Determine your real earnings per hour by factoring in unpaid time and expenses.
Enter your total pay for the week, month, or project.
Hours you are officially paid for (e.g., standard work week).
Overtime, commute, or prep time not directly compensated.
Cost of commute, equipment, or supplies per period.
Nominal Rate (Contracted):–
Net Effective Income:–
Total Actual Hours:–
Actual Hourly Rate: $0.00 / hr
How to Calculate Actual Rate
Calculating your Actual Rate is an essential process for freelancers, salaried employees, and business owners who want to understand the true value of their time. While a contract might state a specific hourly wage or annual salary, the "Actual Rate" accounts for the hidden factors that dilute your earnings: unpaid overtime, commuting hours, administrative tasks, and work-related expenses.
The "Actual Rate" differs from the "Nominal Rate" (the rate stated in your contract) because it looks at net income relative to the total time investment, rather than just billable hours.
The Actual Rate Formula
To determine the actual rate, you must subtract expenses from your gross income and divide the result by the total number of hours dedicated to work (including unpaid time).
Formula:
Actual Rate = (Gross Income – Expenses) / (Contracted Hours + Unpaid Hours)
Step-by-Step Calculation
Determine Gross Income: Identify the total amount earned in a specific period (e.g., one week).
Subtract Expenses: Deduct any costs directly related to earning that income, such as commuting costs, software subscriptions, or uniform cleaning. This gives you your Net Effective Income.
Calculate Total Hours: Add your paid (contracted) hours to any unpaid time spent on work. This includes commuting, answering emails off the clock, or preparing for the next day.
Divide: Divide the Net Effective Income by the Total Hours to find your Actual Hourly Rate.
Example Calculation
Consider an employee with a weekly salary of $1,000 for a standard 40-hour work week.
Nominal Rate: $1,000 / 40 hours = $25.00/hr.
Hidden Factors: The employee spends 5 hours commuting and 5 hours on unpaid overtime. They also spend $50 on gas and lunch.
Total Hours: 40 + 5 + 5 = 50 hours.
Net Income: $1,000 – $50 = $950.
Actual Rate: $950 / 50 hours = $19.00/hr.
In this scenario, the actual rate is significantly lower than the nominal rate, revealing the true cost of the employment arrangement.
Why This Metric Matters
Understanding how to calculate your actual rate allows you to make better financial decisions. For freelancers, it ensures you are pricing your projects high enough to cover administrative time. For employees, it helps in evaluating job offers that might have a high salary but require excessive unpaid overtime or long commutes.
function calculateActualRate() {
// Get input values
var incomeInput = document.getElementById("periodIncome").value;
var contractedHoursInput = document.getElementById("contractedHours").value;
var additionalHoursInput = document.getElementById("additionalHours").value;
var expensesInput = document.getElementById("expenses").value;
// Parse values to floats
var income = parseFloat(incomeInput);
var contractedHours = parseFloat(contractedHoursInput);
var additionalHours = parseFloat(additionalHoursInput);
var expenses = parseFloat(expensesInput);
// Validation
if (isNaN(income) || isNaN(contractedHours) || contractedHours <= 0) {
alert("Please enter a valid income and contracted hours greater than 0.");
return;
}
// Handle empty optional fields
if (isNaN(additionalHours)) additionalHours = 0;
if (isNaN(expenses)) expenses = 0;
// Calculation Logic
var netIncome = income – expenses;
var totalHours = contractedHours + additionalHours;
// Prevent division by zero
if (totalHours 0) {
var percentDrop = (difference / nominalRate) * 100;
comparisonElement.innerHTML = "Your actual rate is " + percentDrop.toFixed(1) + "% lower than your contracted rate due to expenses and extra time.";
} else if (difference < 0) {
// This happens if expenses are negative (refunds) or hours are less than contracted (unlikely but possible math)
comparisonElement.innerHTML = "Your actual rate is higher than your contracted rate.";
} else {
comparisonElement.innerHTML = "Your actual rate matches your contracted rate.";
}
// Show result area
document.getElementById("result-area").style.display = "block";
}