What hourly rate covers income target, business costs and non-billable time?
A sustainable freelance rate spreads the desired income and business costs across billable hours, not every hour worked. Utilisation and unpaid time therefore have a direct effect on the result.
Finding the hours that can actually be billed
The target take-home income is grossed up using the entered tax and contribution rate, then annual business expenses are added to find required revenue.
Billable hours equal weekly billable hours multiplied by working weeks. Required revenue divided by those hours gives the hourly rate; the day rate simply multiplies it by eight.
Why utilisation changes the required rate
The base hourly rate is the amount needed under the entered schedule before items not included. Fewer billable weeks or hours raise the rate because the same annual requirement is recovered from less client time.
Annual requirement spread across billable capacity
Pre tax income = Target income ÷ (1 − Tax% ÷ 100)Revenue needed = Pre tax income + ExpensesBillable hours = Hours per week × Weeks per yearHourly rate = Revenue needed ÷ Billable hoursA year of target income and business costs
The default inputs combine annual income target and expenses, then reduce total working capacity to the billable hours represented by the calculator.
The costs hidden by a salary shortcut
A salary divided by 2,080 hours ignores holidays, administration, sales time, equipment and benefits. That shortcut usually understates a freelance requirement.
- Income target and expenses are annual and use the same currency.
- The entered billable schedule is achievable across the selected working weeks.
- Tax, profit buffer and platform fees are excluded unless entered.
Calculations related to freelance hourly rate
The following tools examine neighbouring parts of the same calculation without changing the inputs or assumptions used above.
Quick answers
Frequently asked questions
Why should billable hours be lower than total working hours?
Administration, sales, holidays and unpaid tasks may reduce the hours that can actually be invoiced; the calculator uses whatever billable figure the user enters.
How does the tax-rate input affect the required rate?
The target take-home income is divided by one minus the tax rate, increasing the pre-tax revenue requirement.
Does the hourly rate include business expenses?
Yes. Entered annual expenses are added before the required revenue is divided by billable hours.
Educational content only. This guide is not financial advice.