What to charge when subcontracting

There is an interesting conversation going on in the Drawar forum about how much freelancers should charge when they subcontract their services. The question being posed in the forum thread is whether a designer/developer should consider discounting their hourly rate when they take on contract work.

While I prefer to take on projects where I deal directly with the client, I still do my fair share of subcontracting, both for agencies and for other freelance designers, and my policy is to always charge my full hourly rate.

Subcontracting for an agency

When contracting for an agency you can be sure they are adding a healthy markup to your fee, possibly as much as 200-300%. The agency will know the going rate for freelance web development, and they will have factored that into their fee structure. It makes no sense to even contemplate giving them a discount, unless you’re feeling especially charitable.

Subcontracting for another freelancer

If you’re contracting for another freelancer it might be less clear how they stand to profit from the arrangement, and you may be tempted to discount your rate to sweeten the deal. What you need to keep in mind is that your input to the project only accounts for a portion of the total billable hours. The freelancer who hires you is still responsible for defining deliverables, preparing quotes, liaising with the client, managing contractors, and all the other aspects of running the project. They will bill the client for the work they do in that capacity, in addition to having the option of marking up your rate just like an agency would. There is no need for you to discount your rate in order for you both to get paid fairly.

Don’t leave money on the table

Your time is valuable, and you deserve to be compensated at your full rate for every hour you work. When someone contracts you to provide a service to one of their clients they do so because you possess skills or resources they don’t, and they should expect to pay the market rate for your services. If you discount your rate then you’re leaving money on the table.

3 thoughts on “What to charge when subcontracting

  1. There are two conditions that must be met in order for me to discount as a subcontractor:

    1. The deal must be done, and the risk of any overages of my time must be absorbed the agency/freelancer that is contracting me.

    2. The agency/freelancer contracting me (or my firm) must be paying on my regular terms, weather or not they have been paid the the end client.

    What this means is simple: I will discount if you are taking on the expense and risk of sales and receivables. I know my cost of sales and my non-payment risk. If you are alleviating me of those burdens, I will discount accordingly.

    BTW: These are great articles. This is the first blog I have added to my RSS in several months.

  2. Jonathan says:

    @Jeremy Thanks for your kind words, it’s always nice to know when someone finds value in my articles.

    The two conditions you outline both sound sensible, it’s good to cover your butt in case of scope creep!

  3. Jonathan – You mentioned the Drawar forum above. I clicked-over today, but I noticed it is “invite only.”

    How would a new fish like me go about getting an invite?


Comments are closed.