Your Minimum Hourly Rate
How to Calculate Your Freelance Hourly Rate
Determining the right hourly rate is one of the most challenging aspects of freelancing. Unlike a salaried employee, your hourly rate must cover not just your salary, but also your business expenses, taxes, health insurance, and unpaid time spent on administration. This Freelance Hourly Rate Calculator helps you work backward from your desired lifestyle to find the exact number you need to charge clients.
The "Billable Hours" Trap
New freelancers often make the mistake of dividing their desired salary by 2,080 (40 hours x 52 weeks). This calculation is dangerous because it assumes you will be billable 100% of the time. In reality, you will spend significant time on:
- Marketing and finding new clients
- Invoicing and accounting
- Email and communication
- Professional development
Most successful freelancers only bill between 20 to 30 hours per week. Our calculator allows you to input a realistic "Billable Hours per Week" metric to ensure you aren't undercharging.
Accounting for Overhead and Taxes
When you are employed, your employer pays a portion of your taxes (FICA) and covers overhead like software licenses and office space. As a freelancer, these costs fall on you. A general rule of thumb is to set aside 25-30% of your gross income for taxes.
Additionally, you must factor in your Cost of Doing Business (CODB). This includes your internet, website hosting, Adobe Creative Cloud or other software subscriptions, hardware upgrades, and liability insurance. If you don't factor these into your hourly rate, you are essentially paying for your client's projects out of your own pocket.
Why Value-Based Pricing Matters
While this calculator gives you a minimum baseline hourly rate, you should aim to move toward value-based pricing as you gain experience. Value-based pricing focuses on the revenue or value you generate for the client rather than the time you spend. However, knowing your calculated minimum hourly rate is essential for creating fixed-price project proposals to ensure you remain profitable.