Hourly rate calculator
How to calculate an hourly rate for freelance or consulting work — the formula, how to account for taxes and non-billable time, worked examples, and when to use hourly vs project pricing. The hourly rate formula: (annual income goal + annual expenses + self-employment taxes) ÷ billable hours per year = minimum hourly rate. Most freelancers target a buffer of 10–20% above that minimum to account for scope changes and missed estimates. Accounting for non-billable time: if you work 40 hours per week but only 25 are billable, your effective billable hours per year are roughly 1,200–1,300. Divide your total income need by that number, not by 2,000. Ignoring non-billable time is the most common reason freelancers undercharge. Accounting for self-employment taxes: as a self-employed person you pay both the employee and employer sides of Social Security and Medicare taxes — roughly 15.3% of net profit on top of income tax. Build at least 25–30% of gross income into your rate to cover taxes. Worked example: a freelancer targeting $80,000 take-home with $15,000 in expenses and a 28% tax buffer needs $80,000 + $15,000 + ~$26,600 in taxes = roughly $121,600 total. At 1,300 billable hours per year, that's a minimum rate of approximately $93/hour. Hourly vs project pricing: hourly billing is transparent and easy to explain, but it penalizes efficiency. Project pricing lets fast, experienced practitioners earn more per hour of actual work. Many freelancers start hourly and move to project pricing as they gain experience.