Freelance Hourly Rate Calculator
* This rate ensures you cover your taxes, expenses, and reach your net income goal.
How to Calculate Your Freelance Hourly Rate
Setting the right price for your services is one of the most challenging aspects of freelancing. Charge too little, and you burn out while struggling to pay bills. Charge too much without justification, and you may lose potential clients. This Freelance Hourly Rate Calculator uses a bottom-up approach to determine exactly what you need to charge to sustain your lifestyle and business.
Why You Can't Just Use Your Old Salary
A common mistake new freelancers make is taking their previous annual salary and dividing it by 2,080 (the standard number of working hours in a year: 40 hours x 52 weeks). This math is fundamentally flawed for self-employed individuals for two main reasons:
- Non-Billable Time: As an employee, you get paid for coffee breaks, meetings, and administrative work. As a freelancer, you only get paid when you are actively working on a client project. Marketing, invoicing, and email management are unpaid tasks.
- Overhead and Taxes: Employers pay a portion of your payroll taxes and cover costs like health insurance, hardware, and software. As a freelancer, 100% of these costs fall on you.
Key Factors in the Calculation
1. Target Net Income
This is your "take-home" pay. It's the money you use for personal rent, food, savings, and lifestyle. Be realistic about what you need to live comfortably, not just survive.
2. Business Expenses (Overhead)
Freelancing isn't free. You need to account for:
- Professional software subscriptions (Adobe CC, Microsoft Office, CRM tools).
- Hardware upgrades (Laptops, cameras, monitors).
- Home office utilities or co-working space fees.
- Health insurance premiums.
- Accountant and legal fees.
3. The Tax Wedge
Self-employment tax can be a shock. In many jurisdictions, you are responsible for both the employer and employee portion of social security and medicare taxes, plus income tax. A safe rule of thumb is to set aside 25-30% of your gross income, but this varies significantly by location.
4. Billable Hours Efficiency
It is rarely sustainable to bill 40 hours a week. Most successful freelancers average between 20 to 30 billable hours per week. The rest of the time is spent on business development, administration, and professional development.
Interpreting Your Results
Once you calculate your minimum hourly rate using the tool above, treat it as your floor, not your ceiling. This is the bare minimum you need to charge to meet your financial goals. Depending on your experience level, niche demand, and the value you provide, you should aim to charge a premium above this calculated rate to ensure business profit and growth.