An hourly rate invoice provides service businesses, freelancers, and contractors a means of giving clients a detailed breakdown of the hours dedicated to a particular task or project. To provide sufficient information for the client, hourly-based invoices must contain three (3) pivotal pieces of information, which include 1) the amount charged, 2) forms of acceptable payment, and 3) the payment deadline.
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- Attorney (Billable Hours)
- Dump Truck Worker
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The two (2) most common charging methods are via an hourly rate ($/hr) or by a single flat fee that is paid upfront or after work has been completed. The two options come with pros and cons and are better utilized by certain professions.
- Hourly rate – A specific dollar amount that is multiplied by the number of hours dedicated to a certain project or task. Although this option is simple, it can result in workers being less motivated (why complete something faster if the pay is the same?) and in a client over-paying.
- Flat fee – Charging a single amount for a job is, like an hourly rate, relatively easy to conceptualize. However, those looking to charge a single fee for their work need to have completed a job several times to ensure they know the amount of time it takes and any pitfalls to avoid being underpaid for a job that takes longer than expected.
Identifying an hourly rate is important for both the employed and employers. Freelancers and contractors, for example, need to have a solid understanding of their finances to charge a rate that allows them to cover living expenses while maintaining as an attractive option for prospective clients. For employers with salaried employees, budgeting and accounting are essential pieces of the business puzzle – the hourly rates paid to employees must allow for sufficient profit.
How is the value calculated? For those looking for an unadjusted rough value, one can take the yearly salary value (let’s say $50,000) and divide it by 2, and then 1,000 (or divide it by 2,000 if a calculator is handy). So $50,000 divided by two (2) equals $25,000, then, to divide by 1,000, move the decimal place to the left by three (3) places, resulting in an hourly wage of $25/hr. To use a method that allows for the consideration of vacation days and other factors, first determine the number of weeks that will be worked in a year (the average is about 50, allowing for two (2) weeks of vacation). Then, identify the number of hours worked in a single week (the average is 40 hrs/week). Multiply the two (2) values. In this case, it would be (50 weeks x 40 hrs/week = 2,080 hours a year). Now, take the yearly wage and divide it by the value found before. With an annual salary of $50,000, the worker’s hourly rate would be 50,000/2,080 = $24.04/hr.
Those that need to calculate an hourly rate fast and don’t want to rely on math to get it right should make use of Calculator.net’s Salary Calculator. It allows the user to input a weekly, bi-weekly, monthly, quarterly, or yearly salary, the number of holidays/vacation days a worker is allotted in a year, and the number of days and hours worked in a week to determine the individual’s hourly rate.