How the day rate is calculated
A freelance day rate has to do three jobs at once: pay you the income you want, cover the costs of running your business and leave room for taxes. And it has to do all of that on the days a client actually pays for, which is far fewer than the days you work. The day rate calculator works backwards from your income goal in three steps.
With the example values, an income goal of $60,000, $9,000 in costs and a 30% tax reserve need $94,714 in revenue. Spread over 176 billable days, that is a day rate of $538.15, or $67.27 an hour over an 8-hour day.
Counting your billable days
The number of billable days moves your rate more than anything else, so it is worth getting right. Work through it in the same order as the calculator:
- Working days. Five days a week for 52 weeks is 260 days. A year has one or two days more than 52 full weeks, so the exact count of weekdays changes a little from year to year. If you plan a four-day week, start from 208.
- Vacation. The days you plan to take off. Nobody pays you for them, so they come out of the year completely.
- Public holidays. The days your clients are closed or you do not work. The number depends on where you and your clients are, so count the ones that actually stop your work.
- Sick days. You cannot plan when you get sick, but you can plan for it. Leaving a few days in the budget means one bad week does not break your year.
- Non-billable share. Finding clients, writing proposals, invoicing, bookkeeping, learning and the gaps between projects are all work, but none of it appears on an invoice. Track a few normal weeks to see your own share; it is often higher when you are just starting out.
The example in the calculator turns 260 working days into 220 days after time off, and 20% unpaid work leaves 176 billable days. The table shows how much that share matters for the same $60,000 income goal.
| Non-billable share | Billable days | Day rate | Hourly (8 h) |
|---|---|---|---|
| 0% | 220 | $430.52 | $53.81 |
| 10% | 198 | $478.35 | $59.79 |
| 20% | 176 | $538.15 | $67.27 |
| 30% | 154 | $615.03 | $76.88 |
| 40% | 132 | $717.53 | $89.69 |
$60,000 income, $9,000 costs, 30% tax reserve, 260 working days, 25 vacation days, 10 holidays and 5 sick days.
Day rates for different income goals
Here is the same example year with different income goals. Costs stay the same, so each extra $20,000 of income adds the same amount to the day rate.
| Income goal | Revenue needed | Day rate | Half day | Hourly (8 h) |
|---|---|---|---|---|
| $40,000 | $66,143 | $375.81 | $187.91 | $46.98 |
| $60,000 | $94,714 | $538.15 | $269.07 | $67.27 |
| $80,000 | $123,286 | $700.49 | $350.24 | $87.56 |
| $100,000 | $151,857 | $862.82 | $431.41 | $107.85 |
| $120,000 | $180,429 | $1,025.16 | $512.58 | $128.15 |
$9,000 costs, 30% tax reserve and 176 billable days of 8 hours.
What the tax reserve does
If your income goal is the money you want to keep, taxes come on top of it. The tax reserve is the share of your profit you put aside for them. Because the reserve is taken from the profit, the calculator divides instead of adding: with a 30% reserve, a $60,000 goal needs a profit of 60,000 ÷ 0.7 = $85,714, not $78,000. Of that profit, 30% goes into the reserve and $60,000 is left for you.
The calculator does not assume any tax rate, because taxes depend on your country, your income and your situation. Your last tax return, your tax office or an accountant gives you a better number than a rule of thumb. If you set the reserve to 0 or leave it empty, the income goal is treated as a figure before tax.
Day rate or hourly rate
The two are the same price written differently: the day rate is the hourly rate times the hours in your day. What changes is what you promise. A day rate sells a day of your time, and the client does not pay for the minutes. An hourly rate bills what you actually spend. A day rate suits work that fills whole days, like workshops, on-site work and longer projects. An hourly rate suits small jobs that do not fill a day.
The hours per day field only changes the hourly equivalent. With the "Convert a rate" mode you can turn an hourly rate into a day rate or back, and see what the rate means per week, per month and per year. The month is a twelfth of the year, so it is an average: a month with more working days brings in more. If you also want the hourly rate worked out from your income and working hours instead of days, the hourly rate calculator starts from the same idea.
Check the rate against your year
Under the result, the year table plays your plan forward: billable days times the day rate gives your revenue, costs and the tax reserve come off, and what is left is your income goal. If the rate is higher than your clients pay, the table shows where to look. You can bill more days by cutting unpaid work, lower your costs, take less time off or find clients who pay more. Changing any of them in the form shows the effect at once.
Keep in mind that this is the rate you need, not the rate the market pays. When you send the first invoice, check that the rate on it matches the plan. To compare the result with an employee salary, the salary converter turns a yearly salary into hourly, weekly and monthly pay.
How to use the day rate calculator
- 1Choose "From your income goal" to work out a rate, or "Convert a rate" to turn an hourly rate into a daily rate or back.
- 2Enter the income you want per year, your business costs and, if your goal is after tax, a tax reserve.
- 3Replace the example working days, vacation, holidays, sick days and non-billable share with your own plan, and set your hours per day.
- 4Read the day rate, the hourly equivalent and the half-day rate, and check the year table. Copy the result or a link to keep it.
Frequently asked questions
How do I turn an hourly rate into a day rate?
Multiply the hourly rate by the hours in your working day. At $75 an hour and 8 hours a day, the day rate is $600. For the other direction, divide: $600 a day over 8 hours is $75 an hour. Switch the calculator to "Convert a rate" to do both, plus the weekly and monthly equivalents.
How many billable days do I have in a year?
Start with your working days, take off vacation, public holidays and sick days, and then take off the share of time you spend on unpaid work such as sales, admin and bookkeeping. With the example values in the calculator, 260 working days become 176 billable days. Your own number depends on your plans and your workload, so enter your own values.
Why is my day rate higher than my old salary divided by 260?
Dividing a salary by 260 assumes you are paid for every weekday of the year. As a freelancer you earn only on the days you bill, and the same rate also has to cover your business costs and the taxes you set aside yourself. All of that has to fit into fewer paid days.
Should my income goal be before or after tax?
Either works. If you enter the income you want to keep after taxes, add a tax reserve: the share of your profit you set aside for income tax and social contributions. If your goal is already a before-tax figure, leave the tax reserve empty. The calculator does not know your tax rate; your last tax return or an accountant gives a better number than a guess.
How is the half-day rate calculated?
The calculator shows exactly half of the day rate. If a half-day booking costs you more than half a day, for example because of travel or because it blocks the rest of the day, you can quote more than half. That is a pricing choice the calculator leaves to you.
What should I count as business costs?
Everything you pay to run the business over a year: computer and phone, software subscriptions, office or coworking, insurance, accounting, training, travel, marketing and any retirement savings you want to fund from the business. Your bank statements from the last twelve months are a good place to start.