How your freelance rate is calculated
The calculator works backwards from the money you want to keep. First it adds the taxes on top of your take-home income and then your business expenses, which gives the revenue you need. Then it counts the hours you can actually bill in a year. Revenue divided by billable hours is your minimum rate.
Why salary ÷ 2,080 is the wrong rate
A common shortcut is to divide a salary by 2,080, the hours in a full-time year. As a freelancer that leaves you far short, because nobody pays you for vacation, holidays, sick days or the time you spend finding clients and doing admin. With 4 weeks of vacation, 15 days off and 70% billable time, 2,080 hours shrink to about 1,260 billable hours.
| Take-home goal | Revenue needed | Hourly rate | Day rate |
|---|---|---|---|
| $40,000 | $66,143 | $52.49 | $419.95 |
| $60,000 | $94,714 | $75.17 | $601.36 |
| $80,000 | $123,286 | $97.85 | $782.77 |
| $100,000 | $151,857 | $120.52 | $964.17 |
With $9,000 expenses, 30% taxes, 4 weeks vacation, 15 days off, 40 hours a week and 70% billable time.
How to use the hourly rate calculator
- 1Enter the income you want to take home and your yearly or monthly business expenses.
- 2Add your tax rate, the time off you plan and how many hours you want to work per week.
- 3Set the share of those hours you can bill. The hourly rate and day rate update as you type.
Frequently asked questions
Why is my freelance rate so much higher than my old salary per hour?
An employee is paid for about 2,080 hours a year, including vacation, holidays and sick days, and the employer covers equipment, software, insurance and part of the taxes. As a freelancer you pay all of that yourself and only bill the hours spent on client work, often 1,000 to 1,400 a year.
What tax rate should I enter?
Enter the share of your profit that goes to income tax and social contributions together. For US freelancers that is often 25% to 35%, because self-employment tax adds about 15.3% on top of income tax. In many European countries 30% to 45% is realistic. Your accountant or last tax return gives the best number.
What does billable share mean?
The part of your working hours you can charge to clients. Sales, emails, admin, bookkeeping and learning are work too, but nobody pays for them directly. Most freelancers bill 60% to 75% of their time. If you are just starting, use a lower value.
Which business expenses should I include?
Everything you pay to run the business: computer and phone, software subscriptions, coworking or a home office share, health and liability insurance, retirement savings, accounting, travel, training and marketing. Monthly costs add up quickly, so check your bank statements.
Is this rate what I should charge?
It is the minimum you need to reach your income. Your market rate depends on your skills, niche and clients and can be higher. If the result is far above what clients pay, look at the levers: more billable hours, lower expenses, fewer weeks off or a higher-paying niche.