Freelance Rate Calculator

How to use the freelance rate calculator

Most new freelancers set their rate by taking their old salary and dividing by 2,080 hours. That almost always leads to undercharging, because as a freelancer you pay for your own benefits, equipment and time off — and you can't bill every hour you work. This calculator works backwards from the income you want to keep:

1. Enter your desired yearly take-home income — what you'd want as net pay from a job.
2. Add what you need for benefits and retirement, such as health insurance and pension contributions an employer used to cover.
3. Enter yearly business expenses: software, hardware, insurance, accountant, coworking, marketing.
4. Set your effective tax rate on profit, including self-employment or social contributions.
5. Be honest about billable hours and weeks off. A buffer covers late payments and quiet months.

The freelance rate formula

Worked example

You want to take home $60,000 a year and need $6,000 for health cover and retirement. With a 25% tax rate on profit you need (60,000 + 6,000) ÷ 0.75 = $88,000 of pre-tax profit. Add $8,000 of expenses to get $96,000, and a 10% buffer brings the revenue target to $105,600. If you bill 25 hours a week and take 6 weeks off, you have 25 × 46 = 1,150 billable hours. Your minimum rate is 105,600 ÷ 1,150 = $91.83 an hour, or about $735 for an 8-hour day. Compare that with the $28.85 an hour (60,000 ÷ 2,080) that an employee keeps per hour on the same $60,000 net income. Because a freelancer funds taxes, benefits, expenses and unpaid time off out of their fees, the billing rate typically ends up two to three times — here more than three times — the employee's net hourly figure.

Why billable hours matter most

Few freelancers bill more than 60–70% of their working time. The rest goes on finding clients, writing proposals, invoicing, bookkeeping, learning and chasing payments. Dropping from 30 to 20 billable hours a week raises the required rate by 50%. Track your time for a month before trusting your estimate; the hours calculator helps total up your timesheets.

Pricing tips for freelancers and contractors

• Treat the result as a floor. Your rate should also reflect market rates, your expertise and the value you create for the client.
• Quote day or project rates when possible. They reward efficiency and reduce haggling over hours.
• Raise rates regularly. Review annually for inflation and demand — a modest increase compounds quickly, as the pay raise calculator shows.
• Plan for taxes. Set aside your tax percentage from every invoice in a separate account so quarterly or annual bills are never a shock.
• Know your break-even. The "rate without buffer" is the lowest you can go without losing money; the break-even calculator applies the same idea to products.

Tax and social contribution rules for the self-employed vary widely by country. Results are estimates for planning, not tax advice.