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Hourly Rate Calculator
Calculate your freelance and consulting hourly rate based on desired income, billable hours, expenses, and taxes. Get minimum, target, and premium pricing tiers.
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Why Most Freelancers Underprice (And Go Broke)
You think: "$50/hour sounds good!" Then reality hits. After taxes, software, health insurance, unpaid admin work, and slow-paying clients, you're making less than minimum wage. This calculator prevents that disaster.
đź’ˇ Real Talk from David Chen, CFA
Most freelancers calculate rates using full-time hours (40/week). That's a trap. You'll spend 10-15 hours/week on non-billable work (invoicing, proposals, marketing). If you charge for 40 hours/week at $50/hour but only bill 25, you're actually making $31.25/hour. Account for this from day one.
The Real Cost of Freelancing
When you're employed, your employer pays for:
- Health Insurance: $6,000-$12,000/year (employer contribution)
- Payroll Taxes: 7.65% (you pay the full 15.3% self-employment tax)
- Paid Time Off: 2-4 weeks + holidays = ~10% of salary
- Retirement Match: 3-6% of salary
- Equipment: Laptop, software, office space
Total hidden compensation: 25-40% on top of salary. If you made $75k as an employee, you need to bill ~$100k-$105k gross to match it.
⚠️ Common Mistake: Forgetting About Taxes
Freelancers pay 15.3% self-employment tax PLUS income tax. That's easily 30-40% total. If you charge $100k and forget about taxes, you'll owe $30k-$40k in April and have no money saved. Build taxes into your rate from the start.
The Three-Tier Pricing Strategy
This calculator gives you three rates:
- Minimum Rate: Your break-even. Charge this and you hit your income goal exactly. No buffer for surprises.
- Target Rate (+20%): Your standard rate. Covers unexpected expenses and slow months.
- Premium Rate (+50%): For complex projects or clients who value expertise. This is what you quote for rush jobs or high-stakes work.
Always quote your Target or Premium rate. The Minimum is your internal floor—never tell clients this number.
What About Value-Based Pricing?
Hourly rates are a baseline. As you gain expertise, switch to project-based pricing. If a client makes $100k from your work, charging $5k (5%) is fair—even if it only took you 10 hours. That's $500/hour. They pay for the outcome, not your time.
Reviewed by David Chen, CFA
Chartered Financial Analyst
David helps freelancers price their services based on real financial modeling.
Frequently Asked Questions
How do freelancers calculate their hourly rate?
Freelancers calculate hourly rates by dividing their desired annual income plus business expenses by their billable hours, then adjusting for taxes. Formula: (Annual Income + Expenses) / (1 - Tax Rate) / Total Billable Hours. Most freelancers add a 20-50% buffer for expertise and market positioning.
What should be included in business expenses?
Business expenses include software subscriptions, equipment, marketing costs, professional development, insurance, healthcare, retirement contributions, workspace costs, and accounting/legal fees. Typical freelancers spend $5,000-$15,000 annually on business expenses.
How many billable hours should a freelancer expect?
Most successful freelancers bill 20-35 hours per week, not 40. The rest goes to admin work, client acquisition, invoicing, and professional development. Assuming 48 working weeks/year (with 4 weeks for vacation/sick time), expect 960-1,680 billable hours annually.