Hourly rate calculator
Enter the income you want to earn, your yearly business expenses, the hours you can bill each week and the weeks you work in a year. The calculator returns the hourly rate that covers all of it plus your profit margin, and shows the matching day rate and annual revenue.
How the rate is calculated
Hourly rate = (target annual income + annual business expenses) ÷ (billable hours per week × working weeks per year), then × (1 + profit margin). The day rate is the hourly rate × 8, the working day most clients assume, and annual revenue is the hourly rate × your billable hours for the year.
Example: $80,000 of income plus $12,000 of expenses is $92,000. At 25 billable hours a week for 46 weeks, or 1,150 hours, that is $80.00 an hour. A 10% margin makes it $88.00 an hour, a $704 day rate and $101,200 of annual revenue.
Billable hours decide the answer
Freelancers typically bill 50% to 75% of the hours they work. The rest goes on finding clients, proposals, bookkeeping and invoicing. A 40-hour week usually means 20 to 30 billable hours, and 52 weeks shrink to 46 to 48 once you take out vacation, public holidays and sick days.
Bill 20 hours a week instead of 25 and the example rate rises from $88 to $110 an hour.
Costs an employer used to cover
An employer pays half of your Social Security and Medicare taxes and often part of your health insurance. Self-employed, you pay all of it: the IRS self-employment tax rate is 15.3% (12.4% Social Security plus 2.9% Medicare), on top of income tax. Put insurance, retirement contributions, software, equipment and accounting fees into expenses.
Then compare the result with what clients pay for similar work. If your number is well above the market, cut costs, bill more hours or specialize to justify it. When you're ready to bill, the hourly invoice template and timesheet invoice generator turn tracked hours into an invoice.
Frequently asked questions
What share of my hours will be billable?
Most freelancers bill 50% to 75% of the hours they work. New freelancers building a client list tend to sit at the lower end, because sales and admin take more time. Track your hours for a month before you commit to a figure, and use the lower number if you're unsure.
Should my target income include taxes?
Treat it like a salary: the amount you want to earn before income tax. Then add the costs an employer would normally carry, such as the employer half of payroll taxes, health insurance and retirement contributions, to your expenses. An accountant can help you set the figure.
What profit margin should I add?
The margin is a buffer for quiet months, late payers and reinvesting in the business. Even 10% adds $9,200 a year in the example above, and a larger margin makes sense if clients often pay late.