Freelance Hourly Rate Calculator
Calculate your ideal billable rate based on desired income, expenses, and realistic working hours.
Your Minimum Hourly Rate:
How to Calculate Your Freelance Hourly Rate
Setting your rate is one of the most critical steps in running a successful freelance business. Many new freelancers make the mistake of simply dividing a corporate salary by 2,080 hours (40 hours x 52 weeks). However, this fails to account for taxes, overhead, and the reality that you cannot bill for every hour you work.
The Formula Behind the Calculation
To find a sustainable rate, we use the following logic:
- Gross Income Required: Since you have to pay taxes and business expenses, your gross income must be significantly higher than your target take-home pay. Formula: (Target Income + Expenses) / (1 – Tax Rate).
- Available Billable Days: We start with 260 potential working days (52 weeks x 5 days) and subtract vacation weeks and public holidays/sick days.
- Real-World Billable Hours: As a freelancer, you spend time on marketing, invoicing, and admin. Most freelancers find they can only bill for 4 to 6 hours in an 8-hour workday.
A Realistic Example
Imagine you want to take home $60,000. You have $4,000 in annual expenses (software, laptop, internet) and a 25% tax burden. To achieve this, you actually need a gross revenue of approximately $85,333.
If you take 3 weeks of vacation and 10 days of holidays, you have 235 working days. At 6 billable hours per day, that's 1,410 billable hours per year. To reach your goal, your rate must be approximately $60.52 per hour.
Tips for Increasing Your Rate
If the calculated rate feels too high for your current market, consider these strategies:
- Value-Based Pricing: Move away from hours and charge based on the value or ROI you provide to the client.
- Reduce Overhead: Audit your subscriptions and business costs to lower your required gross revenue.
- Increase Billable Efficiency: Use automation tools for admin tasks to free up more hours for billable client work.