Freelance Hourly Rate Calculator
Determine exactly what to charge clients to meet your income goals and cover business expenses.
How to Calculate Your Ideal Freelance Hourly Rate
Setting your freelance rate is one of the most critical decisions you will make for your business. Many new freelancers make the mistake of simply looking at what their former employer paid them per hour and adding a small margin. However, this fails to account for the "hidden costs" of being self-employed.
This calculator uses the Bottom-Up Method. Instead of guessing what the market will bear, we calculate what your life and business actually cost to sustain. Here is the formula we use:
- Total Revenue Goal: Your desired personal take-home pay + your business overhead (software, hardware, insurance, taxes).
- Actual Working Weeks: There are 52 weeks in a year. If you take 4 weeks off for vacation and sick leave, you only have 48 weeks to earn your income.
- Billable vs. Non-Billable Hours: Even if you "work" 40 hours a week, you aren't billing 40 hours. You spend time on marketing, invoicing, and admin. Most freelancers find 20-30 hours is their realistic billable limit.
Example Calculation
If you want to take home $70,000 and your expenses (including health insurance and self-employment tax) are $15,000, you need $85,000 in total revenue. If you plan to work 48 weeks a year at 25 billable hours per week (1,200 total billable hours), your math looks like this:
$85,000 / 1,200 hours = $70.83 per hour.
Don't Forget Taxes
When entering your "Desired Annual Income," remember that as a freelancer, you are responsible for both the employer and employee portions of Social Security and Medicare taxes. It is generally recommended to add 25-30% to your desired "take-home" pay to cover these federal and state obligations.
Why Billable Hours Matter
A common trap is assuming a 40-hour billable week. In reality, freelancers spend roughly 25-35% of their time on non-billable tasks: sales calls, writing proposals, updating portfolios, and bookkeeping. If you calculate your rate based on 40 hours but only bill 20, you will end up with half the income you planned for.