Freelance Hourly Rate Calculator
Most freelancers set their rate by taking a salary they liked and dividing by 2,080. That number is always too low. This calculator works backwards from what you want to keep, accounting for the four things employment used to cover for you: tax, expenses, unpaid time off, and hours you cannot bill.
Why dividing a salary by 2,080 gives you the wrong number
The intuitive move is to take the salary you want — say $90,000 — divide by 2,080 working hours, and land on roughly $43 an hour. Every part of that calculation is wrong for a freelancer.
You do not work 2,080 billable hours. You work 2,080 hours, but a large share goes to finding clients, writing proposals, invoicing, chasing payment, updating your portfolio, and staying current. For an established freelancer with steady referrals, 60–70% billable is typical. Someone still building a client base may be at 40%. At 65% billable, 2,080 hours becomes about 1,350 billable hours — you just lost a third of your capacity.
You have no paid leave. An employee taking three weeks of vacation and a week of public holidays still gets paid. You do not. Every week off is a week of zero revenue that the other weeks have to cover.
You pay both halves of payroll tax. In the US, an employee splits Social Security and Medicare with their employer. Self-employed, you pay both sides — the self-employment tax — on top of income tax. Your effective rate is meaningfully higher than a salaried person at the same gross income.
Your employer used to pay your overheads. Laptop, software licences, health insurance, accounting, office space, professional development. As a freelancer these come out of your revenue before you see a dollar.
Run the default values in this calculator and you will see the honest number is roughly double the naive one.
Getting each input right
Target take-home income. This is money in your pocket after tax and after the business has paid its own bills. Do not enter a gross salary figure here — the calculator grosses it up for you.
Annual business expenses. Add up everything the business consumes in a year. Freelancers routinely underestimate this by half. Include software subscriptions, hardware amortized over its life, health insurance, liability insurance, accounting and legal, coworking or a home-office allocation, marketing, and professional development. If you have never tracked it, $12,000 is a reasonable starting estimate for a solo knowledge worker.
Effective tax rate. Not your top marginal bracket — your blended effective rate across all income, including self-employment tax. This varies enormously by country, state, and structure. Ask your accountant for last year's actual figure; guessing here can throw the result off by 20%.
Billable percentage. Be honest rather than aspirational. Track two typical weeks before setting this. If you have never measured it, assume you are 10 points lower than you think.
Profit buffer. This is not greed, it is survival. It absorbs the client who pays 60 days late, the month a project gets cancelled, and the equipment that fails. It also funds the reinvestment that lets you raise your rate later. Setting it to zero shows you the absolute floor below which you are working at a loss in any bad month.
What to do with the number
Treat the result as a floor, not a price. It tells you what you need, not what your work is worth. If you deliver something a client values at $50,000, charging your cost-based rate leaves money on the table. Cost-plus pricing protects you from losing money; it does not capture value.
Consider quoting project fees instead of hours. Hourly billing punishes you for getting faster, and it caps your income at your capacity. Use the hourly figure internally to sanity-check whether a fixed-price quote is viable, and quote the project.
Raise it deliberately. If you are booked solid for more than two months out, your rate is too low. The market is telling you clearly and it is the only reliable signal you get.
Re-run this annually. Expenses creep, tax rates change, and the income you wanted three years ago is not the income you want now.
Frequently asked questions
Why is my calculated rate so much higher than a salaried equivalent?
Because it has to cover four things a salary already included: employer-side payroll tax, paid time off, business overheads, and the hours you spend running the business rather than doing client work. A freelance rate roughly double the hourly equivalent of a target salary is normal, not aggressive.
What billable percentage should I use?
Track two typical weeks before deciding. Established freelancers with steady referral flow usually land between 60% and 70%. If you are still actively prospecting, 40–55% is more realistic. Most people overestimate this figure, so if you are guessing, subtract ten points.
Should I charge hourly or a fixed project fee?
Use the hourly number internally as a floor, then quote fixed fees where you can. Hourly billing caps your income at your available hours and penalises you for becoming more efficient. Fixed pricing lets improvements in your speed accrue to you instead of your client.
What effective tax rate should I enter?
Your blended rate across income tax and self-employment or social insurance contributions — not your top marginal bracket. This varies widely by country and business structure, so use last year's actual figure from your tax return or ask your accountant. A wrong assumption here is the most common source of error in the result.
Is a profit buffer really necessary?
Yes. Without it, one late-paying client or one cancelled project turns a good year into a break-even year. The buffer also funds equipment, training, and marketing — the things that let you charge more next year. Set it to zero only to see your absolute survival floor.