Get a head start into the European IT freelancer market with this extensive guide. Learn how to build a successful freelancing career.
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Table of Contents
- What’s an IT freelancer?
- Why become an IT freelancer?
- Why not become an IT freelancer?
- How much can IT freelancers earn in Europe?
- How do you become an IT freelancer?
- Insurances for IT freelancers
- The truth about IT freelancing
- Sources
What’s an IT freelancer?
🛈 It’s important to note that freelancing means different things to different people, so don’t take my views say as gospel.
In a nutshell, IT freelancers work in mostly DevOps-focused engineering roles. They’re self-employed, offering their services on a project-by-project, relatively short-term basis.
In contrast, employees work for a single company over an extended period of timeon an X-hours-per-week basis. They are subject to a company’s internal policies and procedures.
Although not being subject to top-down policies sounds like a lot of fun, it also entails a wide range of responsibilities such as managing your own taxes, insurance, time, and finding new clients.
In other words, a freelancer is essentially a micro company.
There is another type of service provider called consultant. Consultants may be self-employed (aka independent) or work for consulting firms, and may work on short-term or long-term projects.
They identify problems, assess solutions, and ultimately manage the implementation of a chosen solution. Becoming a consultant is often the next logical step after freelancing for a few years.
The following table summarizes the general differences between IT employees, freelancers, and consultants. Obviously, it’s easy to find exceptions to these general characteristics in the real world.
| IT Employee | IT Freelancer | IT Consultant |
|---|---|---|
| Employed by a company or organization | Self-employed | Self-employed or employed by a consulting firm |
| Long-term engagement with open-ended contract | Short-term project-based engagements | Short to long-term project-based engagements |
| Focused on the tech; detail-oriented | Focused on the tech; detail-oriented | Focused on the big picture & how the tech fits in |
| DevOps role | DevOps role | Lead and/or managing role |
| Fixed monthly salary | Variable revenue (hourly rate × hours worked) | Outcome-based compensation |
| Very predictable income | Less predictable income | Less predictable income |
| Paid time off | No paid time off | No paid time off |
| Other employee benefits | No employee benefits | No employee benefits |
| Limited tax planning possibilities | Extensive tax planning possibilities | Extensive tax planning possibilities |
| No business risk | Minor business risk | Major business risk |
Why become an IT freelancer?
After looking at the above table, you may be asking yourself whether starting your own business is really worth it. It’s a valid question, as there’re many cases where one will be better off as an employee.
You see, going self-employed is a mid- to long-term investment. Depending on one’s personal circumstances, it might take months or even years to get back to the income level you’re used to.
On top of that, you’ll be putting in significantly more hours than you would as an employee! Accounting, doing your taxes, finding clients, and a million other little things don’t happen by themselves.
So why would you still want to start your own business?
The thing is, freelancing is a great first step to start your entrepreneurial journey. Once you start freelancing, you’ll have no other choice than to learn the basic skills to run a business.
But other than a “full-blown” entrepreneur, you’ll not (yet) have to deal with the responsibility of coming up with a business plan, manage employees, and a thousand other little things.
In other words, starting out as a lone wolf freelancer is the sly man’s way of starting a business.
Why not become an IT freelancer?
Like with everything else, there certainly are downsides to the freelancing lifestyle.
Take project interviews as an example. Nobody really likes them, but there are people who dislike them more than others. For some, the frequent interviewing might turn out to be a real problem.
Another downside of freelancing is that smelly code is a big part of the job. Trying to grasp a poor piece of code written by an anonymous dev 7 years ago can make for a frustrating experience.
Furthermore, the lack of long-term work relations can be problematic. Engagements usually last 4-6 months, which is not enough time to build a strong rapport with your coworkers.
Whether freelancing is right for you ultimately depends on what you want in life:
- a more stable lifestyle with a predictable routine, or
- a more adventurous path with potentially higher profits, but also with higher risk and prolonged periods of hustle.
If you’re still unsure about freelancing, I’d say just go for it!
If for some reason your career as a freelancer doesn’t go as intended, you can always call it a day and start looking for a new job. In short, you have nothing to lose but a lot to gain!
How much can IT freelancers earn in Europe?
TL;DR: On average, the German freelance market has the highest rates, with companies currently paying around 100€ per hour. Read on to understand the factors that will determine your actual personal rate.
One of the more popular questions about freelancing revolves around the level of income you can expect to make. There’s really only one valid answer to this question: It depends.
But wait… What do we actually mean when we say that somebody makes XYZ€ a year? After all, what you earn on paper can look very different from what actually ends up on your bank account.
This brings our to our first important factor in the IT freelancer’s income equation. We are talking, of course, about…
Taxation
Working as a full-time IT freelancer (i.e. 8 hours on 21 workdays per month for ~100€ an hour) for a German client without taking a break for a year, you can expect to make around 200.000€ in revenue.
In many countries, this revenue will result in a very expensive tax bill.
In the country where I grew up (Austria), the actual post-tax income would be pretty much exactly 100.000€ (assuming business expenses of 10.000€).
The rest goes to the tax office in the form of social security contributions and income taxes.
And that’s not even the end of it. There’s a multitude of additional taxes such as…
- VAT (at a standard rate of 20%)
- “Tourism contributions” every business owner has to pay even if they’re not in the tourism industry
- A kind of TV tax even if you don’t watch TV
… and so on and so forth. All in all, if there’s no old money in your family, it will be very hard to build wealth in Austria.
But there’s good news. As an IT freelancer, there are many ways to significantly & completely legally reduce your tax bill. I’ll be releasing a dedicated post about this topic very soon, so be sure to subscribe to the newsletter to get the latest content updates.
Experience & skill level
In the world of IT freelancing, your income is closely tied to your level of expertise. Clients expect a high level of general IT skills coupled with specialized knowledge in the specific technologies they utilize.
Typically, a freelancer’s experience with a given technology is measured in years, with 5 or more years of experience generally indicating expertise in that technology.
Project fit
Project fit refers to how well your skills, experience, and working style align with the requirements of a given client.
When there is a good project fit, you’ll be able to work more efficiently and effectively, which will ultimately result in faster & higher return on investment for your client.
On the other hand, when there is a poor project fit, an IT freelancer will struggle to meet the project requirements, leading to delays, rework, and generally poor outcomes.
Marketing
For IT freelancers, self-promotion is necessary to stand out among many other great candidates. How you present yourself during project interviews will impact how much you can charge.
Besides smart self-presentation, confidence and effective communication skills are also vital to leave a positive impression and give you an edge during contract negotiations.
Chosen workload
As an IT freelancer, you tend to have quite a bit of flexibility when it comes to working hours. Depending on your current workload, you might decide to only work 25 hours this week, but then 50 next week.
Quite obviously, the actual amount of work you’re willing to put in will be another important variable in determining your actual income.
Mindset
Last but not least, your mindset plays a major role in how much you’ll earn in the long run. It’s just very easy to take advantage of someone who isn’t convinced of the value they bring to the table.
A very talented developer once told me that he used to charge an American tech company only about a third of the market rate for his services… Well, at least he earned himself a happy customer!
Communication skills
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Client budget
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Project location
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Market demand
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Negotiation skills
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Economic climate
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Reputation & network
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How do you become an IT freelancer?
Insurances for IT freelancers
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