How to Calculate Your Freelance Rate

Setting the right hourly rate is one of the most critical decisions a freelancer can make. It needs to be high enough to cover your salary, business expenses, and taxes, yet competitive enough to attract clients. Our calculator simplifies the first step of this process by determining your baseline rate.

The Freelance Rate Formula

The basic formula our calculator uses is: Hourly Rate = (Desired Annual Income + Annual Business Expenses) / Annual Billable Hours

1. Desired Annual Income: This is the salary you want to pay yourself before taxes.
2. Annual Business Expenses: This includes all the costs of running your business, such as software subscriptions, hardware, marketing, insurance, and office supplies.
3. Annual Billable Hours: This is the most crucial part. It's not just 40 hours a week for 52 weeks. You must account for non-billable time like marketing, client communication, admin work, vacation, and sick days. A common estimate is around 1000-1200 billable hours per year for a full-time freelancer.

The rate calculated is your minimum required rate before taxes. Remember to set aside a significant portion (often 25-30%) for self-employment and income taxes. You should also consider adding a profit margin and adjusting your rate based on your experience, industry, and demand.