Freelance Hourly Rate Calculator
The gap between a salary and a contract rate is mostly invisible hours. Only some of a working year is billable, and the rest has to be paid for by the rate on what is left.
Charge per hour
$76.39an hour
- Charge per hour
- $76.39
- Per day (8 hours)
- $611.11
- Revenue needed
- $88,000.00
- Billable hours a year
- 1,152
- Hours worked a year
- 1,920
- Tax and expenses
- $28,000.00
- Only 60% of the hours you work are billable, so the unbillable ones — finding work, quoting, invoicing, admin — are paid for by the rate on the rest. That is the single biggest reason a contract rate looks so much larger than a salary.
- To take home $60,000.00 you need to invoice $88,000.00. Tax and expenses account for the difference, and neither is optional.
- Also not in this: no paid holiday, no sick pay, no employer pension contribution and no notice period. A common shortcut is to take a salary you would accept, add half again, and check it against the rate here.
- Weeks per year is where people are optimistic. Fifty-two assumes you never take a holiday and are never ill.
About setting a freelance rate
Three things separate a contract rate from a salary, and none of them is greed. Tax, because self-employment tax and business tax come out of revenue. Expenses, because software, insurance, equipment and accountancy are yours now. And unbillable time, which is the largest of the three and the one people forget.
To take home $60,000 with $8,000 of expenses at a 25% effective tax rate, the business needs to invoice $88,000. Work 40 hours a week for 48 weeks and that is 1,920 hours — but at 60% utilisation only 1,152 of them are billable. $88,000 over 1,152 hours is $76.39 an hour.
Sixty per cent is a realistic figure and it surprises people. Finding work, quoting, negotiating, invoicing, chasing payment, bookkeeping, admin and your own professional development are all real hours and none of them can be billed to anyone. Established freelancers with steady repeat clients do better; anyone starting out does considerably worse.
What is still not in the number: paid holiday, sick pay, employer pension contributions and notice periods. A salaried person gets all four and a freelancer gets none, which is why weeks per year is where people are most optimistic. Fifty-two assumes you never take a holiday and are never ill.
A common shortcut is to take a salary you would happily accept, add half again, and check it against the rate here. If the two are far apart, the assumption to examine first is utilisation.
What it works out
- The hourly and daily rate needed to hit a target income
- Revenue required after tax and expenses
- Billable hours against hours worked
The formula
Rate = (Target ÷ (1 − Tax) + Expenses) ÷ (Hours × Weeks × Billable)
Work from the take-home figure outwards. $60,000 after 25% tax means grossing up: $60,000 ÷ 0.75 is $80,000. Add $8,000 of expenses and the business has to invoice $88,000.
Note the division. Adding 25% to $60,000 would give $75,000 and be wrong, because the tax is charged on the larger figure. This is the same reverse-percentage trap as extracting VAT from a gross price.
Now the hours. Forty a week across 48 weeks is 1,920 hours of work, and at 60% utilisation 1,152 of them can be invoiced. $88,000 divided by 1,152 is $76.39 an hour, or $611 a day.
Utilisation is the assumption that moves the answer most. At 80% the rate falls to $57.29; at 40% it rises to $114.58. If a rate looks implausible in either direction, that is the number to examine before anything else.
- Target
- What you want to take home, after tax and after expenses.
- Tax
- Your effective rate including self-employment tax. Divide, do not add.
- Expenses
- Everything the business pays for that an employer would have.
- Billable
- The share of worked hours you can invoice. 60% is realistic.
A worked example
Taking home $60,000 with $8,000 of expenses at 25% tax, working 40 hours across 48 weeks with 60% of it billable.
That works out to $76.39 an hour.
- Charge per hour
- $76.39
- Per day (8 hours)
- $611.11
- Revenue needed
- $88,000.00
- Billable hours a year
- 1,152
- Hours worked a year
- 1,920
- Tax and expenses
- $28,000.00
Questions
What should I charge as a freelancer?
Enough to cover tax, expenses and the hours you cannot bill. To take home $60,000 with $8,000 of expenses at 25% tax and 60% utilisation, that is $76.39 an hour or about $611 a day.
Why is a freelance rate so much higher than a salary?
Because it is buying different things. No paid holiday, no sick pay, no employer pension, no notice period — and only some of the hours worked can be invoiced at all. The rate has to cover the rest.
What is a realistic billable percentage?
Around 60% for an established freelancer with steady clients. Starting out it is often 40% or less, because finding work takes the time that billing would. Above 80% is rare and usually means a single long engagement.
Why divide by one minus the tax rate?
Because tax is charged on the gross figure, not the net. $60,000 ÷ 0.75 is $80,000; adding 25% to $60,000 gives $75,000 and leaves you short. It is the same reverse-percentage trap as extracting VAT from a gross price.
How do I convert a salary into a freelance rate?
Enter the take-home you want and let this work it out — the shortcut of adding half again to a salary lands in roughly the right place. What it will not capture is a low utilisation rate, which is what makes the real answer higher.
Should I charge hourly or by the day?
Day rates are common for longer engagements and simpler to quote. Fixed prices per project are better still once you can estimate reliably, because they reward efficiency instead of penalising it.
What expenses should I include?
Everything an employer would have paid for: software, hardware, insurance, accountancy, professional subscriptions, training, a share of workspace costs. If you would not be buying it without the work, it belongs here.