Setting the right rate is one of the biggest challenges for freelancers. If you price yourself too low, you risk burnout and financial strain; too high, and you might struggle to attract clients. This calculator works backward from your desired annual net income, factoring in taxes, business expenses, and specifically—your non-billable time—to determine the hourly rate you must charge to sustain your lifestyle.
Understanding the Freelance Rate Formula
Unlike a salaried employee, a freelancer's hourly rate must cover much more than just the time spent executing tasks. When you calculate your freelance rate, you are essentially functioning as the HR, IT, and accounting departments of your own small business.
1. The "Billable Hours" Trap
The most common mistake new freelancers make is assuming they can bill 40 hours a week. In reality, you spend time on marketing, invoicing, answering emails, and learning new skills. These are non-billable hours.
If you work 8 hours a day, typically only 5 to 6 of those hours are actually billable to a client. If you calculate your rate based on 40 hours but only bill 25, you will fall short of your income goals by nearly 40%.
2. Gross vs. Net Income
Your target salary is your "Net" income (what you put in your pocket). However, your clients pay your "Gross" revenue. To bridge the gap, you must add:
- Business Expenses: Software subscriptions, hardware, internet, home office costs, and insurance.
- Taxes: Self-employment tax is often higher than employee tax rates because you pay both the employer and employee portions of Social Security and Medicare.
- Profit Margin: A buffer for lean months or business growth.
Calculation Example
Let's look at a realistic scenario:
- Target Net Salary: $60,000
- Expenses: $5,000/year
- Tax Rate: 25%
- Time Off: 4 weeks (vacation + holidays)
- Non-Billable Time: 25% (admin work)
To keep $60,000, you need to generate roughly $86,666 in Gross Revenue (assuming taxes are taken from the top). You have 48 working weeks. At 40 hours a week, that's 1,920 hours. However, removing 25% for admin tasks leaves only 1,440 billable hours.
Rate Calculation: $86,666 / 1,440 hours = $60.18/hour.
If you had simply divided $60,000 by 2,080 (a standard 40-hour work year), you would have charged $28/hour—and gone broke.
Why You Should Charge a Day Rate
While this calculator provides an hourly rate, many senior freelancers prefer a Daily Rate. This protects you from scope creep and shifts the focus from "hours worked" to "value delivered." To find your daily rate, multiply your calculated hourly rate by the number of billable hours you work in a typical day (usually 6-8 hours).
function calculateFreelanceRate() {
// 1. Get Input Values
var targetSalary = parseFloat(document.getElementById('fl_target_salary').value);
var expenses = parseFloat(document.getElementById('fl_expenses').value);
var taxRate = parseFloat(document.getElementById('fl_tax_rate').value);
var profitMargin = parseFloat(document.getElementById('fl_profit_margin').value);
var weeksOff = parseFloat(document.getElementById('fl_weeks_off').value);
var daysPerWeek = parseFloat(document.getElementById('fl_days_week').value);
var hoursPerDay = parseFloat(document.getElementById('fl_hours_day').value);
var unbillablePercent = parseFloat(document.getElementById('fl_unbillable').value);
// 2. Validate Inputs (Handle edge cases and defaults)
if (isNaN(targetSalary) || targetSalary 0) {
totalCashNeeds = totalCashNeeds * (1 + (profitMargin / 100));
}
// Calculate Gross Revenue Required accounting for Tax
// Formula: Gross = Needs / (1 – TaxRate)
var taxDecimal = taxRate / 100;
if (taxDecimal >= 1) taxDecimal = 0.99; // Prevent division by zero or negative
var grossRevenueNeeded = totalCashNeeds / (1 – taxDecimal);
// 4. Time Logic
var totalWeeks = 52;
var workingWeeks = totalWeeks – weeksOff;
var totalWorkingDays = workingWeeks * daysPerWeek;
var totalHoursAvailable = totalWorkingDays * hoursPerDay;
// Remove non-billable time
var billableHours = totalHoursAvailable * (1 – (unbillablePercent / 100));
// Edge case: 0 billable hours
if (billableHours <= 0) {
alert("Your settings result in 0 billable hours. Decrease non-billable time or increase working hours.");
return;
}
// 5. Rate Calculations
var hourlyRate = grossRevenueNeeded / billableHours;
// Daily Rate: Traditionally Hourly * Hours in a work day (even if some is admin, client pays for the day availability)
// Or strictly Billable Hours / Days.
// Standard practice: Hourly Rate * 8 (or whatever full day is), because the rate accounts for the overhead.
var dailyRate = hourlyRate * hoursPerDay;
var weeklyRate = grossRevenueNeeded / workingWeeks;
// 6. Update UI
document.getElementById('res_hourly_rate').innerText = formatMoney(hourlyRate);
document.getElementById('res_daily_rate').innerText = formatMoney(dailyRate);
document.getElementById('res_weekly_rate').innerText = formatMoney(weeklyRate);
document.getElementById('res_gross_revenue').innerText = formatMoney(grossRevenueNeeded);
document.getElementById('res_billable_hours').innerText = Math.round(billableHours).toLocaleString();
var overhead = grossRevenueNeeded – targetSalary;
document.getElementById('res_overhead').innerText = formatMoney(overhead);
document.getElementById('res_real_tax').innerText = taxRate + "%";
// Show result section
document.getElementById('fl_result_section').style.display = "block";
// Scroll to results
document.getElementById('fl_result_section').scrollIntoView({behavior: 'smooth'});
}
function formatMoney(amount) {
return '$' + amount.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 });
}