Difference Between Client and Employer

This morning, I had breakfast with a colleague where this became the central point of our discussion: the difference between an employer and a client. In fact, this has come up many times in the past in my conversations about business and career. It appears that the difference isn't very clear in many people’s minds, although understanding the difference is crucial in avoiding unnecessary conflicts.

This colleague of mine has a lot of experience developing applications for the web and is quite opinionated about how it should be done. From the point of view of an employer looking to hire a developer, this is not necessarily a good thing. Why? Because one developer is only one piece of the puzzle. Development is an inherently collaborative project. If one piece of the puzzle is fixed in shape, as an employer, you’d have no choice but to find other pieces based on whether they can fit around this fixed piece. For this reason, being highly opinionated in this context is not generally seen as a positive trait.

But for a client, it's an entirely different matter. A client is someone who wants to hire you because she has no knowledge or expertise in what you do. For instance, a fashion design company might need an e-commerce system and wants to hire you to build one. They know about fashion, not about web applications. So, they have no idea, nor do they care about what it takes to build one. It’s your responsibility to figure that out. In this context, having a strong opinion about the best and most efficient way to build one, is a great thing. Even if you offered to the client three different ways to build it, they would have no idea how to evaluate them. Offering these choices can even be perceived as a way for you to evade your responsibility (blame the client later for the choice they made). A client has a particular objective with particular conditions; everything else is a risk you have to manage given a fixed budget. That is your responsibility as a vendor.

This leads to another important difference between an employer and a client: pricing structure. Because a client has no knowledge of your field, she would have no idea how to estimate the cost, but as a business owner, she needs to know how much it would cost in order to make executive decisions. This means she cannot work with you on an hourly basis (because it could potentially go on forever). Whether to pay hourly or a fixed price has risk implications. For the payer to pay on an hourly basis means she is shouldering the financial risks. The receiver, employee or freelancer, has no financial risk. Even if something does not work out well, he gets paid for his time anyway. Seeing from the other side, it means the employer has to pay even if the result was unusable for her. She would literally be paying for nothing. In order to take on the financial risks, you’d have to have sufficient amount of control over the project. This is why, as a vendor, you are entitled to decide how it is done, and having strong opinions about how it should be done becomes an asset, not a liability.

Some shrewd employers try to get you as a freelancer to accept a fixed project fee while demanding that you do the project using their ways. If you think about it, this is not fair. What if their way turns out to be the wrong way, and it ends up taking twice as many hours as you had originally expected? If calculated on an hourly basis, your rate would be cut in half. If they want you to take the financial risks, they should give you enough control over the project in order to manage the risks. So, when you are choosing fixed or hourly, you need to be asking who is taking the risks and who has the control. A client is someone who wants you to take the risks, and an employer is someone who is willing to take the risks for you. And, naturally, the price for a client would have to be higher because a significant portion of the project fee is a risk management fee. For a client, it’s worth paying this premium instead of taking the risks themselves without having enough knowledge and experience. If they botch the project, it would be far more expensive to redo it.

Going from hourly to fixed, working for employers to working for clients, is a natural progression in one’s career too. When you are young, you don’t have a broad enough experience in life and business to account for everything that could go wrong in a project. Even a simple website, for instance, has technical and aesthetic components. Even if you are familiar with the technical aspects, you may not know how to manage the aesthetic part of the project. The latter is generally riskier because it’s subjective. There are countless other factors that can complicate a project like legal issues, tax codes, human resource problems, cash flow problems, office troubles, etc..

If you continue to work strictly as a programmer, designer, or writer getting paid on an hourly basis (not taking any financial risks), soon enough, your years of experience will reach a point of diminishing returns. Like the price of wine, adding five more years on top of ten you already have isn’t going to offer noticeably more value to any employers. If you continue to avoid taking risks, you won’t be taking advantage of your experience and strengths.

When choosing a fixed fee or hourly fee structure, both parties should be fully aware of the expectations implied in the choice they make before the project starts. Without understanding these differences, between employer and client, you could easily get into unnecessary conflicts and misunderstandings.