Yup! My first piece of advice would be ‘if you’re offered a choice, do not bill a full-project rate for games writing’ – go for something time-based.
There are occasionally times when a flat rate can work to your advantage, but it usually requires you and/or the people commissioning you to have a good understanding of the project size and scope and likely time to execute.
More often, what happens especially to starting freelancers is that they significantly underestimate how much time will turn out to be required. (Obviously, if you’re used to doing freelance client work in a different field you may already have some sense of the overhead associated with communicating with stakeholders, making revisions, etc., so that may help you with making good estimates. But as a general piece of advice – I try to avoid this except where the client is asking for a very very clearly scoped size of work. And I severely side-eye the fact that this project is defined in terms of word count, unless it’s a thing where they’re basically just giving you a structure and saying ‘write words to go here’. Otherwise, they’re probably implicitly asking for a lot of hidden work to support interactivity that would not be well represented by the word count.)
So, USD per hour is definitely the option I’d pick if it were me.
Then: how much should the hourly be?
I’ll start with UK resources on this both because that’s the market I currently know best and because I know you’re here too.
This Writers Guild of Great Britain doc has some numbers for UK-based people, and their day-rate ranges sound more or less accurate to me based on other experiences I’ve had, both hiring and being hired. Both the experience of the writer and the size and budget of the hiring company affect how much you can charge. I’ve seen writer dailies that go lower – into the range of £250 – for smaller studios.
Meanwhile, if you’d like to benchmark freelance rates vs employment salaries, this spreadsheet contains a decent amount of recentish UK game industry pay data; obviously, if using a full-time salary as a basis of calculation, you’d want to apply appropriate multipliers to figure out what you should ask for freelance contract work, and the general principles here are the same as for any other kind of freelancing (like motion graphics).
Then: you’re talking about a contract in USD. US game dev rates are higher than UK game dev rates, as a rule – though the disparity doesn’t make as large a difference in quality of life as you might think because US people are usually paying for things like health care in ways that UK people aren’t.
Also, the dollar is up right now against the pound. So, between those factors, it’s a good time to be a UK person doing remote work for US companies. This sheet has some global as opposed to UK-based salary data, if you want to look at US baselines to think about US freelancing.
Finally, I tend to apply some multipliers of my own to decide what a job is worth to me. That’s an old post but the basic thinking holds.
Anyway – all that isn’t a number – I don’t have enough information to suggest what to charge in this case – but I hope it provides some help in figuring out what your number should be.