Freelance Hourly Rate Calculator
Work out the hourly rate you need to charge as a freelancer once unbillable time, business costs, taxes and unpaid holiday are accounted for.
How to use this calculator
- 1Enter the take-home income you want — think of it as the salary you are replacing.
- 2Be honest about weeks off and billable percentage. Optimism here is the main reason freelancers underprice.
- 3Add up your real annual business costs, including the ones that feel small.
- 4Use the table at the bottom to see how sensitive your rate is to billable utilisation.
How the calculation works
Rate = (Target / (1 − t) + Costs) / (Weeks worked × Hours per week × Billable %)- Target
- The income you want after tax
- t
- Effective tax and contributions rate as a decimal
- Costs
- Annual business expenses
- Billable %
- Share of worked hours you can actually invoice
The calculation runs backwards from what you want to keep. Dividing by (1 − t) grosses the target up to the pre-tax profit needed.
Business costs are added to profit, not deducted from it, because the revenue has to cover both.
Dividing by billable hours rather than worked hours is the step most people miss, and it is usually worth 35–45% on the rate.
Worked example
Targeting $70,000 take-home with 65% billable time
- 1.Working weeks: 52 − 6 = 46. Total hours: 46 × 40 = 1,840.
- 2.Billable hours: 1,840 × 65% = 1,196.
- 3.Pre-tax profit needed: 70,000 ÷ (1 − 0.30) = $100,000.
- 4.Revenue needed: 100,000 + 8,000 = $108,000.
- 5.Rate: 108,000 ÷ 1,196 = $90.30 an hour, or about $722 for an eight-hour billable day.
Result: About $90 an hour
Why a freelance rate isn’t just a salary divided by hours
Converting a target salary into an hourly rate by dividing by a standard work year — roughly 2,080 hours — gives a number that looks reasonable but is quietly wrong for anyone who isn’t a salaried employee. That calculation assumes every hour is paid, taxes are handled separately by an employer, and holidays cost nothing. None of those are true for a freelancer, which is why a sustainable freelance rate typically runs several times higher than the naive salary-divided-by-hours figure.
The gap isn’t freelancers overcharging — it’s the value of things an employer normally absorbs quietly: paid leave, benefits, equipment, and both halves of payroll taxes, all of which a freelancer has to fund out of the rate they charge.
The costs employment normally hides
A freelance rate has to cover several categories of cost that a salaried paycheck never has to think about.
- Unbillable time — sales calls, proposals, invoicing, admin and professional development all take real hours but produce no invoice. Even experienced freelancers often bill well under the total hours they work.
- Unpaid leave — holidays, sick days and the gaps between contracts aren’t paid unless the rate is set high enough to cover them.
- Self-employment tax — in the US, a self-employed worker pays both the employee and employer portions of Social Security and Medicare taxes — roughly double what a salaried employee sees deducted from their own paycheck. Comparable extra contributions apply in many other countries.
- Business costs — software, insurance, equipment, a home office and accounting fees are all expenses a salaried employee’s company would normally cover.
- Lost benefits — employer retirement contributions, health insurance and paid sick leave all have real monetary value that disappears when going independent.
Hourly, day rate, or project — how freelancers price work
The same underlying value can be quoted in different ways, each suited to a different kind of work.
- Hourly — simplest for short, unpredictable engagements, but it caps income to time and can penalise efficiency, since working faster only shrinks the invoice.
- Day rate — common for longer engagements; it simplifies billing and discourages clients from tracking minutes, while still being straightforwardly tied to time.
- Project or value-based pricing — charges for an outcome rather than time spent, which rewards expertise and speed but requires confidently scoping the work up front.
Setting — and raising — a rate
A defensible rate comes from working the numbers rather than guessing, and revisiting them periodically.
- 1Start from the income needed — not an old payslip — freelancing replaces a salary plus its hidden benefits, not just the wage.
- 2Track actual billable hours — for a few weeks before assuming a percentage — nearly everyone overestimates how much of their time is billable until they measure it.
- 3Add real, itemised business costs — rather than a rough guess, including the small recurring ones that are easy to forget.
- 4Revisit the rate regularly — at least once a year, and whenever demand, experience or cost of living shifts meaningfully — rates that made sense at the start of a freelance career rarely still fit years later.
The trade-off freelancers are actually pricing
A freelance rate isn’t only compensation for time and skill — it’s also compensation for risk and flexibility. Independence brings control over schedule and client selection that a salaried role usually doesn’t offer, but it also removes the income stability, employer-funded benefits and legal protections that come with employment. A rate that only matches an equivalent salary, without accounting for that trade, tends to leave a freelancer worse off than staying employed.
What this assumes, and where it stops
Assumptions
- You bill by the hour and can actually sell all your billable capacity.
- The tax rate is your effective rate on profit, not a marginal band.
- Business costs are fully deductible before tax.
Limitations
- Tax treatment of self-employment varies enormously by country and business structure. The single effective rate here is a simplification — speak to an accountant for your situation.
- Does not account for late payment, bad debt, or the gaps between contracts, all of which argue for a higher rate.
- Value-based and fixed-price work can earn far more than an hourly rate suggests; this calculator sets a floor, not a ceiling.
Common questions
Why is my freelance rate so much higher than my old salary divided by 2,080?
Because that division assumes every hour is paid, there is no tax to pay yourself, no equipment to buy, and holidays are free. In reality a freelancer bills perhaps 60–70% of their hours, funds their own leave, and pays both halves of employment taxes. A rate two to three times the naive figure is normal, not greedy.
What billable percentage is realistic?
Established freelancers with steady clients often reach 65–75%. Newer freelancers spending heavily on business development are frequently below 50%. Track your own hours for a month before trusting an estimate — almost everyone overestimates.
Should I quote a day rate or an hourly rate?
Day rates are simpler for longer engagements and discourage clients from counting minutes. Hourly suits short, fragmented work. The underlying number should be the same: this calculator shows both, with the day rate based on eight billable hours.
Sources
- Self-employed tax obligations — US Internal Revenue Service
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
Related calculators
Tools people commonly use alongside the freelance hourly rate calculator.