How to Set a Freelance Hourly Rate
Work backwards from the income you need, through expenses, taxes and realistic billable hours.
4 min read
Step by step
- Add target income, business expenses and a tax allowance.
- Estimate billable hours honestly — usually 1,000–1,300 per year, not 2,080.
- Divide the revenue target by billable hours for the minimum rate.
- Example: $115,000 of needed revenue ÷ 1,200 hours ≈ $96 per hour.
Key takeaway: Your rate must cover the hours nobody pays you for.
Start from the income you need
Work backwards: target annual income + business expenses + taxes, divided by billable hours. If you need $80,000, spend $8,000 on software, insurance and hardware, and set aside 25% for tax, your revenue target is roughly $115,000.
Billable hours are the trap: of 2,080 working hours, freelancers typically bill only 1,000–1,300 after admin, marketing, and time off. Dividing $115,000 by 1,200 billable hours gives a required rate of about $96 per hour.
Why the rate feels high — and is right
A $96 freelance rate is not 'three times' a $32 salaried rate for the same work; it buys the same income while covering the employer-side costs a salary hides: taxes, insurance, equipment, unpaid vacation and the hours nobody pays you for.
If the market will not pay your computed rate, the fix is usually positioning and specialization, not discounting below sustainability.
Sanity checks
Compare against published rate surveys for your field, and against what agencies charge for similar work (their rate includes overhead you must also cover).
Revisit the number annually: expenses, demand and your own efficiency all move it.
Do it automatically
Minimum rate to charge to hit your income goal after expenses and time off.
Open the Hourly Rate Calculator