This was left in comments yesterday:
I’m currently the senior designer for a well know handbag company in Manhattan. I’m relocating to Boston for personal reasons but have discussed with the corporation continuing on with them remotely. As a corporate company they do not encourage this, so they have requested that I stay on as a freelance designer. I’ve been told to come up with an hourly rate that will be sufficient for my new lifestyle as a freelance designer, travel expenses, & health insurance but something that will be acceptable as well considering it will be consistent work (daily communication with my current boss via phone/email/skype). I’m looking for some input from other designers who are in similar situations because this is new for me and I want to be able to make a substantial living, while still being fair to my current employer. Any thoughts will help! thanks!!
I think you need more sophisticated advice than the usual; namely computing your income needs and dividing the sum by a 40 hour work week. Just what that advice should be, I don’t know but hope others will. I can only offer a few ideas.
When you calculate your hourly rate, you’ll have to add a buffer of 25% of its total. That’s not overhead, it’s the cost of what it costs to employ a person -namely you. Your previous employer paid roughly this amount when it was all said and done (HR overhead, taxes, insurance etc). In other words, it’s a zero sum game for them (useful if you have to negotiate). The benefit on their end is not having to make ongoing overhead expenditures like office equipment upgrades, workplace amenities etc, costs they’d normally incur keeping you employed at the work site.
The matter of expenses like travel is easy. I don’t know if the company booked all your travel previously but there’s no reason they can’t continue to do so. At least, that’s been my experience. If you will have to do it, be sure to get their travel policy accorded to consultants because it may be different. Depending on your cash flow, you might bill for that immediately, prior to taking the trip. You’ll also have to consider whether you will charge for travel time. Stars can get their full rate (like you did as an employee). I can only tell you what I do and that depends. On longer jobs I don’t charge for travel time. Shorter ones, I may charge a little, no more than half my hourly or daily rate but again, it depends. Smaller customers or colleges and universities, I don’t charge beyond the rate I spend working on site.
The cost of work materials required for this client’s job is also pretty easy. Will you have a budget? Will you need approval to purchase items? Make it clear that any materials they pay for will not be used for other clients. You wouldn’t want to lend the impression they’re subsidizing other account activity.
Health insurance is dicier. You’re going to pay more as an individual than as a corporate employee. I can’t imagine how to address this equitably. Hopefully someone else will have ideas.
Overhead and profit can be tricky although I suppose salary is profit at this stage. I don’t know the nature of your relationship with your employer but I’d be very conservative about adding any significant sum to your hourly rate to cover this. To be sure you will have new expenses -office furniture, perhaps software, business cards etc but you’re walking into your new freelancing life with a known quantity who is (presumably) a dependable payer and making this possible for you. Perhaps you could set up a two tier rate. One for this client and another for new clients. You could structure it in terms of discount according to the size of the job if the disparity makes you uncomfortable and until you get some traction. I don’t see any conflicts with a two tier system. Some clients cost more to service, I give good discounts to people who’ve done their homework or have appreciable experience. Since this client is a known quantity, it will cost you less to work with them. That’s a comparative judgment you’ll discover as you go along.
What do you all think?
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