Hourly Rate exchange rate variation

Question

I'm in a bit of a dilemma, and I'd like some third party opinion on this.

My freelance rate is USD, my client is not US based (so he has to exchange USD in order to pay me), I'm also not in the US, so in the end I have to exchange USD to my local currency.

Lately the exchange rates were very favorable for me (USD -> local) and bad for he (his local -> USD), so the end result is that I get a free ~11-12% raise. And he wants to adjust my rate to essentially match the exchange rates when we last agreed on the rate (a few months ago)

I don't know what to think about this... on one hand I like the gig and would like to continue on. but on the other hand it doesn't seem quite fair. So I'd like to know some impartial opinions on this situation.

Answer 1

Honestly, ignore the exchange rate. If you lower your price by 12-12%, you're sending the message that you are not worth that extra bit. For this particular client, I would keep the same rate.

Where exactly are you located? Are you able to use another big currency (by big, I mean widely known/accepted, such as the Euro, British Pound, Canadian Dollar, etc), or is it a lesser-known currency? Personally, I charge everything out in CAD. My PayPal knows I'm expecting that type of payment, and does the conversions for the customer before I see the money. Going forward, if it's a smaller currency, I'd suggest changing to a more well-known currency.

Answer 2

I guess it's all a matter of perspective. If you agree on a price of USD then it's up to them to pay it. If you want to keep on the job and is willing to open the concession at least change something since the project was originally worth X. For example if it was 1000 USD and because of USD flutuations the client is found on a situation that he think he can only pay 900 USD, you should change the scope, or the date of delivery or some paying condition so the project doesn't lose value.

One big important factor is that you can't base your project on a frozen exchange rate. If the USD value skyrocket you will actually lose money if you agree to the exchange rate of a few months ago.

So wraping up:

• Change some factor if you are going to change the price;
• Don't take the risk of the exchange rate

Answer 3

Your agreement should specify the currency in which you will be billing, as well as the bill-rate, which I assume it already does. Then that is the bill rate. If your agreed rate $50 US / hour, then that is what your client should expect to be billed and to pay. If it is 4000 <some other unit> / hour, then that should be the expectation. Exchange should not enter into it.

But of course the exchange rate does matter to you or your client when they have to purchase another currency to pay you and that rate changes significantly. By asking to roll back the agreed exchange rate to a prior date, your client is really asking you to accept payment in his currency instead of in yours, effectively lowering your bill rate. Would he do you the same favor if the difference were reversed?

In future contracts, or in this one if you're willing to renegotiate to keep the client happy, you might specify a referene exchange rate - perhaps its 2-year average - and agree to split the differences during the life of the contract by billing and accepting at a rate 1/2 way between that originally specified rate and the rate on the billing date. It may feel fairer to your client that you'd be willing to take 1/2 the risk (if you would be). Setting the reference rate amounts to exchange speculation which involves risks and I assume is not related in any way to the contracted work. One of you could still take a real loss, so you might want to set some exchange-rate limits around the reference rate that you both agree you won't exceed without stopping to renegotiate.

Answer 4

Does it matter if you convert X -> $ -> Y or if you directly convert X -> Y?

Because if you have to exchange twice, it means twice the volatility, too. In theory one volatility should counterbalance the other, but there are times when you'll be off good/bad in both exchanges.

Many currencies are pegged to fluctuation of USD, or at least very close to it, so it won't make much of a difference. But perhaps if you're using small currencies it might make a difference. You'd have to calculate that, though.

If it doesn't make a difference, keep your current rate in USD. Like Robert mentioned, if the tables were turned, the client probably wouldn't go and pay more USD because you are in a bad spot.