Skip to main content

DigitalCalculators.net

Menu

Hourly Rate Calculator

Work out the hourly rate you need to charge as a freelancer, contractor or consultant to reach your target income after business costs, benefits, extra payroll tax, time off and unbilled hours.

Results

ItemValue
This finds the rate needed to cover your target income and costs. Check it against what clients in your field pay. Income tax is not included because your target income is before income tax, like a salary.

Quick Answer

Add your target income, business costs, benefits and the extra payroll tax a self-employed person pays, then divide by the hours you can actually bill. For $75,000 of income, $8,000 of costs and $9,000 of benefits, working 40 hours a week for 46 weeks and billing 70% of the time (1,288 hours), you need about $75.88 an hour, about 2.1 times the $36.06 an employee earning $75,000 makes per hour.

Last updated: 10 November 2026 ·How we calculate this: costs plus target income divided by billable hours

How This Hourly Rate Calculator Works

Freelancers often set their rate by dividing the salary they want by 2,080 hours, the hours in a full-time work year. That leaves them short, because the self-employed pay their own benefits and business costs, pay both halves of Social Security and Medicare, take unpaid time off, and spend many hours on work they cannot bill, such as sales, admin and learning. Enter your target income, costs, time off and the share of hours you can bill, and the calculator gives the hourly and day rate you need.

Quick explanation: rate = everything you need to earn ÷ the hours you can bill.

  • Billable share: many freelancers bill only 50% to 75% of their working hours.
  • Payroll tax: the self-employed pay 15.3% instead of an employee’s 7.65%.
  • Result: freelance rates are often 1.5 to 2.5 times the equivalent employee hourly wage.

How to Use the Hourly Rate Calculator

  1. Enter the yearly income you want before income tax.
  2. Enter your business expenses and the benefits you pay yourself.
  3. Enter weeks off and working hours per week.
  4. Enter the share of hours you can bill and an optional profit margin.
  5. Press Calculate and read your hourly and day rate.

Freelance Rate Formula

  • Billable hours: (52 − weeks off) × hours per week × billable %
  • Extra payroll tax: 7.65% of target income (the half an employer would normally pay)
  • Revenue needed: (target income + expenses + benefits + extra payroll tax) × (1 + profit margin)
  • Hourly rate: revenue needed ÷ billable hours
  • Day rate: hourly rate × 8

Key Terms

  • Billable hours: hours you can charge to a client.
  • Utilization: billable hours as a share of all working hours.
  • Day rate: a price for a full working day, often 8 hours.
  • Self-employment tax: Social Security and Medicare tax of 15.3% paid by the self-employed.
  • Overhead: business costs that are not tied to one client.

Worked Example

A consultant wants $120,000 a year, has $15,000 of costs and $18,000 of benefits, works 35 hours a week, takes 8 weeks off, bills 60% of the time and adds a 10% margin.

  • Billable hours = 44 × 35 × 0.60 = 924
  • Extra payroll tax = 7.65% × $120,000 = $9,180
  • Revenue needed = ($120,000 + $15,000 + $18,000 + $9,180) × 1.10 = $178,398
  • Hourly rate = $178,398 ÷ 924 = $193.07; day rate $1,544.57

Real-Life Examples

  • New freelancers: $75,000 of income needs about $75.88 an hour, not $36.
  • Part-time freelancing: $50,000 at 30 hours a week, 80% billable, no extra tax, needs $46.01 an hour.
  • Raising rates: see how a higher billable share or fewer weeks off changes your rate.
  • Quotes: use the day rate for short projects.

Employee Hourly Wage vs Freelance Hourly Rate

  • Employee: paid for about 2,080 hours, including holidays; the employer pays benefits, equipment and half of payroll tax.
  • Freelancer: paid only for billable hours and pays all costs and both halves of payroll tax.
  • So the same yearly income needs a much higher freelance hourly rate.

Rate Needed by Income and Billable Hours

No profit margin added.

Target income1,000 billable hours1,300 billable hours1,600 billable hours
$40,000$60$46$38
$60,000$82$63$51
$80,000$103$79$64
$100,000$125$96$78
$120,000$146$112$91
$150,000$178$137$112

How to Set a Rate That Works

The calculated rate is a floor: the least you can charge and still reach your goal. Compare it with market rates for your skills, location and niche. If the market pays more, charge more; if it pays much less, you may need to cut costs, raise your billable share, specialize, or reconsider the target. Many freelancers move to day rates, project prices or retainers once they know their hourly floor, because those reward speed and expertise instead of time.

Typical business costs include software, equipment, insurance, accounting, a home office or coworking space, travel, marketing and training. Benefits include health insurance and retirement savings that an employer would normally fund. Remember that income tax is still owed on top: set aside money for quarterly estimated tax payments.

Common Mistakes to Avoid

  • Dividing by 2,080 hours. You will not bill every working hour.
  • Forgetting time off. Holidays and sick days are unpaid for freelancers.
  • Ignoring benefits. Health insurance and retirement savings come out of your rate.
  • Leaving out payroll tax. The self-employed pay both halves.
  • Pricing below the market floor. Low rates are hard to raise later.

Frequently Asked Questions

Add your target income, expenses, benefits and extra payroll tax, then divide by the hours you can bill in a year.

Often 1,000 to 1,500 a year, depending on time off and how much time goes to non-billable work.

At least the rate this calculator gives, and more if the market for your skills supports it.

Freelancers pay their own benefits, costs and payroll tax, and cannot bill every hour.

Many freelancers manage 60% to 75% of working hours.

Multiply by the hours in your working day, usually 8.

No. The target income is before income tax, like a salary; pay income tax from it.

A margin helps fund growth and slow months; 10% to 20% is common.

Many freelancers review rates every year and for each new client.

References & Sources

SourceUsed ForLink
IRS, Topic No. 554, Self-Employment Tax 15.3% Social Security and Medicare tax for the self-employed. https://www.irs.gov/taxtopics/tc554
US Small Business Administration, Calculate your startup costs Typical business expenses to plan for. https://www.sba.gov/business-guide/plan-your-business/calculate-your-startup-costs