How to Hire a Freelancer? | Hiring Costs

Let’s face the facts, most people focus on experience or hourly rates when hiring a freelancer. But that’s only part of the picture.

What really matters is what they deliver – and how much time and stress they save you.

A $35/hour developer who goes silent mid-sprint ends up costing more than a $90/hour one who delivers steady, clean work. Moreover, there is much more to hiring process than simply establishing a new employee's base salary.

Before you ask, “How much do you take?”, ask yourself, “What’s my project’s scope?”.

Having the right mindset is as important as shortlisting or a solid hiring process.

A landing page and an AI feature prototype are not in the same league. Always link the budget to project scope, not just hours.

Freelancer costs are more than “X hours at $Y/hr”.

When setting your budget, remember to add a buffer for:

• briefing time,
• reviews and revisions,
• overlapping hours (especially across time zones),
• communication and async updates.

These are examples of soft costs and indirect costs – expenses like lost productivity and time spent on coordination that are often overlooked but can significantly impact your total spend.

Don’t forget to factor in internal costs as well, such as the time and resources your team spends managing the freelancer throughout the project.

Interested in a panoramic POV on hiring freelancers?

Click here to read our article: Hiring a Freelancer Guide >>

Rates don’t exist in a vacuum.

Before you agree on a new employee's salary rate, think about what your project is worth to your business.

• Is it core to your product?
• A short-term fix?
• A test?

Having your budget priorities set straight will help you save money.

Before you hire new employees, you should know if you can afford a strong senior from Western Europe or if a mid-level from Southeast Asia.

Here’s an exemplary template for figuring this out:

Such an approach reduces costs and secures the budget.

You'll avoid scope creep and spot false economy.

Not sure how to choose the right freelancer? When evaluating potential candidates, consider their experience, skills, and fit for your project to ensure the best outcome.

Read our article: “Candidate Selection” and find out >>

Hard costs when hiring a freelancer are the direct, fixed expenses tied to their work. These include their hourly rates or project scope, software licenses, tools they need to use, and any subcontractors they bring in.

These are predictable and usually agreed upfront.

Remember, even if you’re only building step one, it should move the business forward. Bringing in new talent can be a key driver in achieving your business goals and staying competitive.

Don’t start by asking what it should cost. Start by asking what it’s worth to your business. If this feature is delivered on time and done right – what’s the upside?

Set your budget around impact – not guesswork.

That shift helps you focus on value, not just direct costs.

Here’s a simple employee costs map to guide your planning:

These are proposed working ranges based on what we see in real projects.

When setting your freelance budget, don’t forget to factor in recruitment costs and hiring costs, as these include both direct and indirect expenses involved in finding and onboarding the right freelancer.

They help avoid two common mistakes:

• guessing too low,
• trying to buy too much with too little.

If your budget’s tight, don’t try to negotiate down the rate. That usually backfires.

Remember, you can always ask your potential candidate for an opinion. Here is an example:

“Here’s the budget. What could we build that delivers core functionality and gives us something to test?”

With such an approach, you’re more likely to get clearer answers, better outcomes, and a smoother relationship.

A Smart Budget = Less Risk

The “cheap” option is rarely the cost-effective one.

Hiring new employees at low rates often ends up costing you more in time, oversight, or rework. If your budget’s too tight, problems will show up fast with such an approach.

A tight budget also means no room for the unexpected.

One wrong assumption, a small change, or extra QA – and suddenly you’re out of time and money.

Additionally, you may attract freelancers who say yes to everything just to get the job – then miss deadlines or cut corners. Or you’ll scope the work too narrowly and get stuck halfway through.

Even with solid freelancers, these things come up.

Unexpected expenses can easily derail a project if they aren’t planned for. It’s always better to plan for them, to be caught off-guard later.

A smarter approach? Add a buffer.

Take your base estimate (rate × hours) and add 20%.

The buffer amount may vary widely depending on the project’s complexity or the freelancer’s experience.

That extra gives you space to:

• Adjust the scope mid-way without renegotiating everything,
• Fix small issues without stress,
• Keep the momentum if timelines shift,
• Maintain full productivity.

With this approach, you’ll stay in control – and avoid the classic trap of scrambling for more budget under pressure.

A $5k budget rarely means $5k all-in.

There are costs that even the best HR teams sometimes forget to plan for – and they add up fast. Here are a few "hidden" costs you should consider before hiring employees:

• Your time – Briefings, background checks, managing, reviewing work... It takes hours, especially early on.
• Training costs – time and resources (internal costs) needed to get your team up to speed with the new software, so the freelancer can work effectively from day one.
• Software licenses – some freelancers have the right tools with them. On average, however, even the mid-tier freelancers try to pass costs on to the hiring party – often billed monthly or yearly, depending on the provider. This might include buing rights to use specific tools or platforms needed for your project.
• Professional development – Younger freelancers often seek a chance to learn or grow. Courses, tools, or time spent building new skills – these are all "hidden costs" aimed at improving the quality and value of the end results.
• Delays and rework – If specs aren’t crystal clear, expect some do-overs, which can lead to lost productivity and increase the overall project cost.
• QA and handoffs – Testing, fixing bugs, and documenting things for your team is often extra.
• Revisions – Even simple changes post-delivery can stretch timelines and budgets.

Safe bet? Add 15–20% buffer.

It gives you room to fix what breaks, without breaking your plans.

Hiring Costs | Fixed Fee vs Hourly rates

Fixed fee sounds safe, but is quite rigid.

Creating a clear job ad can help attract the right freelancers for either payment model.

If the scope shifts, you’re more likely to face delays, extra charges, or scope fights.

Hourly rates, on the other hand, give room to adapt, but without structure, costs can spiral fast. You’ll need clear check-ins and boundaries.

When defining the scope, make sure to clearly outline the job opening to avoid misunderstandings.

Here’s a breakdown to help you choose:

When sourcing freelancers, use targeted job ads to reach suitable candidates.

If you’re unsure about scope or expect changes, go hourly with a weekly cap.

Good freelancers don’t rush for more money or promise too much. They ask smart questions, suggest practical steps, and help you spend wisely.

Here are a few examples to help you choose the right candidate:

Equity vs Performance Bonuses

In 2025, free coffee or fruit Thursdays aren't enough.

Some freelancers are open to equity. Others prefer performance-based bonuses.

Both can work – but only in the right setup.

Equity sounds appealing if you’re short on cash. But most freelancers won’t trade hours for high-risk, long-term bets unless there’s real upside and clear terms.

If you offer equity, treat them like a partner:

• give context,
• timelines,
• show how their work moves the business forward.

If equity or performance bonuses lead to higher motivation and better results, freelancers can make your investment worthwhile. Relocation bonuses are a good example here and are always worth considering.

Out of all options, performance bonuses are the simplest motivation drivers.

You define success, set clear targets (like delivery speed, quality, or usage metrics), and pay extra if those are met.

It gives flexibility without committing long-term ownership.

Choose the model that fits your stage and risk tolerance. And always write it down.

Misunderstandings about equity or bonuses can ruin good relationships.

After all, clarity always wins.

Hiring costs are the core of modern human resource management. Freelance budgeting isn’t just about picking a number. It’s about knowing the tradeoffs, protecting your time, and funding outcomes – not cleanups.

One key benefit of aligning freelancer incentives with project success is improved motivation and results.

Not sure what you should be paying for?

It’s a common problem. Pay too much, and you burn through your budget fast. Pay too little, and the work stalls or disappears. If you’re having difficulty with pricing your project – we can help you make sense of it.

Click here to book a call with us >