosing which projects to work on. While this may be exhilarating at first, it can also leave you feeling flustered. You may find yourself wondering how to best price your services so that you’re fairly compensated for the amount of time you put in.
To help answer this question, we’ve put together this article that breaks down why freelancers are paid more than employees and how to determine your own freelance rates.
| Takeaway |
|---|
| Freelancers often earn more than employees due to various factors such as: |
| 1. Specialized Skills: Freelancers typically possess niche skills that are in high demand, allowing them to command higher rates for their expertise. |
| 2. Flexibility in Pricing: Freelancers have the freedom to set their own rates for each project, enabling them to charge what they believe their work is worth. |
| 3. No Overhead Costs: Unlike traditional employees, freelancers do not require office space or other overhead expenses, which can lead to higher earnings. |
| 4. Multiple Clients: Freelancers can work with multiple clients simultaneously, increasing their potential income streams compared to being tied to one employer. |
| 5. Entrepreneurial Mindset: Freelancers often approach their work with an entrepreneurial mindset, actively seeking lucrative opportunities to grow their businesses. |
Reasons Why Freelancer Paid Higher Than Employee
It’s no secret that freelancers are paid more than employees. But why? Here are 20 reasons and statistics to back them up:
Many aspiring freelancers wonder about the most lucrative opportunities available. If you’re curious about the highest paying freelance jobs, check out our comprehensive guide on The 10 Highest Paying Freelance Jobs: My Experiences to explore potential avenues for maximizing your freelance earnings.
1. Freelancers Work On The Basis Of A Fixed Contract
For a freelancer, the client pays for a specific task to be done in a certain period. This is why, most of the time, freelancers get paid more than employees: their rates are higher because their billing is based on the number of hours they’ve worked.
2. Freelancers Are Responsible For Their Own Health Insurance
As freelancers don’t have an employer, they need to get their own health insurance. This is an important expense, so they need to charge more to compensate for it. In this case, they need to bill enough hours and make extra money so they can pay for their insurance.
3. Freelancers Work Hourly
This is another reason why freelancers usually get paid more than employees: the billing system is different. As we already said, employee salaries are set per month or per year and are not proportional with the number of hours worked. On the other hand, when it comes to freelancers, their payment has to be proportional to the amount of time spent working on a project or task.
Are you considering a career in freelance writing or copywriting? Discover the ins and outs of these creative professions in our article on Are Freelance Writing & Copywriting Good Jobs? to see if they align with your interests and aspirations.
4. Flexible Working Hours
When you work for yourself, you get to decide when and where you work. You don’t have to wake up early in the morning to get ready and rush to an office. You can do your job while lying in bed if that’s what works best for you.
5. No Office Politics
Dealing with office politics is one of the most frustrating things about working in an office environment. As a freelancer, there’s no room for politics because you are your own boss. This is a huge advantage that many people forget about when they think of working as an employee vs a freelancer.
6. You Can Work From Anywhere In The World
Most employers won’t allow their employees to work from home or move to another country for extended periods of time unless it’s absolutely necessary (e.g., family emergency). As a freelancer, you can travel wherever you want and still do your job from anywhere in the world as long as there’s an internet connection available.
7. Freelancers Don’t Have To Deal With Taxes
One of the main reasons why freelancers get paid more than regular employees is that they only get paid for the job they do, while employees also have to pay taxes. Even though every employee gets a tax deduction, the amount paid is still higher than what freelancers have to pay.
8. No Commute Means More Time To Work
Freelancers typically work from home and don’t have any commute time, whereas employees spend an average of 1 hour per day commuting back and forth between work in addition to their actual work hours at the office location where they’re employed full-time; therefore, they’re not only losing valuable time but also money because it costs fuel/parking fees when driving their own car or public transportation fees when taking public transportation such as buses/trains, etc
Transitioning from a full-time job to freelancing can be both exciting and nerve-wracking. If you’re interested in learning about one individual’s journey and the reasons behind their decision to take the leap, read about Why I Quit My Full-Time Job to Start Freelancing for valuable insights and experiences.
9. The Cost Of Benefits Is Eliminated
When you work for yourself as a freelancer, you don’t have to pay for things like health insurance, paid vacation time, and sick days. Since many businesses are required by law to pay for these things for their employees, this eliminates a huge cost for their business—and that means your services can be more competitively priced.
10. They Don’t Have To Buy Lunch Every Day
You’ve heard it before: it’s cheaper to bring your own lunch than eat out every day—and freelancers don’t have any other option but to pack their own lunch! It’s one less expense they have to worry about—or feel guilty about using the office kitchen fridge and microwave for, right?
11. You’ll Be Paid For All The Value You Create
When you’re an employee, you usually get paid in exchange for your time, rather than your results. That means that if you’re working hard to produce good results and someone else who works less hard is getting paid the same amount, it feels unfair and demotivating.
As a freelancer, by contrast, your client will pay based on either the number of hours that you work or the results that you produce. This makes it easier to build a sustainable business because it gives you much more motivation to keep working hard for your clients.
12. Changes Of Rates
Employees have a “ceiling” in their salaries, while freelancers can keep charging more and more as they develop their skills and experience.
13. They Have A Niche Specialty
The best freelancers are really good at just one thing. Think about it: if you’re a freelance copywriter, you probably only write copy. If you’re a freelance graphic designer, you probably only design graphics. This means that everyone knows exactly what they’re getting when they hire them—and exactly how much value they’ll get out of that work. This makes it easier for clients to pay top dollar for their services!
14. Freelancers Can Accept Multiple Clients
This allows them to choose which clients they’d like to work with, how long they would like to spend working on each project, and how much money they can make within a set time period. For example: if a freelancer has 3 clients who want 12 hours worth of work done per week, the freelancer can charge those clients $12.50 per hour – for a total of $450 per week (not including any additional expenses)
15. Freelancers Can Charge Higher Rates
Because they’re not limited by a salary cap like employees are. It’s not just about getting paid more money, either: you also get to decide how much you want to work and when—which means you can spend more time with your family or hang out with friends whenever you want!
Are you intrigued by the concept of the gig economy and how it impacts freelancers? Gain a deeper understanding of the gig economy and its effects on the workforce by exploring our article, Freelancers: What Can You Tell Us About the Gig Economy?, to stay informed about this evolving work landscape.
16. Freelancers Have A Lower Risk Of Being Fired Or Laid Off
If you work as a freelancer, your clients can fire you or stop working with you at any time. But it’s rare for them to do both at the same time. So if one of your clients fires you, you can find another client to replace them. If all of your clients fire you at once, it’s probably because the economy is so bad that there aren’t enough jobs for anyone.
17. Freelancers Are Self-Motivated
Companies have to provide a lot of motivation for their employees. This can come in the form of things like raises, bonuses, and promotions. Motivating employees is a complicated process, and it can be very expensive. Freelancers are naturally motivated and disciplined by the desire to succeed in their field and make money.
18. Freelancers Can Take On Multiple Projects
A freelancer can take on multiple projects at once because they don’t have to ask permission from their boss or coworkers first before taking on another job offer (which would be difficult if it were possible at all).
How To Determine Your Own Freelance Rates
Want to start freelancing? We’ve got a formula for that.
As a budding freelancer, you might be wondering: “how much should I charge for this?” or “If I have 2 years of experience, should I charge less than if I had 5?” The answer is: it depends! That’s why we decided to create a formula that lets you determine your own freelance rates.
Here’s how it works:
1. Take your desired annual income and divide it by 2080 (the number of hours in an average year). This will tell you how much money you want to make in a day.
2. Divide that number by 8 (the number of hours most people work in an average day). This will give you how much you want to make per hour.
3. Subtract the cost of any expenses (like equipment, software subscriptions, etc.) from the amount you want to make per hour. This will give you your bottom line—your absolute bare minimum hourly rate.
4. Now let’s look at your experience level and decide whether we need to add on to that bottom line:
- If you have 0-2 years of experience and are working as a contractor or full-time freelancer, the baseline rate may be okay for you. Just be sure to check out what similar writers in your area are charging for comparable work.
- If you have 3-5 years of experience, you should add 15% to your hourly rate, bringing it up to $42/hour.
- If you have 5+ years of experience and are a specialist (someone who has specific training in a certain niche), add 30% to your hourly rate, bringing it up to $56/hour.
- If you’ve got 10 years or more of experience under your belt and are a master, add 50% to your hourly rate, bringing it up to $75/hour.
- If you have 10+ years of experience and are considered an expert in the industry, add 100% to your hourly rate, bringing it up to $100/hour.
The landscape of work is continually evolving due to freelancing’s growing popularity. To explore how freelancing is reshaping traditional work dynamics and its potential implications, delve into our thought-provoking piece, Freelancing is Changing Work – Why Aren’t We Talking About It More?, and join the conversation on the future of work.
Conclusion
So that’s why freelancers are paid more than employees. Although there are a lot of pros and cons, it ultimately all comes down to personal preference. Freelancers are more likely to have more freedom and work on their own terms, but employees have more stability and benefits.
Further Reading
Freelancer vs. Employee: Understanding the Differences: Learn about the distinctions between freelancers and employees, including their roles, benefits, and how they fit into the modern workforce.
Talent of Tomorrow: Freelancers vs. Employees: Discover the evolving trends in hiring freelancers and employees, and gain insights into how businesses are adapting to the changing landscape of work.
Do Freelancers Get Paid More Than Employees?: Uncover the factors that may impact freelancers’ earnings compared to traditional employees and explore the potential advantages and disadvantages of each career path.
People Also Ask
Do You Know Why Freelancers Are Paid More Than Employees?
There are many reasons. Typically, freelancers get higher pay because they have more experience and their hourly rate is higher than that of an average person. They can work on multiple projects at the same time and earn a decent income per hour.
How Do Freelancers Make More Money?
They do it by charging clients a higher rate per hour or project. Freelancers often have the freedom to set their own fees, and that means they can negotiate the price up, especially for larger projects.
Why Would Anyone Hire A Freelancer If They’re More Expensive?
Freelance work is attractive to companies that want access to specialized skills without having to commit to hiring a full-time employee. There’s also less overhead involved in hiring a freelancer because you don’t have to pay for benefits or office space—just the work itself.
What Are The Benefits Of Being A Freelancer?
You can get paid more money for your work, and there’s no boss watching over your shoulder all day long! There’s also flexibility in setting your own schedule, and you can take on as many clients as you want at once (or not). You don’t have to wait until someone else says it’s okay before starting a new project—you’re in charge of what happens next with every job opportunity that comes along.
What Does It Mean To Be A Freelancer?
A freelancer is someone who works for themselves by offering a service or product for hire to clients on a contract basis. They are also known as contractors or independent contractors. They are self-employed and generally do not receive benefits from their clients such as health insurance, retirement plans, or paid time off.
What Is The Difference Between An Employee And A Freelancer?
The main difference between an employee and a freelancer is that employees receive benefits from their employer, while freelancers do not. Employees may also have the opportunity for promotions and pay raises at some point in their career; however, there is no guarantee of this happening with every job offer that comes along.
So You’re Saying That If I Worked For A Company, I’d Make Less Money?
It’s not so much about making less money as it is about taking responsibility for your own success and having the freedom to scale up when you’re ready for it. When you work for a company as an employee, your payment will be based on your experience and past performance—and the company’s policies. You can get raises and promotions, but your earning potential is limited by the company’s rules.
What If I Don’t Have Any Experience?
You don’t need any experience to start working as a freelancer! All you need are skills that other people need help with—like writing, programming, or graphic design—and a willingness to learn from mistakes, improve yourself, and keep going until you find success.
How Much Do Freelancers Make Per Hour On Average?
According to Payoneer’s 2019 Global Freelancing Report, freelancers earn an average of $19 an hour (and in some cases up to $28). That is about double what the average employee makes in hourly wages ($9.50).
Do Freelancers Get Paid For Their Time Or By The Project?
It depends on how you want to work. Some people prefer working by the hour because it’s easier to track hours worked versus projects completed over an extended period of time (like a month). Other people might prefer getting paid per project because they feel like this method allows them to focus on quality work instead of just trying to bill clients for every second spent in front of a computer screen.
Costantine Edward is a digital marketing expert, freelance writer, and entrepreneur who helps people attain financial freedom. I’ve been working in marketing since I was 18 years old and have managed to build a successful career doing what I love.