How to Calculate Your Freelance Hourly Rate

The most common way to set a first freelance rate goes like this: take your old salary, divide it by 2,080 hours (40 hours × 52 weeks), maybe add a bit. It feels reasonable, and it is almost always too low, often by half.

The reason is simple: as an employee, someone else paid for your vacation, your sick days, your equipment and the hours you spent in meetings that nobody billed. As a freelancer, your rate has to pay for all of that. Here is how to calculate a rate that does. If you want the result right away, the freelance hourly rate calculator runs the same formula with your numbers.

The formula

Hourly rate = (target income + business costs + buffer) ÷ billable hours per year

Four inputs. Three of them are easy. The last one, billable hours, is where most calculations go wrong.

Step 1: Your target income

Start with the gross annual income you want before income tax. Think of it as the salary you would pay yourself.

Two things employers usually cover that you now pay yourself:

• Health insurance and retirement savings. Depending on your country, these can add 15–25% on top of what you were used to.
• Paid time off. Your vacation is now unpaid, so the rate has to earn it in advance. (We handle this in step 3 by counting fewer working weeks.)

If you are not sure, take your last salary and add 20% as a starting point.

Step 2: Your business costs

Everything you pay to be able to work, per year. A typical list for a solo freelancer:

• Software and subscriptions
• Hardware, spread over its lifetime (a €2,400 laptop over three years is €800 a year)
• Coworking or a share of your home office
• Accountant and tax advisor
• Business insurance
• Training, books, conferences
• Marketing: website, portfolio, travel to meet clients

Freelancers regularly underestimate this. If you have never added it up, block an hour and go through last year's bank statements.

Step 3: Your realistic billable hours

This is the number that makes or breaks your rate. Start with the year and subtract everything that is not client work.

Working weeks. 52 weeks, minus vacation, public holidays and sick days:

Billable share. Not every working hour is billable. Sales, proposals, invoicing, bookkeeping, your own marketing and learning all take time. For a solo freelancer, 60–70% billable is realistic; experienced freelancers with steady clients sometimes reach 75%. If you have never measured it, track your time for a month and look at the split.

With 40 hours a week: 43 weeks × 40 hours × 65% ≈ 1,118 billable hours per year. That is barely more than half of the 2,080 hours in the salary calculation, which is exactly why the salary method fails.

Step 4: Add a buffer

Some months will be slow. A client will pay late, or a project will be cancelled. Add 10–20% to cover gaps between projects. The newer your business, the bigger the buffer should be.

A worked example

Let's put it together for a designer who wants €60,000 a year:

Round up to a clean number: €75 per hour, or €600 per day for an 8-hour day rate. The same person dividing €60,000 by 2,080 hours would have charged €29 and wondered all year why the money never quite worked.

The numbers are net of VAT or sales tax. If you have to charge it, it comes on top.

Check it against the market

The formula tells you what you need to charge. The market tells you what you can charge. Compare your number with:

• Rate surveys for your field and region
• What agencies charge for similar work (usually well above freelancers)
• What peers with similar experience tell you (ask, most people are happy to share)

If your calculated rate is above the market, look at the inputs again: fewer business costs, a higher billable share, or a narrower niche where you can charge more. If it is below the market, charge the market rate. There is no prize for being the cheapest.

Hourly, day rate or project price?

Your hourly rate is the foundation, but you do not have to sell it as an hourly rate:

• Hourly: simple and fair when the scope is unclear. Clients may watch the clock.
• Day rate: hourly rate × 8. Good for workshops and embedded work.
• Project price: estimated hours × hourly rate + 15–25% contingency. Rewards you for working efficiently, but only if your estimates are good.

The better your time data, the safer project pricing becomes. After a few projects you will know your personal estimation error and can build it into every quote.

When to raise your rate

• You are booked out for more than two months.
• Your last three proposals were accepted without any negotiation.
• Your costs went up: new equipment, insurance, inflation.
• You have added skills or specialized in a niche.

Raise rates for new clients first, then for existing ones with a notice period of a month or two. A short, friendly email is enough.

Know your real numbers

A rate is only as good as the hours behind it. Winnie tracks your time per client with a one-click timer and shows your hours per day and week, so you can see your real billable share and your effective rate on every project. See how time tracking works.