When offering freelance consulting services or other types of freelance jobs, you may be faced with the option of working on a retainer or hourly basis. What is the difference between these two forms of payments?

Consulting retainer rate refers to a situation where a client books you in advance by paying for work that is to be identified later. The retainer may involve one contract with additional requirements that may be incorporated later. This way, you are assured of a monthly income from that client. A retainer agreement is something close to a full-time employment.

On the other hand, an hourly rate arrangement for your consultancy means that your client pays for a specific block of hours in a given period of time. This is also done in advance.

These two methods have their advantages and disadvantages. For example what happens when a client pays you an hourly rate and you end up not using all the hours paid for? A conscientious freelancer will feel bad by billing for hours that he never worked for. Clients are aware of this possibility and so they may take steps to minimize the work that comes your way. These steps can include:

  • Giving you less work
  • Giving you simple jobs
  • Your client could keep interacting with you at a minimum in order to limit paying you more for any feedback you may give.

An hourly rate can also make the client feel ‘conned’ when a job charged so much is done in such a short time that the client feels that that was easy money on your side.

When you have worked with a client for a while and trust has developed between both of you, a retainer rate has more advantages to you and also the client.