Q. Should I increase my rates to kick off the new year?
A. It depends on your situation - but you should review your rates regularly, even if you choose not to increase them.
Many freelancers use the new calendar year as an opportunity to review and increase their rates.
It's impossible to ignore in recent years the increased cost of living, and the increased cost of doing business.
If you're not reviewing your rates on a regular basis, your income can start falling behind your costs - leading to problems.
Beyond the inflation, you've also been building up more experience and demonstrations of your impact over the past year, and have more to show as a freelancer - which can also mean you can demand a higher rate.
We polled 275 freelancers, and asked whether they're increasing their day rates this month, and the reasons behind their decision
48% will be increasing their day rates
29% due to inflation and increased living costs
Almost one-third are increasing their rates due to inflation - cost of living and business has increased, your clients will likely have put their rates up too - so your rates should at the very least rise in-line with that.
IPSE, who run a quarterly confidence index, suggest that average day rates increased in Q3 of 2024, from an average of £457 to £576, and day rate data from The GOODList also shows increased day rates in 2024.
However, day rates rarely paint the whole picture - freelancers are also reporting shorter projects, increased demands within a project, and work being harder to find.
I’ve been a freelance social media and community manager for over 8 years and, unbelievably, have never increased my day rates.
But with the cost of living increasing rapidly and the freelance job market appearing to be slowing down, it was a necessity for myself and my family.
As a neurodiverse, minority ethnic woman, I’ve found the need to advocate for myself more than ever.
After some research, I realised that my day rate was nowhere near in line with the UK average or my work experience, so I decided to make the scary but necessary decision to increase my rates.
Of course, I had major imposter syndrome, but after a few sessions with my career coach, I’m confident in my decision and hope all freelancers this year feel empowered to do the same!
19% due to increased experience
19% said they were increasing their day rates to due having more experience, and a higher value to their work.
If you've been developing a stronger portfolio, adding new skills and capabilities, have more clients and projects under your belt - increasing your rates in line with your experience helps to ensure your income is not stagnating.
If you were in employment, your salary would be rising each time you moved to a new role - so when you're freelancing, it's important to remember this growth needs to happen for you too.
I recently realised that I have been undercharging myself for years, especially as my experience has increased and I have been involved in bigger collaborations and projects.
I thought it was time my pay reflected this, so I increased my fees for this year.
A fellow poet friend of mine gave me some advice, I measured certain services against fees that had been set for other projects, I’ve had further conversations with those who are supporting more on the business side of my work.
I’ve usually kept my fees for repeat clients the same, so I feel like seeing a rise would be feasible for my clients.
51% are not increasing their rates
29% due to clients are paying less
29% of our respondents said they were not increasing their day rates because they feel client budgets are shrinking, or less willing to pay higher day rates.
Increased costs are affecting all sorts of businesses, and our clients are not immune to this either.
Across the board, we're seeing clients reducing their budgets, or looking to work with freelancers perhaps on lower day rates, or get more work done for the same budget.
It's never been easier for clients to find freelancers, so they can often shop around to find something inline with their costs.
Day rates however, aren't the only way to price your work - and some freelancers are finding success with other pricing models, such as project fees - so clients see the value in the work being done, rather than just the time being spent.
Dr Rachel David
Behavioural science and healthcare comms consultant
I haven’t had enough work since going freelance, so raising my rates does’t make sense at this point
I’ve been approached for work that with day rates much lower than I started out with, with some rates being very low.
I haven’t taken the super-low-paid work because I think it’s counter-productive for the industry, but clearly other people do because it’s offered.
So, overall, I’m a bit nervous to change the rate card I did in the middle of last year (in fact I am almost apologetic when I tell potential clients my rate, but maybe that’s also a female thing).
23% due to not thinking about it or feel they don't need to.
23% of our respondents said they hadn't considered increasing their day rates.
It maybe that you're new to freelancing, or feel that your rates are good value for your experience, and that your clients are happy paying what you're currently charging.
For some freelancers who are just starting out - it might not be the right time to change your pricing just yet - but there's always value in taking a look at day rate benchmarks, and understand whether your pricing is still in line with both the market, the value of your work, and your own income needs.
Whilst January doesn't need to be the only time you review your rates, it can be a useful point of the year to review your business, and think ahead. Reviewing your budget, your income, and your goals for the year can help you to understand where you need to be, and how you can get there.
Many freelancers use the end of the tax year (April) as a point to do this work too.
I’ve got a pretty steady high profile client at the moment and with a new addition to the family due Feb I don’t want to rock the boat.
I review my rates twice a year and feel my rate still represents my skillset and value at the moment.
Useful things to consider
New clients, new rates
Some freelancers worry about communicating new rates to clients - fearful of losing the client due to higher prices. Whilst we believe it's important for clients to pay fair value for freelancers - sometimes it might be easier to maintain some clients at the same rate, and only increase your rates for new clients.
Bear in mind though, especially if you have longer-term relationships, that it's easy to start losing money on projects, if you're undercharging - and if lower paying clients are taking time away from being able to find clients who are paying fairly, you might be losing out.
Different clients, different rates
There's no rule which says you need to charge the same rate for all clients. Varying your rate depending on what value the project offers you, what opportunities it creates, what sector or context they're in, and what type of relationship you have, can all help you ensure you're offering good value to your clients, whilst protecting your income.
For example, working directly with a large corporate client might be a different rate to working via an agency, or with a small business.
Consider being flexible in the pricing you offer.
Day rates aren't the only way to price your work
Whilst day rates are still a dominant way to price your work - there many other ways to charge your client.
For example, project fees based upon deliverables don't really expose a specific day rate, and can allow you to increase the overall cost of your work, without it feeling like your day rate is outside of their range.
Consider being flexible in the pricing you offer.
Day rates don't reflect the real picture of your income
Remember that whilst a day rate might be a useful benchmark, it doesn't always reflect the real picture of what you're earning.
Depending on how you're contracting with a client, there might be deductions at source (i.e. if you're working via an agency, umbrella company or working on payroll).
Your costs might have increased too - whether it's Employer NICs for limited company owners, premiums on your insurance, the cost of travel or software subscriptions.
Adding £50 to your day rate might not feel like a big increase - but if your costs have increased, your take home pay and profit might actually decrease.
Ensure you're reviewing your budget properly to understand a real picture of your income.
Use benchmarks to understand the market
Don't forget to look at data and benchmarks to understand the market - to check you're not undercharging for the work you're doing.
Speak with fellow freelancers too - to understand what they're charging, and how clients are currently reacting to pricing in your industry.
In Summary
There's no simple answer to whether you should increase your rates to kick off the new year - it'll depend on your market, your situation and your goals.
But it is always a good idea to review your rates regularly, and ensure you're charging a fair price for your work.
Disclaimer
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