How to use the freelance rate calculator
- 1Enter the yearly income you want to keep after business costs and tax.
- 2Add your yearly business expenses: software, equipment, insurance, accounting, workspace, training and similar costs.
- 3Enter an estimated tax rate on your profit. Include income tax and any self-employment or social contributions; check your local rates if unsure.
- 4Enter the hours per week you can bill to clients and the weeks you will work in a year, after holidays and sick days.
- 5Add an optional profit buffer for slow months and savings, then read your minimum hourly rate, day rate and revenue targets.
How the rate is worked out
Start from what you want to keep. Tax is charged on profit, so divide your take-home target by one minus your tax rate to get the profit you need before tax. Add your business expenses to get the revenue you need, then add any profit buffer on top.
Divide that revenue by your billable hours for the year. The answer is the lowest hourly rate that reaches your target if you bill every one of those hours.
Revenue needed = (Take-home ÷ (1 − Tax rate) + Expenses) × (1 + Buffer) Hourly rate = Revenue needed ÷ (Billable hours per week × Weeks worked)
Why billable hours are lower than working hours
A freelancer does far more than client work. Finding clients, writing proposals, sending invoices, chasing payments, bookkeeping, learning and admin all take time that nobody pays for directly.
A common guideline is that 50% to 70% of working hours end up billable. On a 40-hour week that is about 20 to 28 billable hours. If you are new and still building a client base, start near the low end; if you have steady retainer clients, you may bill more.
Weeks worked and day rates
Employees are paid for holidays, sick days and public holidays. A freelancer is not, so count only the weeks you expect to bill. Taking out four weeks of vacation, public holidays and a few sick days often leaves around 44 to 47 weeks.
Many contractors quote a day rate instead of an hourly one. This calculator uses an 8-hour day. If your clients expect a 7 or 7.5-hour day, multiply your hourly rate by that number instead.
Day rate = Hourly rate × 8
A minimum, not a market price
The result is the floor below which you lose money against your own target. What clients will pay depends on your field, experience and location, so compare it with going rates for your kind of work. If the market rate is well above your minimum, charge the market rate.
If you are registered for sales tax, VAT or GST, add it on top of this rate when you invoice. It is collected for the government and is not part of your income.
Worked example
A freelance designer wants to take home $60,000 a year. Business costs are $6,000, the estimated tax rate on profit is 25%, and they expect to bill 25 hours a week for 46 weeks, with a 10% buffer.
| Profit needed before tax | $80,000.00 |
| Tax set aside (25%) | $20,000.00 |
| Revenue before buffer | $86,000.00 |
| Revenue with 10% buffer | $94,600.00 |
| Billable hours per year | 1,150 |
| Minimum hourly rate | $82.26 |
| Day rate (8 hours) | $658.09 |
The designer needs to charge at least $82.26 an hour, or $658.09 a day. Without the buffer the floor would be $74.78 an hour. Billing 25 of 40 working hours is about 62% of the week, inside the usual 50% to 70% range.