Determining the correct hourly rate is one of the most critical challenges for freelancers, consultants, and contractors. Unlike a salaried employee, your rate must cover not just your take-home pay, but also your taxes, business expenses, and unpaid time off. Undercharging can lead to burnout and financial instability, while overcharging without justification can cost you clients.
The Formula Behind the Calculation
This calculator uses a "Reverse Income" method to determine your rate. Instead of guessing a number, we start with your desired lifestyle and work backward.
Desired Net Income: The amount of money you want to put in your pocket after all obligations are met.
Business Expenses: Costs such as software subscriptions, hardware, internet, co-working space fees, and professional insurance. These are deducted from your gross revenue before taxes in most jurisdictions (check with a local accountant).
Tax Rate: Self-employed individuals often pay higher effective tax rates due to self-employment taxes. It is crucial to estimate this accurately (often 20-30% in the US).
Billable Hours: You might work 40 hours a week, but you cannot bill for all of them. Admin tasks, marketing, and emails are "non-billable." A healthy freelance target is often 25-30 billable hours per week.
Why You Should Charge More Than You Think
New freelancers often make the mistake of dividing their previous annual salary by 2,080 (the standard number of work hours in a year). This is a mistake. As a freelancer, you do not get paid holidays, sick leave, health insurance contributions, or retirement matching. To compensate for these lost benefits and the instability of contract work, your hourly rate should typically be 1.5x to 2x higher than the hourly equivalent of a salaried role.
Adjusting for Market Value
While this calculator tells you the minimum you need to charge to meet your financial goals, it does not account for market value. If the calculator suggests $50/hour but the market rate for your skills is $100/hour, you should charge $100. Always use the higher of the two numbers: your calculated minimum or the market rate.
function calculateFreelanceRate() {
// 1. Get input values
var desiredIncome = parseFloat(document.getElementById("f_desired_income").value);
var expenses = parseFloat(document.getElementById("f_expenses").value);
var taxRate = parseFloat(document.getElementById("f_tax_rate").value);
var billableHoursWeek = parseFloat(document.getElementById("f_billable_hours").value);
var weeksOff = parseFloat(document.getElementById("f_weeks_off").value);
// 2. Validate inputs
if (isNaN(desiredIncome) || isNaN(expenses) || isNaN(taxRate) || isNaN(billableHoursWeek) || isNaN(weeksOff)) {
alert("Please fill in all fields with valid numbers.");
return;
}
if (billableHoursWeek = 1) {
alert("Tax rate must be less than 100%.");
return;
}
var taxableIncomeNeeded = desiredIncome / (1 – taxDecimal);
var totalRevenueNeeded = taxableIncomeNeeded + expenses;
var workingWeeks = 52 – weeksOff;
if (workingWeeks <= 0) {
alert("Weeks off cannot equal or exceed 52.");
return;
}
var totalBillableHours = billableHoursWeek * workingWeeks;
var hourlyRate = totalRevenueNeeded / totalBillableHours;
var weeklyRevenueTarget = totalRevenueNeeded / workingWeeks;
// 4. Update UI
// Helper to format currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2
});
document.getElementById("res_hourly").innerHTML = formatter.format(hourlyRate);
document.getElementById("res_revenue").innerHTML = formatter.format(totalRevenueNeeded);
document.getElementById("res_hours").innerHTML = Math.round(totalBillableHours).toLocaleString();
document.getElementById("res_weekly").innerHTML = formatter.format(weeklyRevenueTarget);
document.getElementById("f_result").style.display = "block";
}