Fixed price vs hourly: how to price a freelance project (with wording to copy)

Charging by the hour and charging one fixed price for the job are both normal. The difference is who carries the risk when the work takes longer than planned. This guide compares the common pricing models, gives a simple way to choose, shows how to turn an hour estimate into a fixed price without guessing, and has quote lines you can copy. It works in any country; where an official page says something useful, we quote it and link it.

Which model to pick, how to estimate and the wording are general practice (ours), not a legal standard. The official pages quoted (US Federal Acquisition Regulation on acquisition.gov; IRS; Canada Revenue Agency; HMRC via GOV.UK) were checked against those pages on 2026-10-15 (UK and Ontario consumer-law notes on 2026-10-14). Not written by a lawyer or a tax adviser.

Short answer

• Hourly puts most of the overrun risk on the client; fixed price puts it on you. US federal contracting rules describe a firm fixed price as placing "maximum risk and full responsibility for all costs" on the contractor (FAR 16.202-1).
• Choose fixed price when you can list the deliverables and you've done similar work before. Choose hourly (or hourly with a cap) when the scope is unclear or keeps moving.
• To set a fixed price, estimate the hours per task as a range, multiply by your rate from the hourly rate calculator, add a named contingency for the unknowns, and write down what's included and what isn't. We don't publish a "typical" contingency percentage.
• Either way, put the price model in writing on the quote or proposal, and handle extra work with a change request.

1. The pricing models compared

Most freelance work uses one of these, or a mix. The table is ours (general practice), not an official list:

"Value-based" pricing (a price tied to what the result is worth to the client) is a way of setting a fixed price, not a separate billing method. It still needs a clear scope. For retainers, see deposits and retainers explained.

2. Who carries the risk: an official description

We didn't find an official freelance page that compares fixed and hourly pricing. The clearest official description we found is in the US Federal Acquisition Regulation (FAR), the rules US federal agencies follow when they buy work. It is not a law about freelance pricing and doesn't apply to your private clients; we quote it only because it explains the trade-off plainly.

• Fixed price: "A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract." "This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss." (FAR 16.202-1).
• When fixed price fits: "A firm-fixed-price contract, which best utilizes the basic profit motive of business enterprise, shall be used when the risk involved is minimal or can be predicted with an acceptable degree of certainty." (FAR 16.103). It also fits when "Performance uncertainties can be identified and reasonable estimates of their cost impact can be made, and the contractor is willing to accept a firm fixed price representing assumption of the risks involved." (FAR 16.202-2).
• Time-based pricing (the FAR's "time-and-materials", hourly rates plus costs): "A time-and-materials contract may be used only when it is not possible at the time of placing the contract to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence." And: "A time-and-materials contract provides no positive profit incentive to the contractor for cost control or labor efficiency." (FAR 16.601).
• A cap on time-based work: the FAR requires that "The contract or order includes a ceiling price that the contractor exceeds at its own risk." (FAR 16.601). The freelance version is "hourly with a cap" in section five.
• Price and model go together: "Negotiating the contract type and negotiating prices are closely related and should be considered together." (FAR 16.103).

Practical reading (ours): a fixed price is a bet that you understand the work. The better you can describe it, the safer that bet is. When you can't describe it yet, bill time, or cap it.

3. How to choose

Signals that point one way or the other. Ours, not a rule; one project can mix models (for example, a paid discovery phase billed hourly, then a fixed price for the build):

• What the client wants matters too. Some clients need a firm number for a budget or an approval; others prefer to pay only for time used. Ask early.
• Small, repeatable jobs (a logo refresh, a set of product photos, a standard audit) often work best as a fixed-price package you can reuse on the next quote.
• Don't fix a price you can't explain. If you can't say what's included, the client can't either, and the arguments start at the invoice.

4. Turning an hour estimate into a fixed price

Our method; no official page sets one. You need your hourly rate first (the hourly rate calculator gives a floor from your income target, expenses, time off and billable share).

1. Break the job into tasks, including the ones clients don't see: calls, admin, revisions, testing, handover.
2. Estimate each task as a range (a low and a high number of hours). If you've logged similar jobs on a timesheet or a project tracker, start from those real hours.
3. Price the hours: hours × your rate. Many freelancers price nearer the high end of the range for a fixed price, because the overrun is theirs.
4. Add a named contingency for the specific unknowns you listed (late content, a tricky integration, an approval chain). Write the unknowns down; we don't suggest a percentage.
5. Add costs you pass on (fonts, stock images, software, travel), or list them as billed separately.
6. Write the limits: what's included, how many revision rounds, what isn't included, and what you're assuming. That text is what makes the price "fixed".
7. Round to a clean number, set a valid-until date, and decide the payment schedule (a deposit, milestones). See how to write a quote and payment terms.
8. Track your hours anyway. Logging time on fixed-price work shows whether your estimates hold, so the next quote is better.

5. Hourly done well: estimates, caps and billing

• Still give an estimate, as a range. Clients rarely accept an open-ended hourly job without one.
• Offer a cap when the client needs a ceiling: hours × rate up to an agreed amount, and you check in before you reach it. Above the cap is yours unless they approve more in writing.
• Say how time is counted: the smallest unit you bill, whether calls and travel count, and what a "day" is if you use a day rate.
• Bill regularly (weekly, every two weeks or monthly) with the hours and tasks listed. See how to write a freelance invoice and the free invoice generator.
• Hourly isn't a penalty for being fast. If you get much faster at a type of job, that's often the point to package it as a fixed price instead.

6. Changes, switching models and raising prices

• Extra work on a fixed-price job gets its own price and a new total; on an hourly job, an estimate of the extra hours. Our scope creep guide covers both, with a change order to copy.
• Switching an ongoing client from hourly to fixed (or back) is a new agreement for the next piece of work. Finish open work on the old terms unless you both agree otherwise in writing.
• Raising your rate changes the hours × rate behind future fixed prices too. See how to raise your freelance rates.

7. Does the pricing model affect tax status?

Optional reading for the US, Canada and the UK. Tax agencies look at the whole working relationship to decide whether someone is self-employed. How you're paid is one of many indicators, and all three pages below say it isn't decisive on its own:

• US (IRS): "An independent contractor is usually paid by a flat fee for the job. However, it is common in some professions, such as law, to pay independent contractors hourly." (IRS: Financial control).
• Canada (CRA): "Similarly, some self-employed individuals are paid on an hourly basis. However, when a worker is paid a flat rate for the work done, it generally indicates a business relationship, especially if the worker incurs expenses in doing the work." (CRA: Employee or Self-employed (RC4110)).
• UK (HMRC): "The way in which remuneration is calculated and how often it is paid can be important but by and large it is often inconclusive." "Independent contractors, on the other hand, are often paid a fixed sum for a particular job." But: "The hourly payment basis may, such as with many plumbers, accountants and lawyers, merely be a way of charging their time out and ascribing value to the work done." (HMRC: Employment Status Manual, basis of payment).

Practical reading (ours): charging hourly doesn't make you an employee, and a fixed price doesn't make you self-employed. Pick the model that suits the work; if status is a real question for you, see when to get advice.

8. If your client is a consumer

Most freelancers work for businesses. If you sell to individuals buying for personal use, consumer law can affect how prices and estimates work. Two examples we checked; elsewhere, check locally:

• UK: the Consumer Rights Act 2015 says: "“Consumer” means an individual acting for purposes that are wholly or mainly outside that individual's trade, business, craft or profession." Section 51 applies where "the contract does not expressly fix a price or other consideration, and does not say how it is to be fixed, and" no price is fixed elsewhere either: "In that case the contract is to be treated as including a term that the consumer must pay a reasonable price for the service, and no more." (legislation.gov.uk: section 51). Writing the price down avoids that question.
• Ontario, Canada: section 10 of the Consumer Protection Act, 2002: "If a consumer agreement includes an estimate, the supplier shall not charge the consumer an amount that exceeds the estimate by more than 10 per cent." and "Nothing in this section prevents a consumer and a supplier from agreeing to amend the estimate or price in a consumer agreement, if the consumer requires additional or different goods or services." It applies to consumers: "“consumer” means an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes;" The Act notes: "Note: This Act is repealed on a day to be named by proclamation of the Lieutenant Governor. (See: 2023, c. 23, Sched. 1, s. 110)" (Ontario e-Laws, currency date 2026-10-12).

More on this in is a quote binding? in our quote guide.

9. Wording to copy

Replace everything in [brackets]. These are ours, not from any agency.

Fixed-price lines (quote or proposal)

Price: [amount and currency], fixed, for the work listed under "Included".
Included: [deliverables], [number of revision rounds] rounds of revisions, [handover format].
Not included: [main exclusions]. Anything outside "Included" is quoted separately before I start it.
Assumptions: [what you are relying on — content from you by a date, one point of contact, feedback within a set number of working days].
Payment: [deposit, if any] on acceptance, balance [on delivery / on the milestone dates below]. Valid until [date].

Hourly estimate with a cap

Rate: [hourly or day rate and currency], billed on the hours actually worked, from my timesheet.
Estimate: [low] to [high] hours for [the work]. That's an estimate, not a fixed price.
Cap: I won't bill more than [cap amount and currency] for this work without your written OK. If it looks like reaching the cap, I'll tell you before I get there, with what's left and what it would take.
Billing: [weekly / every two weeks / monthly], with the hours and tasks listed on each invoice.

Milestone schedule

Phase one — [name]: [what it delivers]. Price: [amount], fixed. Invoiced when [the phase is approved].
Phase two — [name]: [what it delivers]. Price: [amount], fixed, or re-quoted after phase one if what we learn changes the scope.
Phase three — [name]: [what it delivers]. Price: [amount], fixed.
Each phase starts after you approve the one before. Changes inside a phase go through a short change request.

When a client asks for a fixed price but the scope isn't clear

Subject: Re: fixed price for [project]

Hi [name],

Happy to work to a fixed price. Right now there are a few open questions ([the main unknowns]) that would make any fixed number a guess, for both of us.

Two options:
— A short paid discovery first, at [rate and currency] for up to [hours or days], to answer those questions. After that I'll send a fixed price for the rest of the work.
— Or I start hourly with a cap of [cap amount and currency], and switch to a fixed price once the scope settles.

Which works better for you?

Thanks,
[your name]

10. Checklist

• Know your hourly rate (calculator) before you price anything.
• Decide the model: fixed, hourly, hourly with a cap, day rate, milestones or a retainer.
• For a fixed price: tasks, hour ranges, rate, named contingency, pass-through costs, a clean number.
• Write what's included, revision rounds, exclusions and assumptions.
• For hourly: an estimate range, the cap (if any), how time is counted and how often you bill.
• Put it on a quote or proposal with a valid-until date and payment terms.
• Track hours on every job, fixed-price ones included, and compare them with your estimate afterwards.

Free tools and kits

• Freelance hourly rate calculator: the rate behind both models.
• Free quote and estimate generator and how to write a freelance quote: fixed, estimated and optional lines on one page.
• Free timesheet and how to track multiple client projects: real hours for the next estimate.
• Free invoice generator: bill the hours, the milestone or the balance.
• Our paid Quote & Proposal Kit by Small Rows (US$12, one-time) keeps a price list (each service priced by the hour, day, page or item) and builds the quote and proposal from it, with optional extras kept out of the total. It doesn't choose the pricing model or the price for you.
• Our paid Client & Project Tracker by Small Rows (US$12, one-time) puts budget hours next to hours logged for each project, so you see early when a fixed-price job is running over.
• Our paid Freelance Billing Kit by Small Rows (US$12, one-time) logs hours at your rate and builds invoices from them, for hourly and capped work.
• All three kits together: the All-Kits Bundle by Small Rows (US$24, one-time).

Where the sources differ

• The FAR is about US federal buying, not freelancing. We use its wording on risk because it's official and clear; it doesn't tell a private freelancer what to charge or which model to use.
• Tax agencies lean different ways on pay basis. The IRS and CRA say a flat fee for the job points towards self-employment while some self-employed people bill hourly; HMRC says the basis of payment is often inconclusive. None makes it decisive on its own.
• No official "right" model or contingency figure. We didn't find a government page that says when a freelancer should use fixed or hourly pricing, or how much contingency to add.
• What we did not check: consumer pricing rules outside the UK and Ontario; worker-status tests in other countries, Quebec's civil-law rules or US state tests; the FAR's other contract types (incentive, cost-reimbursement) beyond the sections linked.

When to get advice

• a large fixed-price project where an overrun would really hurt, or a contract the client wrote with penalties or guarantees;
• you mainly sell to consumers, or you're unsure which consumer rules apply;
• you work mostly for one client and aren't sure whether you're self-employed for tax.

Ask a lawyer or tax adviser where you work. This page is general information only.

Related

• Freelance hourly rate calculator
• How to write a freelance quote or estimate
• How to write a freelance proposal
• Scope creep and change requests
• How to raise your freelance rates
• Freelance deposits and retainers
• Freelance client onboarding checklist

Sources

• US (federal contracting, FAC 2026-01, effective 03/13/2026): FAR 16.103 Selecting contract types · FAR 16.202-1 Firm-fixed-price: description · FAR 16.202-2 Firm-fixed-price: application · FAR 16.601 Time-and-materials contracts
• US (tax): IRS: Financial control (page date 30-Jan-2026)
• Canada: CRA: Employee or Self-employed (RC4110) (page date 2023-10-06) · Ontario e-Laws: Consumer Protection Act, 2002
• United Kingdom: HMRC: Employment Status Manual, basis of payment (page date 2016-01-18) · legislation.gov.uk: Consumer Rights Act 2015, section 51

Checked 2026-10-15 (UK and Ontario consumer-law notes 2026-10-14). Found a mistake? Tell us via Support.