Hourly Rate Calculator
Convert your annual salary or income goals into a precise hourly rate.
How to Calculate Your Hourly Rate Effectively
Whether you are a freelancer setting your first quote or a full-time employee trying to understand your true value, calculating your hourly rate is a fundamental financial skill. The math seems simple, but many forget to account for overhead and non-billable time.
To calculate a basic hourly rate from a salary, the standard formula is:
Hourly Rate = Total Annual Income / (Weeks Worked × Hours Per Week)
Key Factors for Freelancers
If you are self-employed, your hourly rate must cover more than just your take-home pay. You must include:
- Overhead: Software subscriptions, office rent, internet, and equipment.
- Taxes: Self-employment taxes and income tax.
- Non-billable Hours: Time spent on marketing, invoicing, and admin work that you can't charge a client for.
- Benefits: Health insurance and retirement contributions that an employer would typically provide.
Example Calculation
If you want a net annual income of $60,000, have $5,000 in annual expenses, work 48 weeks a year (allowing for 4 weeks vacation), and work 35 billable hours per week:
- Total required: $65,000
- Total hours: 48 weeks × 35 hours = 1,680 hours
- Hourly Rate: $65,000 / 1,680 = $38.69 per hour
Billable vs. Actual Hours
It is important to distinguish between hours spent "at work" and hours you can actually bill. Most freelancers only bill for about 60% to 70% of their actual working time. If you work 40 hours a week but only 25 are billable, you must base your calculation on the 25 billable hours to reach your income goals.