Freelancer Hourly Rate Calculator
How to Calculate Your Freelance Rate
Determining your hourly or project rate is one of the most challenging aspects of transitioning from employment to freelancing. Unlike a salaried position where taxes, insurance, and overhead are handled by the employer, a freelancer must account for all non-billable costs within their rate.
1. The "Billable Hours" Trap
A common mistake new freelancers make is dividing their desired annual salary by 2,080 (the standard 40-hour work week x 52 weeks). This math is flawed because freelancers cannot bill for every hour they work. You must account for:
- Admin & Accounting: Invoicing, bookkeeping, and taxes.
- Marketing & Sales: Finding new clients, pitching, and networking.
- Skill Development: Courses and learning new tools.
Most successful freelancers only bill 20 to 30 hours per week. This calculator adjusts for this by asking for your "Billable Hours Per Week" rather than total work hours.
2. Accounting for Overhead and Taxes
To maintain a specific lifestyle (your Net Annual Income), your Gross Revenue must be significantly higher. This calculator uses the following logic to ensure your take-home pay matches your expectations:
Formula: Required Gross Revenue = (Target Net Income / (1 – Tax Rate)) + Expenses
By treating expenses as a pre-tax deduction (in simplified terms for estimation) and inflating the net income to cover taxes, we find the total amount you need to invoice clients annually.
3. Vacation and Sick Days
Freelancers do not get paid time off (PTO). If you plan to take 2 weeks of vacation, 1 week for holidays, and account for 1 week of potential sick days, you are only earning revenue for 48 weeks of the year. Your hourly rate must be high enough during those 48 weeks to cover the 4 weeks of downtime.
Why Your Rate Seems High
If the result looks higher than you expected, remember that you are operating a business. Clients pay a premium for flexibility and to avoid the overhead of hiring a full-time employee (which typically costs them 1.3x to 1.5x the employee's salary). Do not undervalue your services; use this data to confidently negotiate your fees.