How to Calculate Your Freelance Hourly Rate
Most freelancers start out by guessing their hourly price or copying a competitor's rates. That approach often leads to working 50 hours a week while earning less than an entry-level salaried job. When you work for yourself, your rate must cover personal income target, self-employment taxes, insurance, software tools, and unpaid administrative time.
Calculating a sustainable freelance rate requires starting with your desired net income and working backward to account for real business expenses.
Open Freelance Rate Calculator
Step 1: Determine Total Gross Revenue Needed
Add your desired personal take-home pay, annual business overhead (software, hardware, hosting, accounting), and self-employment tax buffer (15.3% in the US).
For example, suppose you want a net personal income of $75,000. Your software subscriptions and equipment cost $5,000 per year. Adding taxes and expenses means your business must generate roughly $95,000 in total gross revenue.
Step 2: Calculate True Billable Hours
You cannot bill 40 hours a week for 52 weeks. Administrative tasks like sending proposals, invoicing clients, updating your portfolio, and answering emails take up significant time. Most full-time freelancers average 25 to 30 billable hours per week.
- 52 weeks minus 4 weeks off (vacation/sick) = 48 working weeks
- 48 weeks x 40 total hours = 1,920 working hours
- If 30% of time is non-billable admin, billable ratio is 70%
- True annual billable hours: 1,920 x 0.70 = 1,344 hours
Step 3: Calculate Your Minimum Hourly Rate
Divide your required gross revenue ($95,000) by your annual billable hours (1,344). Your minimum target rate comes out to $70.68 per hour.
You can adjust any parameter to fit your goals using our free Freelance Rate Calculator.
