Transitioning from a salaried position to freelancing requires a fundamental shift in how you view your income. You are no longer just an employee; you are a business entity responsible for your own taxes, insurance, equipment, and downtime. This calculator helps you work backward from your financial goals to find the exact rate you need to charge to sustain your lifestyle.
Key Components of the Calculation
Desired Annual Net Salary: This is the take-home amount you want to keep after business expenses and taxes have been paid.
Business Expenses: Include software subscriptions, hardware, office rent, marketing, health insurance, and accounting fees.
Billable Hours vs. Working Hours: As a freelancer, not every hour is billable. You spend time on admin, invoicing, and lead generation. Most full-time freelancers average 20–30 billable hours per week.
Tax Provision: Unlike employees, freelancers pay the full portion of self-employment taxes. Setting aside 25-30% is a common baseline.
Example Calculation
If you want to earn a net salary of $80,000, have $10,000 in annual expenses, take 4 weeks of vacation, and work 25 billable hours per week with a 25% tax rate:
Total required before tax: ($80,000 + $10,000) / (1 – 0.25) = $120,000.
Why You Should Charge More Than Your "Employee Rate"
A common mistake is taking your previous salary and dividing it by 2,080 (the standard yearly hours for a 40-hour week). This results in a rate that is too low because it doesn't account for unpaid holidays, sick leave, or the cost of doing business. Always factor in a "buffer" for professional development and periods between contracts.
function calculateFreelanceRate() {
var salary = parseFloat(document.getElementById('desiredSalary').value);
var expenses = parseFloat(document.getElementById('annualExpenses').value);
var hoursPerWeek = parseFloat(document.getElementById('billableHours').value);
var weeksOff = parseFloat(document.getElementById('weeksOff').value);
var taxRate = parseFloat(document.getElementById('taxRate').value);
if (isNaN(salary) || isNaN(expenses) || isNaN(hoursPerWeek) || isNaN(weeksOff) || isNaN(taxRate)) {
alert("Please fill in all fields with valid numbers.");
return;
}
// Validation for logic
if (weeksOff >= 52) {
alert("Weeks off cannot be 52 or more.");
return;
}
if (taxRate >= 100) {
alert("Tax rate must be less than 100%.");
return;
}
// Step 1: Total Gross Revenue Needed
// Equation: (Net Salary + Expenses) / (1 – (TaxRate/100))
var grossRevenueNeeded = (salary + expenses) / (1 – (taxRate / 100));
// Step 2: Total Annual Billable Hours
var workingWeeks = 52 – weeksOff;
var totalBillableHours = workingWeeks * hoursPerWeek;
// Step 3: Hourly Rate
var hourlyRate = grossRevenueNeeded / totalBillableHours;
// Display results
var resultBox = document.getElementById('freelance-result-box');
var rateDisplay = document.getElementById('finalRateDisplay');
var breakdownDisplay = document.getElementById('breakdownText');
rateDisplay.innerHTML = "$" + hourlyRate.toFixed(2);
breakdownDisplay.innerHTML = "To reach a net profit of $" + salary.toLocaleString() + " after paying $" + expenses.toLocaleString() + " in expenses and " + taxRate + "% in taxes, you need to bill approximately $" + hourlyRate.toFixed(2) + " for each of your " + totalBillableHours.toLocaleString() + " annual billable hours.";
resultBox.style.display = 'block';
// Smooth scroll to result
resultBox.scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}