How to Calculate Your Freelance Hourly Rate
Setting the right hourly rate is one of the most critical challenges for new and experienced freelancers alike. If you charge too little, you risk burnout and financial instability. If you charge too much without justification, you might struggle to attract clients. This Freelance Hourly Rate Calculator helps you work backward from your financial goals to determine exactly what you need to charge.
The Formula Explained
Many employees make the mistake of taking their previous salary and dividing it by 2,080 (the standard number of work hours in a year). This approach is flawed for freelancers because it ignores overhead, taxes, and non-billable time.
Our calculator uses a comprehensive "Bottom-Up" approach:
- Net Income Goal: The amount of money you want to take home after expenses and taxes.
- Business Expenses: Costs like software subscriptions, hardware, internet, coworking spaces, and insurance.
- Taxes: As a freelancer, you are responsible for the full self-employment tax burden. We factor this in so your net income stays true.
- Billable Efficiency: We adjust for the weeks you take off (vacation and sick time) and the realistic hours you can actually bill clients.
Why Your Rate Seems Higher Than a Salary
When you see the result from the calculator, it might look higher than the hourly equivalent of a full-time job. This is normal and necessary. A full-time employer covers health insurance, paid time off, office equipment, and the employer portion of taxes. As a freelancer, you must build these costs into your hourly rate.
Adjusting for Market Value
Once you have your "Minimum Hourly Rate" from the calculator above, compare it to the market rates for your specific industry and experience level. If your calculated rate is significantly lower than the market average, you have room to increase your profit margin. If it is higher, you may need to reduce expenses or increase your billable hours until you can command higher fees.
Frequently Asked Questions
What is a good billable hours target?
For most creative and technical freelancers (writers, developers, designers), 20 to 30 billable hours per week is considered healthy. This leaves 10-20 hours for finding new work, managing invoices, and professional development.
How much should I set aside for taxes?
While this varies by country and state, a safe rule of thumb for US-based freelancers is to set aside 25-30% of your gross income for taxes. Always consult with a tax professional for your specific situation.