*This rate covers your desired salary, business expenses, and accounts for non-billable time.
function calculateRate() {
// Retrieve inputs using var
var annualSalary = parseFloat(document.getElementById('annualSalary').value);
var annualExpenses = parseFloat(document.getElementById('annualExpenses').value);
var weeksOff = parseFloat(document.getElementById('weeksOff').value);
var hoursPerWeek = parseFloat(document.getElementById('hoursPerWeek').value);
var nonBillablePercent = parseFloat(document.getElementById('nonBillablePercent').value);
// Validation to prevent errors
if (isNaN(annualSalary) || annualSalary < 0) annualSalary = 0;
if (isNaN(annualExpenses) || annualExpenses < 0) annualExpenses = 0;
if (isNaN(weeksOff) || weeksOff < 0) weeksOff = 0;
if (isNaN(hoursPerWeek) || hoursPerWeek <= 0) hoursPerWeek = 40; // Avoid division by zero later if user enters 0
if (isNaN(nonBillablePercent) || nonBillablePercent 0) {
hourlyRate = totalRevenueNeeded / totalBillableHours;
}
// Display Results
document.getElementById('resBillableHours').innerHTML = Math.round(totalBillableHours).toLocaleString();
document.getElementById('resTotalRevenue').innerHTML = "$" + totalRevenueNeeded.toLocaleString();
document.getElementById('resHourlyRate').innerHTML = "$" + hourlyRate.toFixed(2);
// Show result box
document.getElementById('result-box').style.display = "block";
}
How to Calculate Your Hourly Rate as a Freelancer
Determining the correct hourly rate is one of the most critical challenges for freelancers and independent contractors. Unlike a salaried employee, your rate must cover not just your take-home pay, but also your business overhead, taxes, insurance, and unpaid time spent on administrative tasks. This guide explains the logic behind the calculation used in the tool above.
The Formula for Freelance Rates
To calculate a sustainable hourly rate, you must work backward from your financial goals and your actual availability. The core formula used by professionals is:
Your total financial need is the sum of two components:
Desired Salary: The amount of money you want to pay yourself personally. This is comparable to a gross salary in a traditional job.
Business Expenses: These are the costs required to run your freelance business. This includes software subscriptions (Adobe, Office, etc.), hardware, internet, co-working space fees, professional insurance, and accounting fees.
2. Understanding Billable vs. Non-Billable Hours
A common mistake freelancers make is assuming they can bill for 40 hours a week, 52 weeks a year. This is rarely possible. You must account for:
Time Off: You do not get paid holidays or sick leave. If you want 2 weeks of vacation and anticipate 1 week of sick time, you are only working 49 weeks.
Non-Billable Time: This is time spent on tasks that generate no direct revenue, such as invoicing, marketing, finding new clients, and answering emails. A healthy freelance business typically spends 20% to 30% of its time on these non-billable activities.
3. Example Calculation
Let's say you want to earn $80,000/year and have $10,000 in business expenses.
Total Revenue Need: $90,000.
Availability: You plan to take 4 weeks off (working 48 weeks).
Efficiency: You work 40 hours a week, but 25% is administrative (non-billable). This leaves you with 30 billable hours per week.
Using a calculator ensures you don't undervalue your time. If you simply divided your $80,000 goal by a standard 2,080-hour work year (40hrs * 52wks), you would charge ~$38/hr, which would likely lead to a significant financial shortfall.