Freelance Hourly Rate Calculator
Minimum Hourly Rate:
Total Annual Gross Revenue Needed:
Total Annual Billable Hours:
How to Calculate Your Freelance Hourly Rate
Setting your freelance rate is one of the most critical steps in building a sustainable business. Many freelancers make the mistake of simply matching what their previous employer paid them hourly, forgetting that as a freelancer, you are responsible for your own taxes, equipment, health insurance, and non-billable time.
The Formula for Freelance Success
Our calculator uses a comprehensive formula to ensure you don't undercharge. The logic follows these steps:
- Step 1: Determine Total Costs. We add your desired net income to your annual business expenses (Monthly Expenses × 12).
- Step 2: Account for Taxes. We adjust your target income upwards to account for self-employment and income taxes.
- Step 3: Calculate Billable Time. We subtract vacation and sick weeks from the year (52 weeks) and multiply by your billable hours per week.
- Step 4: The Final Division. We divide the total gross revenue needed by the total billable hours.
Example Calculation
Suppose you want to take home $60,000 per year. You have $400 in monthly expenses ($4,800/year). You want 4 weeks of vacation and plan to bill 20 hours per week (leaving time for admin). With a 25% tax rate:
1. Total Needed (Pre-tax) = ($60,000 + $4,800) / (1 – 0.25) = $86,400.
2. Total Billable Weeks = 52 – 4 = 48 weeks.
3. Total Billable Hours = 48 * 20 = 960 hours.
4. Hourly Rate = $86,400 / 960 = $90.00/hour.
Factors Often Forgotten
When using this calculator, consider these often-overlooked freelance costs:
- Software Subscriptions: Adobe Creative Cloud, CRM tools, and accounting software.
- Hardware: Saving for a new laptop every 3 years.
- Insurance: Health, disability, and professional liability insurance.
- Retirement: Since you have no employer matching, you must fund your own 401k or IRA.