How to Set a Freelance Hourly Rate
Taking your old salary, dividing by 2,080 and charging that is the most common pricing mistake new freelancers make. The rate has to cover far more than the salary did.
What an employer was paying for
As an employee, part of your compensation never appeared in your hourly rate:
- Paid vacation, holidays and sick days
- Health insurance and retirement contributions
- The employer's half of Social Security and Medicare (7.65% of wages in the U.S.)
- Equipment, software, office space and training
- Time spent in meetings, admin and between projects, all paid
A freelancer pays for all of it, and is paid only for billable hours.
Billable hours are fewer than you think
Finding clients, writing proposals, invoicing, bookkeeping and learning are real work, but nobody pays for them by the hour. Many freelancers bill 20 to 30 hours in a 40-hour week. Add vacations, holidays and sick days, and 46 working weeks a year is a reasonable starting assumption.
25 billable hours × 46 weeks = 1,150 billable hours a year, a little over half of an employee's 2,080 paid hours.
The method
- Income you want to keep. Start with the take-home income you need, or the salary you would accept in a job.
- Add taxes. Divide by (1 − your tax share). In the U.S., self-employed people pay self-employment tax of 15.3% on most net earnings (both halves of Social Security and Medicare) on top of income tax. Setting aside 25% to 30% is a common starting point; confirm your figure with a tax professional.
- Add business expenses. Software, equipment, insurance, health coverage, accounting, a share of your phone and internet.
- Divide by billable hours. Billable hours per week × working weeks per year.
An example
Target income: $60,000. Tax share: 25%, so $60,000 ÷ 0.75 = $80,000 before tax. Expenses: $6,000. Revenue needed: $86,000. Billable hours: 25 × 46 = 1,150.
Minimum rate: $86,000 ÷ 1,150 = $74.78 an hour.
An employee earning $60,000 makes $28.85 an hour. The freelance floor is more than two and a half times that, and it includes no profit margin and no cushion for a slow month.
The floor is not the price
The calculation gives the rate below which freelancing pays less than a job. The price you charge also depends on what clients in your field pay, the value of the result to them, and your experience. Some freelancers quote per project instead of per hour once they know how long a type of job takes; the hourly floor still tells them the least a project must earn.
Day and project rates
Day rate = hourly rate × billable hours per day. At $75 an hour and 5 billable hours a day, that is $375. For a project, estimate the hours, multiply by the rate, and add a margin for revisions and communication.
Revisit the rate
Recalculate once a year, or when expenses change. If you are fully booked for several months, that is a sign the rate is below what the market will pay.
Try your own figures in the freelance rate calculator.
Last reviewed October 2, 2026. General information, not financial, tax or legal advice.