Freelancers' Biggest Challenge

Calculating Freelancer Underpayment: The Math & The Justification Gap

Freelancers are systematically underpaid across the UK, but the issue is quantifiable—and Earns can uniquely solve both the calculation problem and the client justification problem.

Gap 1: The 30% Hidden Cost Reality

Freelancers lose 20–30% of their time to unpaid work—chasing payments, writing proposals, endless emails, admin, and client consultations.

Example: Jessica, a London marketing consultant

  • Quoted hourly rate: £80
  • Billable hours: 60
  • Unpaid hours (proposals, emails, revisions): 15
  • Total time invested: 75 hours
  • Actual hourly rate: £4,500 ÷ 75 hours = £60/hour (25% gap)

Gap 2: The Employment Equivalence Gap

Freelancers must price not just for current income, but for lost benefits. A full-time employee earning £40,000 costs their employer £55,000–£60,000 when including tax, pension, training, and overheads. Yet freelancers earning £40,000 often don't add a buffer for self-employment taxes, sick pay, or holiday pay they must self-fund.

Formula: (Target Annual Income + 30% Benefits Buffer) ÷ Annual Billable Hours = Fair Hourly Rate

Example: Graphic designer targets £35,000

  • Add 30% buffer: £35,000 + £10,500 = £45,500
  • Billable hours (1,536/year at 50% utilization): 1,536
  • Fair rate: £45,500 ÷ 1,536 = £29.62/hour
  • Many quote £22/hour (undercutting by 26%)

Gap 3: Market Rate vs. Quoted Rate

The broadest underpayment: freelancers across roles are underpaid 26–144% versus equivalent full-time employees, depending on field.

RoleFreelance HourlyEmployee HourlyGap
Legal Consultant£99.06£16.00+144%
Photographer£65.69£14.67+127%
UX/UI Designer£27.33£35.76-26%
Illustrator£18.00£23.43-26%

The paradox: Some fields (creative) see freelancers undercut full-time salaries, while consultancy roles command premiums.

How Much Are Freelancers Actually Underpaid?

Across the 2M UK freelancer market, the wealth transfer is staggering:

  • Median freelancer hourly rate: £12.23 vs. national median £18/hour = 32% pay gap
  • Average hidden cost impact: 20–30% of hours unpaid = Another 30% gap on quoted rates
  • Aggregate annual loss to UK freelancers: Roughly £8–16 billion when multiplied across the population losing 25–35% to combined gaps

For an individual: A freelancer earning £30,000 thinks they make £30,000. Reality: £21,000 actual take-home after hidden hours + costs.

Yes, Freelancers & Services "Need" to Justify Prices (And Fail Spectacularly)

The Core Problem: 63% of UK freelancers feel undervalued because they can't articulate why their rates are fair. Clients push back with "Why should I pay £X when competitor Y charges £Y-20%?"

Most freelancers have zero pricing justification framework. They either:

  1. Quote a number and hope (no defense)
  2. Use time-based justification ("I charge £X/hour because...") → Clients negotiate hours
  3. Panic and drop the price

5 Pricing Models Freelancers Can Use (With ROI Justification)

1. Hourly Rate (Basic, Limited)

Example: £45/hour for admin work

Problem: Clients fixate on hours; "Why does it take 10 hours?" negotiation ensues

Better for: Retainers, support work

2. Daily Rate (1.5x leverage)

Example: £300/day (7–8x hourly rate)

Advantage: Removes hour-by-hour tracking, increases earnings 15%+

Better for: Consultants, on-site work

3. Fixed-Fee/Project Rate (2.5x leverage)

Example: £2,500 for website redesign

Advantage: Client knows total cost; you profit from efficiency (+25% earnings)

Better for: Design, writing, development

4. Value-Based Pricing with ROI (10x+ leverage)

Example: Marketing strategy generating £300k revenue annually → Charge £50k–£100k fee (3–10x ROI rule)

Framework: "Your problem costs you £X/year. My solution returns £Y. Fee: 10–30% of annual value created."

Earnings potential: 2–3x increase vs. hourly

Better for: Consulting, strategy, high-impact roles

5. Tiered Pricing (1.4–2x leverage)

Example: Tier 1 (£500) | Tier 2 (£1,200) | Tier 3 (£2,500)

Advantage: Clients self-select premium tier; middle tier becomes "obvious" choice (+40% close rate)

Better for: All roles (entry + premium packaging)

How Earns Solves the Justification Gap

Enter the job. Earns returns a defensible price.

Earns is a pricing intelligence system, not a collection of tools. Everything—ROI logic, pricing history, client capacity, hidden costs—works together in one unified flow.

How Earns Works

Step 1: Input

You enter:

  • Your role and experience
  • The job description (natural language)
  • Estimated scope / timeline
  • The client company name

No templates. No libraries. No decision fatigue.

Step 2: Intelligence Layer

Earns combines:

  • Market pricing data (role + task benchmarks)
  • Personal pricing history (what you've charged and had accepted)
  • Client capacity signals (Companies House: turnover, employees, entity type)
  • Hidden cost modelling (unpaid time, benefits gap, risk)
  • Opportunity context (one-off vs repeat, strategic value)

AI interprets the job description, classifies complexity, matches it to comparable work, and weights signals appropriately. This is where AI belongs: synthesis, not authority.

Step 3: Output

Earns outputs:

  • A recommended pricing range (not a single number)
  • A confidence position ("Conservative / Aligned / Ambitious")
  • A short pricing rationale, written in client-safe language:
    • Why this range is reasonable
    • How it reflects scope, value, and client size
  • Contextual comparison to:
    • Market rates
    • Your own historical pricing

You choose the final number. Earns gives you the evidence behind it.

What Makes Earns Different

  • Prices work based on outcomes and context, not hours
  • Adjusts recommendations using your actual pricing history
  • Factors in client size and capacity to pay
  • Accounts for unpaid work and missing benefits
  • Uses AI to interpret real jobs, not rigid templates

How This Replaces Separate Tools

Nothing is lost—it's just unified. Everything that was once a separate feature now lives within the pricing intelligence flow:

ROI Calculator → Embedded in pricing rationale

Objection Responses → Implied in the rationale

Tiered Offers → Reflected in pricing range

Rate Increase Scripts → History-aware recommendations

Value Questions → AI job interpretation

Real-World Impact

Scenario: Web Developer earning £65k/year quoted rate, actually £45.5k

Without Earns:

  • Stays at £65k quoted (£45.5k actual) = Loses £13.5k+ annually
  • Client objections go unchallenged
  • Struggles to raise rates

With Earns (Pricing Intelligence):

  • Enters job details: "Website redesign for mid-size e-commerce company"
  • Earns analyzes: Market rates (£35–50k), client capacity (Companies House data), freelancer's history (similar projects accepted at £40k), hidden costs, strategic value
  • Receives defensible pricing range: £42k–£55k with rationale: "Reflects market benchmarks for your experience level, accounts for client's £2M turnover capacity, and includes 30% buffer for unpaid work and benefits gap"
  • Selects £48k (mid-range, confident position)
  • Uses provided rationale in client conversation—no templates needed
  • Client accepts at £48k = +5.5% increase from previous £45.5k actual

Outcome: Freelancer moves from £45.5k actual → £60k+ actual income. Subscription pays for itself 10x over in year 1.

This is where Earns becomes indispensable: not just calculating a rate, but providing the data-backed evidence to defend it with clients.

Start Solving This Challenge →

Sources & References

These sources form the foundation of Earns' market validation, underpricing quantification, and zero-churn retention strategy.