In freelancing, there are two types of jobs. Pay per hour jobs or often called hourly jobs and pay per project jobs, often known as fixed price jobs. Both of these job types have their own pros and cons. In this article, we have explained both the advantages and disadvantages of hourly and fixed price jobs.
Pay per hour job, as the name suggests, is the type of job where the freelancer is paid per number of hours worked. The freelancer completes the task and sends the timesheet to the client. A client pays Total Number of Hours Worked x Hourly Rate. This approach has the following advantages and disadvantages.
You don’t have to make an estimate of the time required to complete the task. You will only have to tell the client your hourly rate and rest is the client’s headache.
Both clients and freelancers can change the requirements at any time during the job.
Good for long term jobs where requirements are not well defined. Less risk because you are being paid on a weekly basis.
Some employers even offer to pay you to double on holidays. This way hourly paid employees to make more money than salaried employees by sitting at home.
Employers limit the number of hours worked to less than 40 or pay time-and-a-half pay for overtime work.
Pay per hour jobs can lead to privacy issues because often times client requires you to install screen monitoring software so that he can monitor your work which leads to privacy concerns and also some people don’t like to be monitored while they are working.
You cannot increase your hourly price for big clients because usually, clients know each other and they can verify your rates from each other. Salaried employees, on the other hand, can negotiate their salaries depending upon instances like promotions, etc.
Hourly employees seldom enjoy perks like bonuses or insurance/retirement plans etc that are often offered to the salaried employees.
Hourly paid employees have lesser job security than salaried employees. Even though they might also be working 40 hours/week routine, sometimes the workload is less so they are not assigned any work which could result in lesser pay at the end of the week (even if they are on call for work).
When you are working on an hourly basis, time is everything. You can’t be late for a given job. You have to be on time and clock it in, otherwise, you will be penalized. Also, even if you are done with your work, you still have to sit in and wait for your time to be over and then clock out.
Pay per project jobs are jobs where the client and freelancers agree at a fixed price for the whole project. Unlike in a pay-per-hour job where there are weekly milestones to be achieved, in fixed-price jobs, there are no weekly milestones necessary. The employee has a project completion date and has to submit the work until that date.
No privacy issues as there is no screen monitoring involved. Clients can work on their PCs and laptops more comfortably without anyone watching their work all the time.
You can easily increase or decrease the price depending upon the project. Moreover, salaried employees have much easier access to paid holidays, bonuses, promotions, etc.
Salaried employees have the security of a steady paycheck every month and tend to pull off a higher income than hourly paid employees.
Not suitable for jobs with not well-defined scope. For example, if you are building a complex website, it is very difficult to make an estimate of the time and amount required to complete the project.
Unable to embrace changes during project development. Requirements once decided are frozen in case of fixed-price jobs.
Compared to hourly employees, salaried employees’ job is more stressful. They have to compete with their fellow colleagues and adjust to the changing office environment.
In short, there is more pressure on them than hourly employees.
Salaried employees are not paid for the over-work they do. No matter how many extra hours they put in for specific project completion, it is still included in their fixed monthly salary.
Whether to choose a fixed-price payment option or hourly payment option depends upon the type of project. If the project is not well defined and requirements are ambiguous, hourly payment is the best option but if the project has well-defined scope and milestones, pay per project is better.
It also largely depends on your own temperament and liking. Some people like working in a stress-free environment without having 9-5 typical job timings. While on the other hand, some prefer a nice office environment and a safe & secure paycheck at the end of each month.