The Freelance Hourly Rate Formula That Actually Works
📑 Table of contents (3)
Most freelancers under-price because they divide desired salary by 40 × 52. That formula skips taxes, expenses, and the ~40% of your week that isn't billable. Here's the version that keeps you profitable.
The formula
Hourly rate = (Desired take-home + Business expenses) ÷ (1 − Tax rate) ÷ (Billable hours per week × Weeks worked).
Realistic billable hours = 20–25 per week for solo freelancers. Realistic working weeks = 46–48 after holidays and downtime.
Worked example
Target take-home $70,000, expenses $6,000, tax 28%, billable 22 hrs/week, 47 weeks.
Pre-tax revenue needed = ($70,000 + $6,000) ÷ 0.72 = $105,556.
Annual billable hours = 22 × 47 = 1,034.
Hourly rate = $105,556 ÷ 1,034 ≈ $102/hr. That is the sustainable floor — not a stretch goal.
When to raise your rate
Booked 3+ months out — raise 15%.
Turning down more than 1 in 4 inquiries — raise 20%.
You've added a specialty or case study — raise 10–25% for new clients.
FAQs
Why is my calculated rate higher than local employees make?
Freelancers pay both halves of payroll tax, buy their own benefits, and have unbillable time. 2–3× the employee-equivalent is normal.
Should I charge hourly or fixed price?
Use the hourly rate as your internal floor, then quote fixed prices that hit that floor for the estimated hours + risk buffer.