Flat Rate vs. Hourly Rate

‘Flat rate vs hourly rate pay- which should I use for billing my clients?’ This is a question that most business owners and contractors ask. Each of these billing methods has its perks and drawbacks, which you will learn more about in the guide below. In case you are looking for a flat rate invoice or an hourly rate invoice, you can even find that here.

WeInvoice provides flat rate and hourly rate invoice templates that you can use based on the job at hand. Different services require a different type of invoice, which is why you need to make sure the invoice you are using is appropriate for the work you are doing.

What Is Flat Rate Pay?

A flat-rate pay is a fixed price for an entire project. This price is decided beforehand before starting the job with your client. If the project is too long, the flat-rate pay can be broken into various milestones. The flat-rate pay can be calculated by taking the hourly rate as a reference and multiplying it by the approximate number of hours that the job can take.

Since a flat rate pay is decided in advance based on the work required, there is little scope of variations or modifications in the work. If the client wants to change certain aspects of the job, the service provider may demand extra for it. Moreover, a flat rate pay generally assures faster completion of the work than an hourly rate structure.

What Is an Hourly Fee?

An hourly fee is a per hour rate that the service provider can charge for the job. It is generally used when it is uncertain how many hours a job can take. Since the client is paying the service provider by the hour, there is a lot of scope of modifications or additions if the client requires it.

Even though the hourly rate structure is used when the number of hours for the work is uncertain, you still might have to provide your client with an approximate time in which you will complete the job.

Pros and Cons of Flat Rate vs. Hourly Rate

When it comes to the question ‘flat rate or hourly rate- which one is better?’, there is no clear answer. Every pay structure has its perks and its limitations. Here are the pros and cons of each of them:

Flat Rate Fee Structure

ProsCons
  • The flat-rate fee is decided in advance for the entire project. Therefore, a client will know how much they need to pay without any uncertainty.
  • Freelancers do not have to worry about earning less by completing work faster.
  • Easier to use for remote workers since the clients do not have to worry about them slacking off in the work.
  • Since the fee for the work is decided in advance, there is little to no scope of doing modifications in the work requirement without revising the price quote.
  • If the work takes a lot more time than the freelancer expected, they are still going to get paid what they agreed upon initially.
  • Flat rate pricing is more transparent for the client since they won’t need an explanation of how you are using your hours.

Hourly Rate Fee Structure

ProsCons
  • The hourly rate is great for the freelancer because they get paid fairly for the amount of work they have put in.
  • A freelancer can bill the time spent on research or any unforeseen aspect of the project.
  • Since the payment is being made by the hour, the client can make any additions or modifications in the work that is required and the service provider does not have to worry about discussing additional payment.
  • If a freelancer is very efficient, the project can be finished quite quickly which can lead to lower billings than what is due.
  • A client might ask for an explanation of where the time is being spent if the billed hours seem excessive or unreasonable.
  • For remote teams, the client can never be sure if the service provider is working on the job during the hours they are billing.

Endnotes

Choosing between a flat rate and hourly rate can depend on the type of job, the experience of the service provider, and the requirements of the clients. Regardless of which type of billing model you are following, you will find a dedicated invoice template at WeInvoice.

WeInvoice’s hourly rate templates provide space to add the hourly rate and the number of hours. In the flat rate invoice template, the hourly rate columns are removed and you can directly add the fixed rate for the service that is performed. Use WeInvoice’s invoice generator and download the perfect invoice for you right away!