One of the most common mistakes new freelancers make is attempting to replicate their full-time salary by simply dividing it by 2,080 (the standard number of working hours in a year). This approach often leads to burnout and financial struggle because it ignores the unique overhead of running a business.
Unlike an employee, a freelancer must cover their own health insurance, software licenses, hardware costs, and self-employment taxes. Furthermore, not every hour you work is "billable." Administrative tasks, marketing, pitching clients, and accounting are essential but unpaid activities.
Key Factors in Setting Your Rate
Billable Hours: Most freelancers can only bill for 50-75% of their working time. If you aim to work 40 hours a week, you might only bill 20 to 25 hours.
Taxes: As a freelancer, you are responsible for both the employer and employee portions of social security and Medicare taxes, plus income tax. A safe buffer is often 25-30% of your gross income.
Time Off: You don't get paid vacation or sick leave. You must price these weeks into your hourly rate so you can afford to take a break without losing income.
How to Use This Calculator
To get the most accurate result, start with your Desired Net Annual Salary—this is the money you want to take home after all expenses and taxes. Next, list your Annual Business Expenses (laptop, subscriptions, co-working space). Be realistic about your Billable Hours; fewer hours often mean higher quality work and better client retention. Finally, input your expected Tax Rate and planned Time Off.
The calculator works backward from your net goal to determine the exact gross revenue you need to generate, and divides that by your actual billable capacity to give you a minimum viable hourly rate.
function calculateFreelanceRate() {
// 1. Get Input Values
var targetSalary = parseFloat(document.getElementById("targetSalary").value);
var annualExpenses = parseFloat(document.getElementById("annualExpenses").value);
var billableHours = parseFloat(document.getElementById("billableHours").value);
var weeksOff = parseFloat(document.getElementById("weeksOff").value);
var taxRate = parseFloat(document.getElementById("taxRate").value);
// 2. Validation
if (isNaN(targetSalary) || targetSalary < 0) {
alert("Please enter a valid desired salary.");
return;
}
if (isNaN(annualExpenses) || annualExpenses < 0) {
annualExpenses = 0; // Default to 0 if empty
}
if (isNaN(billableHours) || billableHours <= 0) {
alert("Please enter valid billable hours per week.");
return;
}
if (isNaN(weeksOff) || weeksOff < 0) {
weeksOff = 0;
}
if (isNaN(taxRate) || taxRate < 0) {
taxRate = 0;
}
// 3. Logic Calculation
// Calculate working weeks
var workingWeeks = 52 – weeksOff;
if (workingWeeks <= 0) {
alert("Weeks off cannot exceed 52.");
return;
}
// Calculate total billable hours per year
var totalBillableHours = workingWeeks * billableHours;
// Calculate Gross Revenue Needed
// Formula: (Target Net + Expenses) / (1 – TaxRateDecimal)
// Note: This assumes tax is taken from the Gross, covering both the Net and the Expenses part logic depends on tax jurisdiction,
// but generally Revenue = Net / (1-Tax) is standard for simple reverse tax calc.
// However, expenses reduce taxable income.
// Better Formula: Gross Revenue = (Target Net + Expenses) / (1 – TaxRateDecimal) is a safe over-estimation usually,
// but strictly speaking: Taxable Income = Gross – Expenses.
// Net = Gross – Expenses – (Taxable Income * TaxRate).
// Net = Gross – Expenses – ((Gross – Expenses) * TaxRate).
// Net = (Gross – Expenses) * (1 – TaxRate).
// Net / (1 – TaxRate) = Gross – Expenses.
// Gross = [Net / (1 – TaxRate)] + Expenses.
var taxRateDecimal = taxRate / 100;
var grossRevenueNeeded = (targetSalary / (1 – taxRateDecimal)) + annualExpenses;
// Calculate Tax Amount
var estimatedTax = (grossRevenueNeeded – annualExpenses) * taxRateDecimal;
// Calculate Hourly Rate
var hourlyRate = grossRevenueNeeded / totalBillableHours;
// Calculate Day Rate (assuming billable hours are spread over 5 days, or just hourly * hours/day implied?)
// Let's calculate Day Rate based on a standard 8 hour day equivalent or just hourly * (billableHours / 5)
var dailyBillableAvg = billableHours / 5;
// Actually, freelancers usually charge day rates based on a full availability day.
// Let's just output Hourly * 8 as a standard "Full Day Rate" reference,
// or strictly Hourly * (Billable/5) if they only work partial days.
// To be safe and specific: Hourly Rate * 8 is standard "Day Rate" pricing,
// but let's use Hourly * (BillableHours / 5) to show what they earn per day worked based on their input schedule.
var dayRate = hourlyRate * (billableHours / 5);
// 4. Update UI
document.getElementById("resHourlyRate").innerHTML = "$" + hourlyRate.toFixed(2);
document.getElementById("resDayRate").innerHTML = "$" + dayRate.toFixed(2) + " (avg per working day)";
document.getElementById("resGrossRev").innerHTML = "$" + grossRevenueNeeded.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resTaxes").innerHTML = "$" + estimatedTax.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resTotalHours").innerHTML = totalBillableHours.toLocaleString() + " hours";
// Show results
document.getElementById("fhcResult").style.display = "block";
}