How the rate is calculated
Billable hours = (52 − Weeks off) × Hours per week × Billable %
Revenue needed = (Salary × (1 + Extra SE tax) + Benefits + Expenses) × (1 + Profit %)
Hourly rate = Revenue needed ÷ Billable hours
Revenue needed = (Salary × (1 + Extra SE tax) + Benefits + Expenses) × (1 + Profit %)
Hourly rate = Revenue needed ÷ Billable hours
Example: To match an $80,000 salary, you add $10,000 of benefits, $6,000 of expenses and 7.65% extra self-employment tax — $102,120 a year. With 6 weeks off and 65% of 40 hours billable, you have 1,196 billable hours, so the minimum rate is $85.38 an hour (about $683 a day). The equivalent employee earns $38.46 an hour.
Raising your rate
- Specialize: niche expertise commands higher rates than general work.
- Raise rates for new clients first, then existing clients once a year.
- Offer retainers or packages to smooth income and reduce sales time.
Pricing products instead of time? Use the markup calculator.
Frequently asked questions
How do I calculate my freelance hourly rate?
Add your target salary, the benefits and expenses an employer would normally cover, and extra self-employment tax. Divide by the hours you can actually bill in a year — usually far fewer than 2,080.
How many billable hours does a freelancer have?
After vacation, holidays, sick days, marketing, admin and invoicing, many freelancers bill 1,000–1,400 hours a year. 46 working weeks × 40 hours × 65% billable is 1,196 hours.
What is the extra self-employment tax?
Employees pay 7.65% for Social Security and Medicare and the employer pays another 7.65%. Self-employed people pay both halves — 15.3% on 92.35% of net earnings — so the calculator adds the employer half by default.
Should I charge by the hour or by the project?
Use your hourly rate to price projects: estimate the hours, multiply, and add a buffer. Project pricing rewards you for working efficiently.