There are essentially two types of billing
for contract work: Fixed Bid or Time & Materials. Both have
their advantages and disadvantages. And you'd better know
up-front which one your client has in mind before you start
talking about money.
A Fixed Bid contract is just like it sounds. You bid
that you can do a defined set of work for a fixed amount of
money. If you are more efficient at doing the work, you make
more money per hour of work done.
If you are inefficient, or worse, overlooked something
about the project (or you allowed scope-creep), you can
spend a lot of time and end up bringing your effective rate
per hour way down, possibly even losing money on the project
if you really blow it.
A Time & Materials contract is similar to being an
hourly employee, at least in that you are paid a set rate
for the actual hours that you worked, and you may be
reimbursed for specific expenses such as hardware that you
purchase for the company.
You don't work, you don't get paid (see my notes about
unpaid holidays for more on this). If you are efficient, you
might make less money overall, but if scope-creep enters in,
you still get paid for all of your work. (Scope-creep is
when you allow the defined set of boundaries for the work to
be expanded. A telltale sign this is happening is when you
hear someone say, “As long as we're doing that, let's...”.)
