Freelance Hourly Rate Calculator

How to use this freelance rate calculator

1. Set your income goal. Enter the take-home pay you want for a year after tax: the money you actually live on.
2. Add your tax rate. Use your total rate on profit, including income tax and any self-employment or social contributions. The self-employment tax calculator can help you estimate it.
3. Edit the expenses. Enter each cost per month or per year, delete what you don't pay and add what's missing.
4. Describe your working year: hours and days per week, time off, and the share of your time you can bill.
5. Pick a buffer of 10–20% for slow months and late payers. Read off your rate, day rate and revenue targets, and use Copy link to save the scenario.

The freelance hourly rate formula

Profit before tax = take-home ÷ (1 − tax rate)
Gross revenue = profit before tax + business expenses
Billable hours = (52 − weeks off) × hours per week × billable %
Minimum rate = gross revenue ÷ billable hours
Recommended rate = minimum rate × (1 + buffer)

A worked example

Say you want to take home $60,000 a year and expect 25% of your profit to go on tax. You need a profit of $60,000 ÷ 0.75 = $80,000, of which $20,000 is tax. Add $18,000 of yearly expenses (software, equipment, insurance, an accountant, a coworking desk, health insurance, retirement saving, phone and training) and you need $98,000 of revenue.

Now the time. Twenty vacation days, ten public holidays and five sick days make 35 days, or 7 weeks on a five-day week. That leaves 45 working weeks of 40 hours, or 1,800 hours. If 60% of that is billable, you can invoice 1,080 hours.

$98,000 ÷ 1,080 hours = $90.74 an hour. That is your floor. Add a 10% buffer and you get $99.81, so you would quote $100 an hour, or about $800 for an 8-hour day. To stay on track you need to invoice roughly $2,400 in every working week.

Why freelancers must charge more than an employee's hourly pay

To take home the same $60,000 as an employee at the same tax rate, you would need a salary of $80,000. Over 2,080 paid hours (40 a week, all year) that is $38.46 an hour. The freelancer in the example needs $90.74, about 2.4 times as much, for the same take-home pay. That isn't greed. You are now carrying costs an employer used to cover:

• Paid time off. Employees are paid for holidays and sick days. You earn nothing on those days, so the rest of the year has to pay for them.
• Unbilled work. Proposals, sales calls, invoicing, bookkeeping and learning are part of the job, but no client pays for those hours directly.
• Overheads and benefits. Equipment, software, insurance, health cover and retirement contributions used to be someone else's line items. In many countries employers also pay payroll taxes on top of salary; the self-employed pay their own.

Dividing your old salary by 2,080 is the quickest way to underprice yourself. If you are comparing a job offer with contracting, the salary to contract rate calculator runs the numbers from the other direction.

Choosing a realistic billable percentage

Billable percentage, or utilization, is the share of your working hours that ends up on an invoice. It moves your rate more than any other input, and it is the one people are most optimistic about. Nobody bills 100%: finding work, admin, invoicing and keeping your skills current all take time.

• Just starting out: plan on 40–50%. With no repeat clients, finding work takes a big part of the week.
• Established, with repeat clients: 60–75% is a reasonable target.
• Above 80%: possible for a few busy months, but it leaves no time for marketing, so the pipeline dries up and the next quarter suffers.

The best number is your own. Track every working hour for a month, client work or not, and divide the billable hours by the total. The table in the calculator shows how much it matters: in the example, dropping from 60% to 50% billable lifts the minimum rate from $90.74 to $108.89.

When to move to day rates, project pricing or value pricing

Your hourly rate is the foundation of your pricing. It doesn't have to be what clients see.

• Day rates suit work where a client books your whole day, such as on-site or embedded team work. They end the clock-watching over every 15 minutes, and you don't lose out for working quickly.
• Project pricing suits well-defined work you have done before. Estimate the hours, multiply by your recommended rate, add contingency for unknowns and quote one number. The faster you get, the more you earn per hour. The reality check above converts hours into a project price, and the project cost estimator helps you build the estimate.
• Value pricing ties the fee to what the result is worth to the client: revenue gained, costs saved or risk removed. It works when the outcome is measurable and large compared with your fee. Your minimum rate times the expected hours is still your floor.

How to raise your rates with existing clients

• Start with new clients. Quote every new enquiry at the new rate. It tests the market without risking current work.
• Give notice in writing, 30 to 60 days ahead, so clients can budget for it.
• Pick a natural moment: a new year, contract or project, not the middle of a deliverable.
• Keep it short. State the new rate and the date it applies, give one line on why (more experience, more demand, higher costs) and don't apologise.
• Offer key clients a bridge, such as finishing the current project at the old rate or locking in a rate for a longer commitment.
• Do the math on losing someone. After a 15% increase you could lose 13% of your billable hours and still earn the same, with that time back.

Common mistakes

• Dividing your old salary by 2,080. It ignores time off, unbilled hours and every cost your employer used to pay.
• Assuming you will bill 40 hours a week. Plan with a realistic billable percentage instead.
• Confusing revenue with take-home pay. Tax and expenses come out of every invoice before you see a cent.
• Forgetting health cover, retirement and equipment. They are easy to leave out until the bill arrives.
• Copying other freelancers' rates. Their costs, goals and hours aren't yours. Use market rates as a sense check, not a starting point.
• Never revisiting the number. Re-run it every year and whenever your costs or hours change.

Frequently asked questions