What to pay yourself per hour

Why the question feels impossible

Asked what your time is worth, most makers freeze. It sounds like a question about self-worth, and answered that way it has no correct answer — only a number you feel slightly embarrassed by in either direction.

So swap it for a question that does have an answer: what does an hour of my making time have to earn for this to be worth doing? That one is arithmetic. It depends on how much you need, how many hours you can actually work, and how much of that time is spent making rather than everything else. None of those is a judgement about you.

Tip. If you take nothing else from this: an hourly rate is a target you set, not a value you discover. You are allowed to simply decide, and then check whether the decision holds up.

Three ways to land on a number

There is no single right method, but there are three that people actually use. Try all three — if they land within a few dollars of each other, you have your rate, and if they do not, the gap between them is telling you something.

The first is the floor test. What would you be paid per hour doing skilled work locally — not minimum wage, but the rate for someone competent at a trade? That is the least your making time can be worth, because you could go and do that instead. Plenty of makers are quietly paying themselves less than a supermarket would.

The second is the job test. Imagine a stranger offers to pay you to make forty of the thing you are pricing, to a deadline, in your own workshop. What is the lowest hourly rate at which you would say yes without resenting it by item eleven? That number is usually more honest than anything you would write down cold, because it prices the tedium as well as the craft.

The third is working backwards from what you need, which takes the longest and gives the number you can defend. It is the one worth doing properly.

Working a yearly target back into a rate

Start from what you want making to pay you in a year, then divide it by the hours you will really spend at the bench. The catch is in that second number, and it is where nearly every calculation of this kind goes wrong.

That is $24,000 divided by 828 making hours, and the twelve admin hours never enter the sum. They are the whole point of it. If you divide your target by all thirty working hours instead, you get about $17 an hour, and the difference is you personally funding your own photography and post office runs.

Watch out. Be honest about the eighteen. Time in the workshop is not the same as time making, and an afternoon that included two loads of washing and a school run was not four hours at the bench.

What a self-employed rate has to cover

An employee earning $29 an hour is not really earning $29 an hour. They are earning that plus holiday, plus sick pay, plus half their payroll tax, plus whatever pension and insurance their employer puts in. Nobody is putting any of that in for you.

• Time off. Every hour you do not work is an hour you do not get paid for, and the rate is what has to cover the gap.
• Illness, and the week where a hand injury stops you making anything at all.
• Self-employment and income tax, which come out of the number rather than sitting on top of it. Set aside a share of every payment as it arrives.
• Equipment that wears out, insurance, and the slow drip of things that need replacing.
• The hours you spend learning, testing a new recipe, or making the thing that failed.

This is the honest reason a self-employed rate looks higher than a wage for the same work. It is not greed and it is not the market rate for craftsmanship. It is the same take-home pay with all the invisible employer contributions folded into a single number you have to charge yourself.

Tax rules differ everywhere, and how much to set aside depends on where you are and what else you earn. Ask an accountant in your own country rather than working from a rule of thumb you read on the internet, this one included.

The traps that talk you down

Once you have a rate, a series of very reasonable-sounding arguments will appear for charging less than it. They are worth naming, because each one is the same mistake wearing a different coat.

• "I'm slow, so I shouldn't charge for all those hours." Speed is a separate problem. Charge the rate and fix the hours by improving the process or making bigger batches, rather than by paying yourself less.
• "I enjoy it, so it isn't really work." Enjoying your job has never been a reason to be paid less for it, and the enjoyment tends to survive being paid properly.
• "It's just a side thing." A side thing that pays you $8 an hour is a side thing that costs you the evenings you could have spent otherwise.
• "Nobody here would pay that." Sometimes true, and worth testing rather than assuming. When it is true, the answer is usually a different product or a different customer, not a lower rate.

The one that deserves a straight answer is the last. If your honest rate produces a price the people around you will not pay, you have found something real — but lowering the rate does not fix it, it just moves the loss onto you and hides it. Making fewer, better things, cutting the hours a piece takes, or selling to a different buyer all fix it properly.

Changing the number later

A rate set once and never touched quietly loses value every year. Materials go up, your skill goes up, and the number sitting in your spreadsheet from three years ago does neither. Put a date in the calendar once a year to look at it.

When you do raise it, raise it before you are desperate rather than after. A rate reviewed calmly in January is a business decision. The same rise made in a panic in October, when you have realised a whole season was underpriced, feels like an emergency to you and looks like one to your customers.

Tip. Try your new rate in the calculator before you commit to it. Seeing what a two dollar rise does to the price of one candle is usually reassuring — it is far less than people expect.