In this blog post, we delineate the types of costing models followed in the world of freelance developers. We also look at factors that influence the rates of freelance developers, and the average freelance developer rates across geographies.
TABLE OF CONTENTS
- Costing model 1: Project-based compensation
- Costing model 2: Time-based compensation
- Factors that Influence Freelance Developer Rates
Now, you have decided to work with a freelance developer. If not, you should definitely read our article about the reasons to hire a freelance developer, before you proceed. However, the next challenge you face is to understand what the average freelance developer rates are, and how much much it would cost you to hire a web or app developer.
So, let’s get straight into it. Freelance software development typically has two major types of payment models. Each varies significantly from the other and has its own benefits and drawbacks. The opinion is divided among the freelancing community on what model works the best.
Hence, it’s a case of understanding which one would work better for your use-case and suit your exact needs. So, let’s start by delving deeper into each of these.
Costing model 1: Project-based compensation
In project-based compensation (or) ‘Fixed Price’ compensation, the freelance developer rates are based on the outcome of the project. Here, you would need to pay a previously agreed upon, fixed-rate to the freelance developer. The payment is contingent upon the successful and satisfactory completion of the project.
This type of model works well for small startups where budget is a major constraint, and where strict adherence to keeping a low budget is the number one priority.
However, it depends heavily on the initial estimates, which are in turn based on some assumptions. Hence, for long-term projects, which require flexibility and re-alignment during the course of the project, fixed price projects are seldom used.
Also, most freelance developers don’t prefer to work on a fixed-price model themselves. This is because it puts them under unprecedented pressure when the estimates don’t match with reality when the project’s already started.
- Suited for short-term projects which require fast turnarounds, and payments to developers need to be processed fast
- As the model suggests, you know your what the developer will charge for project delivery upfront
- Requires the initial estimates to be perfectly accurate for the engagement to run as expected. This is fairly difficult for long-term projects and software development in general.
- Usually results in misalignment of goals between the freelance developer and the client. ‘Project completion’ takes center stage, rather than the goal of building the best product possible
- Problems in estimates, tough deadlines, lack of flexibility in product specs, and misalignment of goals between the client and developers, among others, can lead to a high failure rate
Till now, we have touched upon the fact that development projects require a certain degree of flexibility. However, why though? This is because flexibility is necessary to refine the build and make changes along the way. In project-based compensation, achieving this can be very hard due to its rigid nature.
This applies more so for long-term projects that are highly subjective in nature and often open-ended in certain aspects. Hence, a time-based compensation model might be better suited to development projects – as evidenced by its higher popularity in the domain.
Costing model 2: Time-based compensation
In the time-based compensation model, you would pay the freelance developer, typically, for the hours that they put in on your project. So based on your estimate of work, you would need to calculate the number of hours that it would take completing. Then, the freelance developer rate times the estimated number of hours would be your development cost for the project.
Of course, time-based can also be daily-/ weekly- (or) monthly-fee based in some cases. In such a model, you would be invoiced at regular intervals for the time that the freelance developer has put in working on your project.
Development Cost for Project = (Freelance Developer Rate)*(Time Spent on Project)
This is more suited for long-term projects, due to more leeway being available in implementing changes as the project progresses. This flexibility can be invaluable in software development projects, where there are always improvements and changes to be made.
- Greater degree of flexibility
- Gives the developer freedom to devote time & energy in creating a quality product, rather than purely focusing on meeting milestones and estimates
- Provides an opportunity for better communication throughout the project life-cycle, making it possible for the developer to share updates and align on objectives with the client
- Higher success rates due to increased flexibility and alignment of objectives between the developer and client
- Needs a flexible budget
- Regular documentation of tasks needs to be maintained throughout the engagement by the developer and verified by the client
- The model, naturally, requires a reliable developer whose technical skills are excellent and is also generally trustworthy
As can be concluded, time-based compensation is the advised model of working. However, it does require a reliable, trustworthy, and high-quality developer. Vetted freelance networks such as Flexiple and Toptal are a good place to find such developers. Such platforms also have a risk-free trial period. This allows you to work with a developer for a week, and only pay if you’re satisfied.
Hourly Rates of Freelance Developers
Hourly-rates are the most popular form of time-based freelance developer rates. This is in part due to a high level of detail that can be achieved while maintaining documentation. The client can understand precisely what they’ll be getting and how much is being spent on what, paving the way for more accurate development estimates. It also allows the freelance developer to get adequately compensated for the exact amount of hours that they’ve put in.
For software development projects, the outcomes are objective in nature. Hence, hourly-rate based compensation provides the level of detail required to keep a log of each small/big task completed, and how they add up to larger objectives in the project.
Factors that Influence Freelance Developer Rates
These are the broad factors that have an impact on freelance developer rates:
1. Demand for the skill in the market
The demand for a particular technology heavily influences the freelance developer rates. Developers skilled in popular and in-demand technologies typically command higher rates.
A good example to cite here would be the exponential rise of ReactJS in the years 2015-16. Companies began rapidly adopting ReactJS, with burgeoning demand leading to the disproportionate increase in hourly rates for freelance developers skilled in ReactJS.
Of course, alternatively, if a developer possesses a very niche skill which not many do, it allows them to quote a premium rate. However, finding a constant flow of projects in such technologies might be difficult for them.
2. Expertise in the technology and a well-rounded skill-set
As one can expect, customers prefer to work with the best developers out there. Therefore, they are naturally inclined to pay a higher rate for freelance developers who are able to demonstrate their expertise in skills and rank among the top candidates.
Prior work on a variety of production-level projects as well as open-source projects – which are usually visible on a developer’s GitHub profile – are indicative of their expertise, and make a case for higher rates.
This doesn’t just include technical skillsets though. Having well-rounded skills, including soft skills such as quality communication, remote working ability, and good client management, makes a very attractive proposition.
3. Past Work Experience
While past work experience is not a perfect indicator, it does influence a freelance developer’s rates. Typically, clients view higher work experience as a proxy for a developer having a better knowledge of the technologies they work on, better code quality, ability to have a nuanced vision of a product, and so on.
Additionally, customers appreciate and recognise freelance developers who have delivered quality work under similar conditions to what would be demanded on their own project.
Therefore, these factors, naturally, increase the hourly rates of an experienced developer.
Brand names on a freelance developer’s resume often are indicative of the quality of their experience.
This can be a reputed college where they studied (or) a popular tech company that they previously worked at. Companies treat these brand names as a proxy for the developer’s quality and hence will be ready to pay a premium.
With the living costs differing across regions, the average freelance developer rates vary across geographies. An example of this would be the hourly rates of a developer in Ukraine being considerably lower than those of a similarly-skilled developer present in the U.S. (where the living costs are much higher).
On a parting note, below are the average hourly rates of freelance developers worldwide. We’ve aggregated the data over the past 4 years, and categorised it by geography: