How I Built Diversity, Equity, and Inclusion into My Freelancing Rates (And How Clients React)

Photo by Alizée Baudez on Unsplash

A New Kind of Sliding Scale

I primarily work with startups to build IT where there was none before (teams, tech, policies, processes). It’s terribly messy and creative, like hacking through a jungle, which reminds me of a Ryan Holiday quote, “The one who clears the path, shapes the path.”

Last year, I left a full-time role to build more novelty into my work. Specifically, I wanted to set discrete barriers around how long I would engage with a particular set of problems. This meant leaving the Diversity, Equity, and Inclusion working groups that were filling a social good bucket of mine (and are straight-up due our respect and participation).

A Social Cause Framework for Freelancing

So I set out to find meaningful ways of supporting DEI beyond the traditional approaches (ie: pro bono or just donating money). The result was a deep dive into the metrics that I felt were indicative of a company taking DEI seriously, which I used to build discounts into my hourly rate.

In a word, companies showing a real commitment to DEI will pay less than companies who do not.

I call this a social cause payment structure and it can be applied to any cause. What I’ll show you next is how to create a range, or sliding scale, that is centered around an average rate to reach your desired annual income. Once we define a range, we’ll identify metrics to trigger discounts and weight them.

Disclaimers

  1. First and foremost, this is a zero judgement zone. There are companies that quality for a discount and companies that do not qualify for a discount. We do not attach labels such as ‘good’ or ‘bad’ in regards to whether or not they qualify. If you’re feeling emotions about this article, it would behoove you to spend more time with those emotions to uncover their source. I recommend Thais Gibson’s Personal Development School as your next stop.
  2. You need to have more than one client for this to work. This can be multiple at the same time, or one at a time over the course of 12 months.
  3. Beware, there is math involved 😬

Let’s get started!

Establish the Range

1. Identify your average hourly rate

The first step in creating a social cause payment structure is to identify your target hourly rate. All else being equal, this would be your standard hourly rate for new clients.

I’m going to use $100/h as an example, but you could determine this in many ways. Here’s a few:

  • If you’ve had an annual salary, divide it by 2080 hours (generally considered 40 hour work week),
  • Look at Upwork or Fivrr posts for people with you skillset,
  • Ask colleagues or, honestly, just google it.
  • Trial and error — start with some reasonable and negotiation higher with new clients.

Once you have yours, consider adding 15% to cover health insurance and other costs of doing business. My example is now $115/h.

2. Find the upper limit

Now, let’s assume I keep two clients at a time. If I want to average $115/h between them, I could theoretically charge one client $0/h and the other client $230/h (assuming time is split evenly between them). But that’s not very practical, so we’ll need to tighten up the range. Here’s how I did it.

Start with the upper limit, which is the highest hourly rate you could reasonable obtain for your service. It should be something that you have to sell, but is not unreachable nor unreasonable.

To identify this, I asked two questions:

  1. Where else could a client go for this service?
  • Research the rates of competitors in my local market
  • Contact them for a quote
  • Ask friends/colleagues/Reddit forums for help

2. What is the demand for my service?

  • Look on Upwork and Fivrr for posts for your services,
  • What is the frequency of your role appearing on company job boards?
  • Are you getting a lot of referrals or inbound requests via your website or social media?

Through this, I found that I could expect to successfully negotiate $145/h, so this becomes my upper range. Now find the percent increase from your base rate (Here’s a tool you can use). The difference between my base and upper range is $30/h, which is a 25% increase.

3. Find the lower limit

The lower limit is the same percentage in the other direction and I used the same tool to find it. So, my lower limit will be 25% less than my base rate of $115/h, which is $29 . 115–29 = 86.

My range is $86 — $145/h.

My discounted range is $86/h–$115/h

My compensatory range is $115/h–$145/h

Now that you have your sliding scale, let’s identify and weight measureable metrics that will trigger discounts.

Why DEI?

Photo by Amy Elting on Unsplash

Do you remember when you mom made you eat all your vegetables? For those new to it, DEI is kind of similar — it’s good for you even if you don’t know it yet.

Racial and ethnic diversity alone contributes significantly to financial performance. According to a McKinsey 2015 study by Vivian Hunt, Dennis Layton, and Sara Prince, Diversity Matters:

“Companies in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians.”

And if you think that’s outdated, well, they’ve kept at it with a second study in 2018, and another in 2020, which had this to say:

“Our latest report shows not only that the business case remains robust but also that the relationship between diversity on executive teams and the likelihood of financial outperformance has strengthened over time. These findings emerge from our largest data set so far, encompassing 15 countries and more than 1,000 large companies.”

And if you could care less about money, consider the additional benefits outlined by Sarah Wong in 2021 in Berkeley’s GRC Insights group, which combined the research of many indepedent firms to conclude that diverse workplaces hold an advantage in talent acquisition, increased employee satisfaction, better alignment with customer base, and improved decision making and corporate innovation.

But real talk, this isn’t about improving your bottom line. It’s about putting people first and doing the work to identify the biases you inherited culturally, socially, and familially. The alternative is to be the byproduct of mindless programming, carrying the useless stigmas into the 2020’s. Kind of like a virus, of sorts.

Identify & Weight Meaningful Metrics

Once you have the range, we’ll define which factors warrant a discount. These are metrics that are totally up to you. I encourage you to make them personal!

The metrics I chose will likely be different than yours. For me, improving diversity, equity, and inclusion in work environments is reflected by:

  1. Minority-Led, Female-Led, or Social Benefit/Mission Based?
  2. Gender diversity across leadership roles? Yes = any minority gender is within 25% count of 50% of the majority gender.
  3. Racial diversity across leadership roles? Yes = any minority race is within 25% count of 50% of the majority race.
  4. Annual sensitivity training or parental leave for male and female parents?
  5. Equal or transparent pay iniatives?

While all of my metrics are binary (yes/no), others may be dynamic measurements, like percentages. Once you’ve identified a couple of your own, let me show you how to weight them.

Weighting is the degree to which any single metric influences your rate. For example, I can decide that all five metrics are equally important (or, I just don’t want to do anymore math) and thus, each can reduce the rate by up to 20% (100/5=20%) within my discounted range ($86/h — $115/h). I’ll use this case for the remainder of this process, but, I could decide that Sensitivity Training is the most important metric and will affect 60% of my rate changes, leaving 40% left for the remaining 4 (10% each).

Disclaimer

  1. In order to apply these metrics, I am going to perform some light research on the company. This shouldn’t take more than 10–15 minutes and most of it will be available on their website. Glassdoor is another great resource.
  2. In my example, deciding if a company qualifies for a discount is not an exact science and requires assumptions regarding race, sex, and other factors.

Slide Yo Scale

Photo by Roman Kraft on Unsplash

Now for the fun part — let’s use our system to propose a rate to a new client.

Example Scenario I have two customers and my target average rate is $115/h . My scale is $86–$145/h and I have five equally weighted, binary metrics (20%).

[EXAMPLE FOR ILLUSTRATIVE PURPOSES Client #1] — Clinton Foundation, HIV/AIDs Initiative

  1. Minority-Led, Female-Led, or Social Benefit/Mission Based? YES
  2. Gender diversity across leadership roles? YES (4/9m, 5/9f)
  3. Racial diversity across leadership roles? YES (3/9w, 3/9b, 3/9 non-w, non-b)
  4. Sensitivity Training or Parental leave for either parent? Unknown, would ask.
  5. Equal or Transparent pay iniative? Unknown, would ask.

This client is a not-for-profit organization with a demonstrated commitment to equality and diversity.

Discount = 60%. They’re in my discounted range of 86–115, where 100% discount would be the full $29. Since they qualify for 60% discount, we take .6 * 29 = $17. Let’s take $17/h off our average target rate of $115/h.

I would offer $98/h to this client.

[EXAMPLE FOR ILLUSTRATIVE PURPOSES Client #2] — Verizon

  1. Minority-Led, Female-Led, or Social Benefit/Mission Based? NO
  2. Gender diversity across leadership roles? YES (5/12f, 7/12m)
  3. Racial diversity across leadership roles? NO (10/12w, 2/12 non-w)
  4. Sensitivity Training or Parental leave for either parent? NO
  5. Equal or Transparent pay iniative? YES

This client offers a DEI Report and, in 2017, clearly made a lot of noise around equal pay. What they’ve made public is largely just policies and it appears to be self-audited, but I will give them the benefit of the doubt here.

Discount: 40% of my full discount ($30) is $12 off of my base rate of 115.

In the next and last section, I’ll demonstrate how I adjust the equation to hit my average rate.

Achieving Average Rate with Corrections and Adjustments

Photo by Drew Patrick Miller on Unsplash

Different Starting Points

Now, I have not yet listed my proposed rate to client #2 because if I always work within the discounted range, I’ll never be able to reach my average rate.

To reach your average rate, some of your clients will need to be in the compensatory tier, which is the upper half of your range. We could call these client tiers and recall thecompensatory tier in this example is $115/h–$145/h.

How do you decide which tier a company should fall into? Well, I use company revenue and size.

Using the examples above, Client #1 is a not-for-profit, so they will start from my average rate of $115. Client #2, however, had revenue of $31 billion in 2021. They will be in the compensatory tier and I would take the reduction of $12 from $145.

I would offer $133/h to Client #2.

Adjusting for Same-Tier Clients

There may be cases where you’re unable to hit your target rate. For example, all of your clients may be not-for-profits! In this case, you:

  • may need to build in other metrics to differentiate between starting rates or,
  • you may add considerations to offset discounts (ie: do they lobby the US Government to keep guns in schools? Do they support a political party that outlaws abortion?) or,
  • reduce the number of clients who qualify or,
  • tighten the range to be closer to your target average rate.

Adjusting for Billed Time Differences

If time split between the two clients were even, my average rate between them would be (133 + 98) / 2 = $115.50/hr. Nice!

There are cases where time will not be split evenly, or you may have more than 2 clients. To ensure I stay close to my target average rate, I:

  • build in minimum and maximum time commitments into my agreements and,
  • include incentives to remain within a target hourly range per month (such as further discounting the rate or increasing it based on overage hours) or,
  • add a base monthly fee, in addition to hourly.

The Case Against Everything I’ve Said Here

Photo by Mehdi MeSSrro on Unsplash

Availability

According to 2020 US Census data, the representation of the US population is 58% white, 19% hispanic, 12% black, and 11% “other” (ugh). For many companies, the local population may be racially homogenous, making it very difficult to diversify the team. With that said, diverse does not mean equal — representation alone is important.

Logic Flaws

It could also be said that blanket statements like, “all companies should have gender/racial equality at the leadership level”, are subjected to their own pitfalls. While it’s important to me, you may not share the same sentiment. I encourage you to support what is important to you after you’ve done the work to identify your biases and have challenged your strongly held beliefs.

Unknown Unknowns

All decisions carry a number of unknown unknowns. A question I like to ask myself when I’m lasered in on something is this, “Because I’m so focused on this, what am I missing?” The answer here is, I don’t know.

Biases

What about a company with just one person? If not built-in, at what size should diverity be expected? Who decides that?

Final Word

This is not about penalizing companies, not even inventizing, but recognizing those who reflect the values that are important to you. Think of it like donating to a cause you support.

In fact, why not avoid all this trouble and donate a portion of your income to an organization supporting your chosen cause?

By doing it this way, you’re creating awareness — and that’s a multiplier. I enjoy the conversation around my rates and engagement from articles such as this one. Clients tend to react with a shock but my discounts are not so egregious that it forces further scruntiny. And, I’ve actually had zero clients choose not to work with me based on my pricing structure.

All in all, it forces us to think about how we build meaning into our everyday lives. And there’s value in that, too.

If this information resonates with you, please consider connecting on LinkedIn or providing some feedback here! To discuss engagements, check out my website at theitplan.com

Building IT infrastructure and teams where there was none before. Fitness, wellness, and adventure enthusiast. Enagements at theitplan.com or dave-bour.com

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Dave Bour

Dave Bour

Building IT infrastructure and teams where there was none before. Fitness, wellness, and adventure enthusiast. Enagements at theitplan.com or dave-bour.com

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