Flat Rate VS Hourly Rate. It’s Not Just Black and White

The famous debate between the fixed rate and the hourly rate that has been for a long time and still continue to be because it is something that beside the field of activity, it is also based on personal preferences or at least that’s the general perception.  Although in the field of graphic design things are not exactly just black and white.

A Little Explanation of the Terms

A fixed payment system (flat rate) means that a client pays a fixed amount of money regardless the duration of the project. That fixed amount set from the beginning assures the client that the price will not change. This system is simple, easy to understand, and gives the client some peace of mind, especially when it has a low budget in which must fit.

On the other side is the hourly payment system (hourly rate) where the client pays a price based on the duration of the project. Usually an estimate is made at the beginning of the project with the approximate number of hours required, so in the end the price may differ If for some reasons an hour or more were necessary.

So for a three-hour project a graphic designer under the fixed payment system is paid per project (three hours) even though the designer has worked for example one hour or five hours compared to the hourly payment system where the designer will be paid exactly the number of hours worked.

At first sight each system has advantages and disadvantages and the decision to choose one over the other may seem difficult, even though the hourly payment system cannot be applied in any situation.

Hourly Rate

The major advantage of this system is that from the designer’s point of view, even if something unexpected appears that requires additional time, he/she is paid exactly the amount of hours worked. This is a major advantage at least for new designers who are at the beginning of the road and tend to underestimate their work by not accurately estimate the time required for the project or even forget to take into account certain things that may lead to an endless project.

However, beside the fact that you feel more assured and that at first sight it may seem easier to implement, there is the misconception that you do not have to think much about the price because you can approximate a certain amount of hours much faster as these are just estimates. It’s not quite like that because you can’t deviate to much from your estimate. For satisfied clients you should fit in your estimate without exceeding the limit because otherwise you may end up with dissatisfied clients, even if your work is exceptional.

Flat Rate

On a fixed payment system, you usually have a more relaxed client and because you don’t have to keep your eyes on the clock you can instead concentrate more on the project, which automatically leads to better results. You also have no benefits to waste time and that will lead to a faster response time and overall to satisfied clients. When you set a certain price from the beginning and come with creative solutions in quite a short time, your clients will be more than happy with the fast quality services you offer.

Clients usually prefer to pay on a per-project basis as they like to know beforehand how much your services will cost rather than to give you free hand and have unpleasant surprises at the end.

The Gray Area

Claiming to work on a time-based system is not OK because some things are more expensive than others regardless the number of hours worked, and those who work this way actually combine both systems.

Take for example a client who has two projects, knows your price per hour and the initial estimate with which he/she agrees. Let’s simply say you estimated 15 hours for a custom logo design and 5 hours for an illustration, and you as a designer are honest and professional.

So for the first project the client needs an illustration to print on some t-shirts, but quite detailed and complicated that in the end it will take a total of 6 hours.
For the second project the client needs a logo where let’s say this time, instead of researching for a few hours you came with a great and unique idea, but still simple to make and you put it into practice showing exceptionally in just two hours.

How will you proceed? For the logo, you’ll charge the client for just two hours?!
Obviously not, because paying for time is a misconception when in fact the client is actually paying the value, idea and the designer’s experience. So it doesn’t matter if the exceptional logo from the above example was made in two hours or fifteen, because for the company that was made for, it would have the same value.

Also like the flat rate, the hourly rate does not include only the time spent, but also other indirect costs that you as a designer pay such as taxes, bills, soft licenses, hardware expenses and so on.

As an example, most people would save some money by giving up 15 minutes of their time to change a broken water tap, but in exchange they call a plumber and pay happily for this because they know that they didn’t pay for those 15 minutes, but for the plumber’s experience of solving the problem. Whether the plumber changed the tap in one hour or fifteen minutes, as long as the service has been professionally executed, those customers will be just as pleased or even more satisfied for the plumber speed and experience in case of a 15-minute change.

So you can’t only work by hour without a fixed starting price. For example, a particular project may cost X and any other unexpected things, changes etc. will cost Y per hour. Otherwise if you don’t have a fixed starting price, you will need to increase the rate per hour so that way you can get a decent price for a logo like in the example above where you may have made it in just a few hours. In this case, when the same client comes up with another project, a smaller and simple one this time that would take you an hour at most to complete, it would cost too much because of your higher rate to justify the logo in the previous example.

Of course this doesn’t happen because no one declares the exact hours spent if those are way below the initial estimation as that will mess his/her hour rate.

Conclusion

So you can choose a flat rate pricing or combine both of them because working only with an hourly rate pricing system is not quite possible or at least not in this field of graphic design. Hourly rate pricing may work very well for other domain activities like nursing, consulting or a law firm and so on.

So if you manage to make a quality thing in a very short amount of time, that doesn’t mean that you have to be paid a very small amount because for you to get there it took a lot of effort, years of work and money invested. Regarding this there is also a nice story with Pablo Picasso:

When he was sketching in a park a woman recognized him and asked him to sketch her portrait. He agreed and after just a few minutes he gave her the finished portrait. She was amazed by the wonderful work he’s done and asked how much she owes him. “5000 francs” he replied. The woman was shocked and asked him why it cost so much when it took him only a few minutes. He looked at her and quickly replied “Madame, it took me my entire life.”