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Hourly rate calculator: how it works
Work out the revenue you need (take-home pay grossed up for tax, plus business costs) and divide it by the hours you can actually bill in a year. $60,000 take-home at 25% tax and $6,000 of costs needs $86,000 of revenue; over 1,288 billable hours that is $66.77 an hour.
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The formula
Revenue needed = take-home pay ÷ (1 − tax share) + business costs. Billable hours = (52 − weeks off) × hours a week × billable share. Hourly rate = revenue needed ÷ billable hours.
With the defaults: $60,000 ÷ 0.75 = $80,000, plus $6,000 costs = $86,000. Billable hours = 46 × 40 × 70% = 1,288. Rate = $86,000 ÷ 1,288 = $66.77, so charge at least $67 an hour, or $534 a day.
How to use the hourly rate calculator
- Pick your currency and enter the take-home pay you want a year.
- Add your yearly business costs and the share of profit to set aside for tax.
- Enter weeks off, hours a week and the share of hours you can bill.
- Read the hourly rate, the day rate and the yearly revenue target.
Checking your rate
- Compare with what clients pay for similar work in your market; a rate far below it signals inexperience, not value.
- Round up, and review it every year as costs and experience grow.
- Fixed-price quotes still need an hourly rate underneath: estimate the hours, add contingency, multiply.
- Tax set-aside is a rough share of profit; your accountant can give a better figure for your country.
Questions people ask
How do I calculate my freelance hourly rate?
Work out the revenue you need (take-home pay grossed up for tax, plus business costs) and divide it by the hours you can actually bill in a year. $60,000 take-home at 25% tax and $6,000 of costs needs $86,000 of revenue; over 1,288 billable hours that is $66.77 an hour.
Why is the rate so much higher than my old salary per hour?
An employer pays for holidays, sick days, equipment, pension and the hours you spend on admin. As a freelancer you pay for all of that from what you bill, and only part of your working week is billable.
What billable share should I use?
Many freelancers bill 60–75% of their working hours. The rest goes on finding work, admin, invoicing and learning. If you are just starting out, assume less.
How is the day rate worked out?
It is the hourly rate × 8 hours. If your clients expect a 7.5-hour day, multiply by 7.5 instead.