Desired take-home pay after business expenses and taxes.
Software, equipment, insurance, coworking, etc.
Percentage to set aside for taxes (Self-employment tax + Income tax).
Percentage of time spent on admin, marketing, and sales.
Days you plan to take off (including public holidays).
Unexpected time off for illness or emergencies.
Minimum Daily Rate
$0.00
To achieve your net income target
Billable Days Per Year
0
Actual days you earn money
Gross Revenue Target
$0.00
Total earnings before tax/expenses
How to Calculate Your Freelance Day Rate Accurately
Calculating a freelance day rate is more complex than simply dividing your desired salary by the days of the year. Unlike a salaried employee, a freelancer must account for unpaid time, business overhead, self-employment taxes, and the lack of paid benefits like sick leave or vacation.
The "Reverse Engineering" Formula
The most effective way to determine your rate is to start with your financial goals and work backward. This ensures that every billable hour you work contributes enough to cover your non-billable time and expenses.
Step 1: Define Target Net Income. This is the cash you want in your pocket for personal living expenses and savings.
Step 2: Add Overhead. Add all business costs (software subscriptions, hardware, internet, office space).
Step 3: Account for Taxes. Freelancers often pay a higher effective tax rate due to self-employment taxes. Gross up your needed revenue to cover this liability.
Step 4: Determine Billable Capacity. You cannot bill 365 days a year. Subtract weekends, holidays, vacation, and sick days. Then, subtract the time spent on administration, marketing, and sales (often 20-30% of work time).
Why Freelancers Undercharge
Many new freelancers simply take their previous annual salary and divide it by 260 (working days in a year). This is a critical mistake. If you earned $80,000 as an employee, your employer likely paid another $20,000+ in benefits, payroll taxes, and equipment. As a freelancer, you bear these costs.
Furthermore, an employee is paid for 40 hours a week regardless of productivity. A freelancer is only paid for output or billable hours. If you spend 10 hours a week finding clients, those are 10 hours you aren't paid for directly. Your billable rate must subsidize this administrative time.
Understanding Non-Billable Utilization
The "Non-Billable Work (%)" input in the calculator above is crucial. Most successful freelancers only bill for 60-75% of their working hours. The rest is spent on:
Business development and pitching
Invoicing and bookkeeping
Continuing education and skill building
Website maintenance and marketing
If you ignore this factor, you will likely work significantly more hours than intended just to meet your income goals.
Common Freelance Rate Strategies
While this calculator helps you find your minimum viable rate, market factors also play a role.
Cost-Plus Pricing: The method used here. Calculates costs + desired profit to find a rate.
Market-Based Pricing: Setting rates based on what peers with similar experience charge.
Value-Based Pricing: Charging based on the value or revenue you generate for the client, rather than the time it takes you.
Use the result from this calculator as your "floor"—the lowest rate you can accept without compromising your financial stability. Ideally, your market rate should be higher, providing a profit margin for business growth.
function calculateDayRate() {
// 1. Get Input Values
var targetIncome = parseFloat(document.getElementById('targetIncome').value);
var annualExpenses = parseFloat(document.getElementById('annualExpenses').value);
var taxRate = parseFloat(document.getElementById('taxRate').value);
var nonBillablePercent = parseFloat(document.getElementById('nonBillable').value);
var vacationDays = parseFloat(document.getElementById('vacationDays').value);
var sickDays = parseFloat(document.getElementById('sickDays').value);
// 2. Validate Inputs
if (isNaN(targetIncome) || targetIncome < 0) {
targetIncome = 0;
}
if (isNaN(annualExpenses) || annualExpenses < 0) {
annualExpenses = 0;
}
if (isNaN(taxRate) || taxRate < 0) {
taxRate = 0;
}
if (isNaN(nonBillablePercent) || nonBillablePercent < 0) {
nonBillablePercent = 0;
}
if (isNaN(vacationDays) || vacationDays < 0) {
vacationDays = 0;
}
if (isNaN(sickDays) || sickDays Gross = Net / (1 – TaxRate)
var taxFactor = 1 – (taxRate / 100);
if (taxFactor <= 0) taxFactor = 0.01; // Prevent division by zero or negative
var grossRevenue = totalNetNeeded / taxFactor;
// 4. Calculate Billable Time
var totalDaysInYear = 365;
var weekends = 52 * 2;
var standardWorkDays = totalDaysInYear – weekends; // ~261 days
var availableDays = standardWorkDays – vacationDays – sickDays;
// Account for non-billable time (admin, marketing)
// If 25% is non-billable, then 75% is billable
var billableRatio = 1 – (nonBillablePercent / 100);
var billableDays = availableDays * billableRatio;
// Safety check to prevent division by zero or negative days
if (billableDays < 1) {
billableDays = 1;
}
// 5. Calculate Day Rate
var dayRate = grossRevenue / billableDays;
// 6. Display Results
document.getElementById('results').style.display = 'block';
// Format Currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
maximumFractionDigits: 2
});
document.getElementById('displayDayRate').innerText = formatter.format(dayRate);
document.getElementById('displayBillableDays').innerText = Math.round(billableDays);
document.getElementById('displayGrossRevenue').innerText = formatter.format(grossRevenue);
}