How the hourly rate formula works
The calculator uses the standard freelance pricing formula:
Hourly rate = (Target income + Business expenses) ÷ Billable hours per year × (1 + Buffer %)
Billable hours per year = billable hours per week × working weeks per year. The buffer protects you against the things that always happen: a client who pays late, a quiet January, a laptop that dies.
Worked example
Sara is a freelance designer. She wants to earn $60,000 before tax, spends about $6,000 a year on software, insurance and a co-working desk, bills 25 hours a week and works 46 weeks a year.
- Billable hours: 25 × 46 = 1,150 hours
- Break-even rate: ($60,000 + $6,000) ÷ 1,150 = $57.39/hour
- With a 15% buffer: $57.39 × 1.15 = $66/hour
If Sara charged the $40/hour that "felt right", she would earn only $46,000 in revenue, and after expenses just $40,000 – a third less than her goal.
Why billable hours are lower than you think
A 40-hour week does not mean 40 billable hours. Surveys of freelancers consistently find that only 50–65% of working time is billable. The rest goes to finding clients, writing proposals, invoicing, bookkeeping, learning, and email. If you are new, assume 20 billable hours a week; experienced freelancers with repeat clients can reach 30.
Hourly vs project pricing
Even if you quote fixed prices, knowing your hourly rate is essential: it is how you estimate a project price. Multiply the estimated hours by your rate, then add a contingency for revisions. If a client's budget is below that number, you can decide to reduce scope rather than your rate. Use the quote generator to send the itemized proposal, and the billable hours calculator to tally up the time you spent.
Frequently asked questions
Should I charge more than the calculator says?
The result is your floor, not your ceiling. Market rates for your skill and location, your experience and the value you deliver can all justify a higher rate. Never charge less than the break-even figure for long.
Does the target income include taxes?
Enter your income before tax. Income tax and self-employment tax (in the US, 15.3% of net earnings) are paid out of that figure, so set the target high enough to cover them.
How many weeks should I enter?
Start from 52 and subtract vacation (2–4 weeks), public holidays (about 2 weeks) and a few sick or slow weeks. 44–48 is realistic for most freelancers.
What counts as a business expense?
Anything you pay to run the business: software subscriptions, computer and equipment, phone and internet share, insurance, accountant fees, co-working or home office costs, marketing, training and bank fees.