The rate that actually replaces a salary
The formula is short. The honesty is in the inputs:
hourly rate = (target income + business expenses) ÷ true billable hours
Every term matters. Target income is what you want to take home before personal tax. Business expenses are everything an employer used to absorb. And billable hours, the number everyone gets wrong, are the hours a client actually pays for, not the hours you work.
Worked example: the $38 trap and the $78 truth
Say you want $80,000 a year and your business costs $10,000 to run. The naive calculation divides $80,000 by 2,080 hours (40 × 52) and announces $38/hour. The honest one notices that you will bill perhaps 25 hours in a 40-hour week, the rest goes to finding clients, proposals, invoicing, email and admin, and that after holidays, sick days and gaps between projects you will work about 46 weeks:
| Naive | Honest | |
|---|---|---|
| Income target | $80,000 | $80,000 + $10,000 expenses |
| Hours | 2,080 (40 × 52) | 1,150 (25 × 46) |
| Required rate | $38/hour | ~$78/hour |
Double. Not because freelancers are greedy, because the naive figure quietly assumes zero expenses and 2,080 billable hours, and both assumptions are false. Charge $38 and you will work full weeks to earn roughly half your target, then wonder where the money went.
The billable-hours honesty check
Unbillable time is not slacking; it is the job. Client acquisition, scoping calls, proposals, revisions beyond scope, bookkeeping, professional development, and the email that surrounds all of it, none of it invoices. Established freelancers typically bill 20–30 hours of a full working week. If you plan on 35+ billable hours, you are planning to do the unbillable work at midnight, and your rate is subsidised by your evenings. Put a real number in the calculator; 25 is a defensible default.
Expenses: the invisible payroll
- Software, hardware and subscriptions
- Insurance, accounting and legal
- Workspace, co-working fees or the home-office share
- Marketing, portfolio and platform fees
- Self-funded retirement and the employer-side taxes you now pay yourself
These routinely total 10–20% of target income. The calculator adds them to the income target because that is where they belong, in the rate, not silently deducted from your pay.
Day rates and raises
For workshop and consulting engagements, quote a day rate: the convention is day rate = 8 × hourly, about $624 in the example, usually rounded to something clean. Since a booked day excludes all other clients, pricing slightly above 8× is defensible; below it is a discount.
When demand fills your calendar, resist adding hours, raise the rate. Hours have a hard ceiling and a burnout tax; a rate increase compounds across every future engagement. Being consistently booked solid is the market telling you the price is too low.
Cross-checking the number
It is worth sanity-checking your rate against employment: the salary calculator converts your target into the equivalent employed wage so you can see the freelance premium explicitly. If you bill by tracked time, the time card calculator totals the week accurately. And if your work carries direct project costs, API usage, for instance, which the AI token cost calculator estimates, price them into the engagement, not out of your margin.