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Hourly vs. Project vs. Retainer Pricing

By Andrew James Flores, Nathan Management · Updated September 23, 2026 · Editorial Standards

Andrew prices and invoices his own service work and built the calculator on this site to replace guesswork with a formula.

Every pricing model answers one question: when the work takes longer than planned, who pays for the extra time? Hourly pricing sends that cost to the client, provided they authorized the hours. A fixed fee keeps it with you. A retainer can go either way, depending on one clause: the overage clause. Pick the model whose risk you can see coming and control, then write the agreement so that risk has a price.

Which model to use: recommended defaults

These recommended starting choices come from the author’s own pricing practice. Each one names the situation it fits, so you can tell when yours is different.

• Hourly with a written cap when you cannot yet describe the finished result: discovery, troubleshooting, audits, open-ended editing, or a client who expects to change direction as the work develops.
• Fixed fee when you have delivered closely similar work at least three times, can write the acceptance criteria in one or two sentences, and know exactly which inputs the client must supply.
• Monthly retainer when the client needs the same kind of work every month and you can say in one line what the fee buys: a set output, a block of hours, or guaranteed response times.
• Start hourly, then convert when a new client’s work looks repeatable but you have no tracked hours for it yet. Two or three months of logged time give you the estimate that a fixed fee or retainer needs.

One 40-hour job under three agreements

Take a defined deliverable you estimate at 40 hours and price it three ways at the calculator’s default rate of $80 an hour (the “Current or proposed rate ($/hour)” field). Then let the job run to 60 hours, a 50% overrun. Throughout this guide, rate means a price per hour and fee means one price for a defined piece of work. The effective rate is the amount invoiced divided by the hours actually worked.

Against the $66.67 floor, the fixed fee gives the best result when the estimate holds ($96.00 an hour, 44% above the floor) and drops below the floor by 60 hours. The hourly and retainer agreements stay at $80.00 an hour, but only because the client signed off on every extra hour. Without that sign-off, the retainer is the worst of the three: $42.67 an hour at 60 hours.

Hourly: the client carries overruns, you carry unsold hours

Hourly pricing suits work you cannot scope yet. The client pays for every hour they authorize, so a long job does not cut your rate. The risk moves to two other places: hours the client will not authorize, and hours you never sell at all.

Make authorization visible. Default: a written cap at your estimate plus 20% (48 hours, or $3,840.00, on a 40-hour estimate), time logged daily, and a short update when you reach 80% of the cap, which is 38.4 hours here. The update should state the hours used, what remains and whether you expect to need more. Hours worked past the cap without a written OK are the hours a client can reasonably refuse to pay.

Know how many hours you can actually sell. At a set hourly rate, annual income depends on invoiced hours, and invoiced hours are always fewer than hours worked because sales, admin and the gaps between projects are unpaid. Instead of borrowing someone else’s figure for billable hours, track four representative weeks and use your own billable share. Table 2 shows what that one number does to the default plan.

At $80 an hour the plan breaks even at 1,000 invoiced hours a year ($80,000 ÷ $80), or 20.83 hours per working week. Each billable hour per week that you lose, across 48 working weeks, removes $3,840.00 of revenue. If your tracked number comes in below break-even, raise the rate, cut costs, or move repeatable work to fixed fees, where working faster raises your effective rate instead of lowering the invoice.

Fixed fee: you carry the estimate

A fixed fee pays the same whether the work takes 30 hours or 80. That rewards you when you are fast and your estimate is accurate, and it costs you when the estimate is wrong. Before quoting, run the project check with every production hour (meetings, revisions and handoff included), an extra-time allowance and any project-only direct costs. For a 40-hour estimate, set “Estimated project hours” to 40, leave “Extra-time allowance (%)” at 20, and set “Project-only direct costs ($)” to 0 (the defaults are 10 hours and $100). The check returns $3,200.00: 48 planned hours at the unrounded floor of $66.666…. Treat that figure as your walk-away price and quote above it.

Table 3 shows why the allowance matters. Each column is a fee for the same 40-hour estimate. The first four are project-check results at different allowances; the last is the $3,840.00 fee from Table 1, priced at $80 an hour with a 20% allowance. Each row is how long the job actually took.

Fees are the project check’s output rounded up to the cent. Effective rate = fee ÷ hours worked, rounded to the nearest cent. Break-even hours = fee ÷ the unrounded floor, to one decimal.

Read the table along its diagonal: each fee lands exactly on your floor at the hours its allowance covers, and every cell below the diagonal is time you give away. Adding margin buys extra cushion. The $3,840.00 fee stays above the floor until 57.6 hours, a 44% overrun. With the $3,200.00 fee, every hour past 48 is an hour you work with no additional fee, so a 60-hour outcome leaves you $800.00 short of plan (12 hours × the unrounded floor of $66.666…).

Two habits keep you on the right side of the diagonal. First, set the allowance from your own records: if your last three similar jobs ran 15%, 25% and 30% over, a 10% allowance is wishful. Second, write down what triggers a change order, a short written note that adds scope, price and time before the extra work begins. Overruns caused by new requests then become new fees instead of lost hours.

Retainer: name what the monthly fee buys

A retainer is a recurring fee, and the agreement has to say what it pays for. Name one of three things, because each puts the risk in a different place:

• A defined output, such as four articles or one monthly report. It behaves like a monthly fixed fee: you carry the time risk.
• A block of time, such as up to 32 hours a month. It behaves like prepaid hourly work, as long as the overage clause is followed.
• Reserved availability, such as a reply within one business day. The client pays to have you on call; the risk is how much work being on call turns into.

Take the time block from Table 1: $2,560.00 for up to 32 hours. If the client uses only 20 hours, you still invoice $2,560.00, which is $128.00 per hour used, but the 12 unused hours were held for this client and could not be sold to anyone else. If the client needs 40 hours and authorizes the extra 8, you invoice $3,200.00 at $80.00 an hour. If you quietly absorb those 8 hours, the month earns $64.00 an hour, below the $66.67 floor.

Twelve months of this retainer invoice $30,720.00 and reserve 384 of the default plan’s 1,200 billable hours, or 32%. That predictability is the reason to offer a retainer. It is also why losing one hurts, so set a notice period long enough to resell the time.

Recommended contract defaults

The table collects the defaults used above in one place. Treat them as a starting point you adjust with your own records and your client’s needs.

Mixing models without charging twice

Hybrids are often the best fit. Default: a fixed fee for the build plus hourly support afterward, a fixed fee with a stated hourly rate for changes, or a discovery phase billed hourly that ends in a fixed quote for the rest. Write down where one agreement ends and the next begins, whether that is a date, a deliverable or an hour count. Then the same work cannot land on two invoices, and both of you know which clause applies when something new comes up.

Do not double-count costs the calculator already includes

The calculator’s floor is built from your personal income goal before income and self-employment taxes, your annual business operating costs, your benefits budget, your billable hours, the share of invoices you expect to collect, and payment fees. All of that is already inside the hourly floor, so a quote should not add it again.

• Leave out software, insurance or equipment you already counted in “Business operating costs ($/year)”.
• Leave out a card or platform surcharge if you entered that percentage in “Fees on collected payments (%)”; the floor already grosses up for it.
• Add costs that exist only because of this job, such as a stock-photo license, a subcontractor or travel, in the project check’s “Project-only direct costs ($)” field. For the 40-hour example, set “Estimated project hours” to 40, leave “Extra-time allowance (%)” at 20, and leave “Project-only direct costs ($)” at its default of $100 (the default hours are 10). The check returns $3,300.00: $3,200.00 for 48 planned hours plus $100.00 of direct costs.
• Budget income and self-employment taxes separately; the estimated tax guide shows how to set money aside during the year.

Answer these six questions before you quote

1. What unit are you selling? An hour, a deliverable, a block of monthly time, or reserved availability.
2. What is included? Outputs, meetings, revision rounds, handoff and any support period.
3. What must the client supply, and by when? Content, access and feedback turnaround, plus what happens to the schedule and fee if inputs arrive late.
4. Who can authorize more work? Name the person, the hour or dollar limit, and how a change order is confirmed.
5. When and how do you get paid? Deposit or milestones, invoice dates, due date and late-payment terms. The invoicing guide covers payment terms in detail.
6. Does the price clear your floor? Run the project check with total expected hours, an allowance and direct costs, and compare the result with your quote.

Put the answers in writing even for small jobs. If you work for hiring parties in New York City, the city’s Freelance Isn’t Free Act page states that contracts worth $800 or more, counting all agreements with the same hiring party in any 120-day period, must be in writing and must spell out the work, the pay and the date you get paid. Other cities and states set their own rules.

Build the invoice and payment workflow · Convert production time into a sold unit · See rate floors for other plans