Determine your ideal freelance hourly rate to ensure profitability and cover all your business expenses. This calculator helps you factor in desired income, business costs, billable hours, and taxes.
How to Calculate Your Freelance Rate
As a freelancer, setting the right hourly rate is crucial for a sustainable and profitable business. It's not just about what you want to earn; it's about covering all your costs, accounting for non-billable time, and ensuring you take home the income you deserve after taxes.
Key Factors to Consider:
Desired Annual Income: This is the amount of money you want to earn for yourself after all business expenses and taxes are paid. Be realistic about your personal financial needs.
Annual Business Expenses: Include everything you spend to run your freelance business. This can encompass software subscriptions, hardware, office supplies, insurance, marketing, professional development, internet, phone bills, and even a portion of your home office expenses.
Paid Time Off: Freelancers don't get paid holidays or vacation days automatically. You need to factor in the time you'll take off for rest and personal reasons. The calculator converts your desired days off into hours.
Sick Days: Just like paid time off, you need to account for days you might be unwell and unable to work.
Work Hours Per Week: This is the number of hours you realistically expect to work and be available to clients each week.
Estimated Annual Tax Rate: As a self-employed individual, you're responsible for your own taxes. Research your local tax obligations and include them in your calculation. This might include income tax, self-employment tax, and potentially others.
The Calculation:
The calculator works by first determining your total required income (including expenses and taxes). Then, it subtracts the hours you won't be billing for (vacation, holidays, sick days) from the total potential work hours in a year. Finally, it divides the total required income by the number of billable hours to arrive at your minimum hourly rate.
For example, if you aim for a $60,000 annual income after tax, have $5,000 in business expenses, take 160 hours of paid time off, use 40 hours for sick days, work 40 hours a week, and expect a 25% tax rate, the calculator will help you find the hourly rate that makes this all possible.
function calculateFreelanceRate() {
var desiredAnnualIncome = parseFloat(document.getElementById("desiredAnnualIncome").value);
var annualBusinessExpenses = parseFloat(document.getElementById("annualBusinessExpenses").value);
var paidTimeOff = parseFloat(document.getElementById("paidTimeOff").value);
var sickDays = parseFloat(document.getElementById("sickDays").value);
var workHoursPerWeek = parseFloat(document.getElementById("workHoursPerWeek").value);
var taxRate = parseFloat(document.getElementById("taxRate").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(desiredAnnualIncome) || isNaN(annualBusinessExpenses) || isNaN(paidTimeOff) || isNaN(sickDays) || isNaN(workHoursPerWeek) || isNaN(taxRate)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (desiredAnnualIncome <= 0 || annualBusinessExpenses < 0 || paidTimeOff < 0 || sickDays < 0 || workHoursPerWeek <= 0 || taxRate 100) {
resultDiv.innerHTML = "Please enter valid positive numbers. Tax rate must be between 0 and 100.";
return;
}
// Calculate total hours available for work in a year
var totalWorkHoursInYear = 52 * workHoursPerWeek;
var nonBillableHours = paidTimeOff + sickDays;
var billableHoursInYear = totalWorkHoursInYear – nonBillableHours;
if (billableHoursInYear <= 0) {
resultDiv.innerHTML = "Your non-billable hours exceed total work hours in a year. Adjust your inputs.";
return;
}
// Calculate total gross income needed (income after tax + expenses)
// If income is X after tax, and tax rate is T, then X = Gross * (1-T/100)
// So, Gross = X / (1-T/100)
var grossIncomeNeededBeforeTax = desiredAnnualIncome / (1 – (taxRate / 100));
var totalIncomeRequirement = grossIncomeNeededBeforeTax + annualBusinessExpenses;
// Calculate the required hourly rate
var hourlyRate = totalIncomeRequirement / billableHoursInYear;
resultDiv.innerHTML =
"