How to calculate your freelance hourly rate (with a worked example)

Many freelancers set their hourly rate by looking at what others charge. That tells you what the market accepts, but not whether the rate actually pays your bills. The calculation below starts from what you want to keep and works backwards. It takes about ten minutes.

Step 1: Start with the net income you want per year

Write down the amount you want to keep after tax and social contributions. In our example: 45,000.

Step 2: Add tax and social contributions

Freelancers pay income tax and social contributions out of their revenue. Estimate the share for your country and situation (ask your accountant or tax office, rules differ a lot). In the example we assume 35 %.

Gross income needed = net income / (1 - share)

45,000 / 0.65 = 69,230.77

Step 3: Add your business costs

Software, hardware, insurance, accounting, training, phone, coworking. Add them up for a full year. Example: 6,000.

69,230.77 + 6,000 = 75,230.77 revenue needed per year.

Step 4: Count your real billable hours

This is where most rates go wrong. You do not bill 52 weeks of 40 hours. Take off holidays, public holidays and sick days, then take off the time you spend on admin, sales and learning.

Example: 220 working days x 8 hours x 60 % billable = 1,056 billable hours per year.

Step 5: Divide

75,230.77 / 1,056 = 71.24 per hour

That is your break-even rate: the minimum that reaches your goal if everything goes to plan.

Step 6: Add a buffer

Clients pay late, projects slip, a quiet month happens. A 10 % buffer gives:

71.24 x 1.1 = 78.37 per hour, or about 626.92 per 8-hour day and 6,896.15 per month on average.

Common mistakes

Counting 100 % of your hours as billable. 50 to 70 % is more typical once you count admin and finding clients.
Forgetting costs that come once a year, like insurance or a new laptop.
Mixing up net and gross. Your goal is what you keep, your rate has to cover what you pay.
Never updating the rate. Recalculate once a year or when your costs change.

Check your own numbers

You can do this on paper, or use our free spreadsheet, which does the steps above automatically: Free Freelancer Rate Calculator LITE. Enter your own values; the example values are only there to show how it works.

If you also want project quotes, invoices and payment tracking in one place, the Freelancer Business Kit (29 EUR) includes the full rate calculator.

This article was written with AI assistance and the numbers were checked by recalculation. It is general planning information, not tax, legal or financial advice.