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Freelance Rates: Income ÷ Billable Hours (Not ÷ 2,080)
Career · 6 min read · Last updated September 2026
The formula
Worked example: you want 1,500,000 a year after a 1,200,000 salary-equivalent plus 300,000 for insurance, software, taxes and dead time. Working 1,920 hours a year (48 weeks × 40) at 60% billable = 1,152 hours. Rate = 1,500,000 ÷ 1,152 ≈ 1,302.
Why 60% utilization
Sales calls, proposals, invoicing, learning and admin are real work that generates no invoice. Early-career freelancers often overestimate billable share (70–80%) and underprice as a result; 55–65% is the honest planning band once a client pipeline exists. Newer freelancers with empty pipelines should bill higher rates, not lower — every hour is scarce.
The salaried comparison, done right
| Basis | Math | Equivalent |
|---|---|---|
| Naive (salary ÷ 2,080) | 1,200,000 ÷ 2,080 | 577/hr |
| Reality (target ÷ billable) | 1,500,000 ÷ 1,152 | 1,302/hr |
Freelance rates at "salary equivalence" quietly donate your benefits, taxes and unbilled hours to clients. The Freelance Hourly Rate Calculator runs the full computation with your own inputs; the Contractor vs Employee tool compares total packages side by side.
Try the calculators
Worked example: Freelance Hourly Rate at its default inputs
Open Freelance Hourly Rate and press calculate without editing a field. What comes back is the table and result below, so the hourly-rate numbers here are checkable in one click.
| Input | Default |
|---|---|
| Desired Annual ($) | 100000 |
Result: $68.68/hr
Sensitivity: Desired Annual ($) from half to one-and-a-half times
The table below varies desired annual ($) alone — half, the default, and half again.
| Desired Annual ($) | Result |
|---|---|
| 50,000 | $34.34/hr |
| 100,000 | $68.68/hr |
| 150,000 | $103.02/hr |
Read the three rows as a range: the spread between them is how much the answer depends on desired annual ($) alone, with everything else held still.
Related guides
Salary divided by hours is not your rate
The usual shortcut divides annual salary by 2,080 hours. That number is the cost of an hour to your employer, not the value of an hour to you: it ignores unpaid overtime, the commute, and the fact that a salaried role usually includes work you would not do for free.
Divide by the hours you actually work in a year — including the evenings — and add the value of benefits you would otherwise buy (health cover, pension contribution, equipment). The honest comparison number is usually higher than the naive one.
The employer cost multiplier
A salaried employee costs the employer roughly 1.2-1.4 times the gross salary once payroll taxes, benefits, equipment, software and admin are included. That is why contractors charge more per hour than employees earn per hour without being overpaid.
If you are pricing freelance work against a salary you used to earn, apply that multiplier before comparing. Ignoring it is the most common reason a new freelancer underprices by 30% and only notices a year later.
Billable hours are a fraction of worked hours
Freelancers rarely bill more than 60-70% of their working time. Admin, invoicing, sales, learning and gaps between projects are real hours that earn nothing, so the billable rate has to cover them.
That is the arithmetic behind the common advice to set a freelance rate at roughly twice the equivalent hourly wage. It is not a markup on skill — it is the cost of the unbilled hours.
A floor, a target and a walk-away number
Three numbers are more useful than one. The floor covers costs and the minimum you need to stay solvent; the target is what you quote; the walk-away is the point below which the work damages you financially or blocks better work.
Revisit all three when your costs change, and raise the target for new clients before raising it for existing ones. Long-standing clients can be moved with notice and a reason; new clients only ever see the current number.
Review all three once a year, and after any large change in costs. A rate set two years ago against a different rent and a different software stack is a number you have outgrown without noticing, and the gap is paid by your evenings.
Frequently asked questions
How do I calculate my freelance hourly rate?
Add your target income to business costs, then divide by billable hours: working hours × utilization. Example: 1,500,000 ÷ 1,152 (60% of 1,920 hours) ≈ 1,302 per hour.
What percentage of a freelancer’s hours are billable?
Plan on 55–65% once you have steady clients; proposals, admin and sales consume the rest. Newer freelancers effectively have fewer billable hours, which argues for higher rates, not lower.
Why is my freelance rate so much higher than my old salary rate?
A salary hides taxes, benefits, paid leave and all the hours that never get billed. Dividing salary by 2,080 ignores all of it — your rate must cover those costs plus profit.
Should I charge hourly or per project?
Hourly is the honest starting point; per-project pricing shifts efficiency gains to you but requires experience estimating scope. Compute your hourly minimum first either way — never quote below it.
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