Freelance Hourly Rate Calculator
Work out the hourly rate that covers the pay you want, your business costs and a tax set-aside, from the hours you can bill. Every assumption is an input you set.
Your numbers
The values filled in are an example, not a recommendation. Replace them with your own.
What you want left after the tax set-aside below.
Software, equipment, insurance and other costs of running the business.
Vacation, public holidays and sick time. Working weeks = 52 − weeks off.
All the hours you work, billable or not.
The share of profit you put aside for taxes. Use the rate that applies to you.
Hourly rate
$69.88
per billable hour
At this rate, 1,288 billable hours bring in $90,005.44, which covers the $90,000.00 needed.
How the rate is worked out
- Profit needed (pay ÷ (1 − tax set-aside))
- $80,000.00
- Tax set-aside (profit needed − pay)
- $20,000.00
- Revenue needed (profit needed + business costs)
- $90,000.00
- Working weeks (52 − weeks off)
- 46 weeks
- Hours worked (working weeks × hours per week)
- 1,840 hours a year
- Billable hours (hours worked × billable share)
- 1,288 hours a year
- Hourly rate (revenue needed ÷ billable hours)
- $69.88
Money amounts are rounded to the cent. The hourly rate is rounded up to the next cent, so the rate × billable hours is never less than the revenue needed.
How the Hourly Rate Is Calculated
The calculator works back from what you want to keep to what you need to charge for each hour you can invoice. Each step uses one of your inputs:
- Profit needed = pay you want ÷ (1 − tax set-aside). The tax set-aside is the difference.
- Revenue needed = profit needed + business costs.
- Hours worked = (52 − weeks off) × hours per week.
- Billable hours = hours worked × billable share.
- Hourly rate = revenue needed ÷ billable hours, rounded up to the next cent.
Worked example
The example filled in above uses these inputs. They show how the math works; they aren't a recommendation.
- Pay you want to keep: $60,000 a year. Tax set-aside: 25% of profit.
- Profit needed: $60,000 ÷ (1 − 0.25) = $80,000, of which $20,000 is the tax set-aside.
- Business costs: $10,000 a year, so revenue needed is $80,000 + $10,000 = $90,000.
- Weeks off: 6, so 46 working weeks. At 40 hours a week, that's 1,840 hours worked.
- Billable share: 70%, so 1,840 × 0.70 = 1,288 billable hours.
- Hourly rate: $90,000 ÷ 1,288 = $69.8758…, rounded up to $69.88. At that rate, 1,288 hours bring in $90,005.44.
The billable share
Only the hours a client pays for bring in revenue, so the billable share has a large effect on the rate. With the same example inputs, a billable share of 50% gives 920 billable hours and a rate of $97.83 ($90,000 ÷ 920, rounded up). Enter the share that matches how you work; the calculator doesn't assume one.
The tax set-aside
The tax set-aside is the percentage of your profit you put aside for taxes. The calculator uses only the percentage you enter. Tax depends on where you work and your situation, so check with your tax agency or an accountant before you choose it. Enter 0% to leave taxes out.
Inputs the calculator accepts
- Pay and business costs: 0 to 1,000,000,000,000 dollars a year. Decimals are fine.
- Weeks off: 0 to less than 52, so there's at least part of a working week.
- Hours worked per week: above 0 and up to 168, the hours in a week.
- Billable share: above 0% and up to 100%.
- Tax set-aside: 0% to less than 100%.
Negative numbers, empty fields and values outside these ranges show a message instead of a rate. If the result would be above $1,000,000,000 an hour, the calculator says it's too large to show.
Frequently Asked Questions
- How does the calculator work out my hourly rate?
- It finds the profit you need before taxes (the pay you want ÷ (1 − your tax set-aside)), adds your business costs to get the revenue you need, and divides that by your billable hours: (52 − weeks off) × hours per week × billable share. With the example inputs, that's $90,000 ÷ 1,288 hours = $69.88 an hour.
- What billable share should I enter?
- Enter your own. It's the part of your working hours you can invoice to clients; time spent on admin, sales and anything else a client isn't paying for isn't billable. If you're not sure, look at your past weeks: billable hours ÷ hours worked. The calculator doesn't assume a share for you.
- What does the tax set-aside do?
- It treats the percentage you enter as the share of your profit you put aside for taxes, so the rate covers that amount as well as the pay you want to keep. The calculator doesn't know your tax rate. What you owe depends on where you work and your situation, so check with your tax agency or an accountant and enter the rate that applies to you.
- Why is the rate rounded up?
- So that the rate × your billable hours is never less than the revenue you need. In the example, $90,000 ÷ 1,288 hours is $69.8758…, which rounds up to $69.88 and brings in $90,005.44.
- Should I charge every client this rate?
- It's the rate that covers the numbers you entered if you bill all your billable hours at it. You can quote more for some work, such as rush jobs. If you quote less, the rest of your billable hours have to make up the difference.
- What should I count as business costs?
- The yearly cost of running the business: software and subscriptions, equipment, insurance, office or coworking space, accounting help, training and marketing. Don't include your own pay; that's the first input.
Bill Your Hours with Billed
Create an hourly rate project in Billed and set its hourly rate: Billed tracks the charge on each task as you log time, and you can invoice one or more tasks from the project dashboard.
No credit card required.