Freelance Target Hourly Rate
Work backwards from what you need to earn rather than forwards from what you think you can charge. This takes your target net income, your business expenses, and your genuinely billable hours, and returns the rate that arithmetic requires.
How to use it
- Enter your desired annual net income.
- Enter your annual business expenses.
- Enter billable hours per week — the hours you can actually invoice.
- Read the required hourly rate and gross revenue needed.
Billable hours are the number people get wrong
A 40-hour week does not contain 40 billable hours, and assuming it does is the single largest error in freelance pricing.
Unbillable work is not optional overhead you can eliminate with discipline. It is proposals and pitches, contract negotiation, invoicing and chasing payment, bookkeeping, client communication that falls outside scope, marketing, portfolio work, and keeping your skills current. All of it is necessary and none of it invoices.
Realistic utilisation for an established solo freelancer is 50 to 65 percent, which is 20 to 26 billable hours in a 40-hour week. Below about 50 percent you are spending more time running the business than doing the work; consistently above 75 percent usually means you are not doing enough business development and there is a gap coming.
The effect on rate is direct. A $100,000 revenue target across 30 billable hours a week needs about $77 an hour. The same target across 20 hours needs about $115. Set the rate from 40 hours and you have committed yourself to a 60-hour week to hit the number.
Weeks you do not work
Employees are paid through vacation, illness, and public holidays. Freelancers are not, and the shortfall has to be priced in rather than absorbed.
Four weeks of vacation, ten public holidays, and a realistic allowance for sick days and slow periods leaves roughly 45 working weeks out of 52 — about 13 percent fewer than the calendar suggests. A rate set on 52 weeks is 13 percent short before anything else goes wrong.
Slow periods deserve explicit planning rather than optimism. Most freelance work is seasonal to some degree, and December and August are quiet in a great many markets. Pricing on the assumption of even demand across the year produces a cash crunch at a predictable time.
Expenses, including the ones that do not feel like expenses
The expense figure should include everything you pay because you work for yourself.
- Self-employment tax. In the United States this is 15.3 percent on net earnings, covering both halves of Social Security and Medicare. It is levied on top of income tax and is the item most often forgotten at the first tax deadline.
- Health insurance at individual rates, with no employer contribution.
- Retirement contributions, entirely self-funded and with no match.
- Software, subscriptions, hardware replacement, and professional licences.
- Liability and professional indemnity insurance where your field requires it.
- Accounting, legal review of contracts, and business registration.
- Workspace, whether a coworking membership or the attributable share of home costs.
- Continuing education, which in fast-moving fields is not discretionary.
The rate is a floor, not a price
What comes out of this is the minimum rate consistent with your income goal. What you charge should usually be higher, and hourly billing is often the wrong structure entirely.
The problem with hourly pricing is that it caps your income at your available hours and penalises you for being good at the work. Finishing in six hours what a slower practitioner takes twelve to do means earning half as much for the same result, which is a strange incentive.
Project and value-based pricing decouple fee from time. A fixed fee for a defined deliverable lets efficiency accrue to you, and gives the client a known cost instead of an open meter. Retainers add predictability on both sides. The hourly figure remains useful as an internal check — if a fixed-fee project works out below your floor rate, that is worth knowing — but it does not have to be what appears on the invoice.
Finally, price rises are structural in freelancing. Costs rise, skills improve, and long-standing clients tend to be the ones paying the oldest rates. Reviewing rates annually and applying increases to new work is far easier than attempting a large correction after five years.
At a glance
| Method | Target net income plus expenses, divided by annual billable hours |
|---|---|
| Realistic utilisation | 50 to 65 percent of working hours |
| Working weeks | About 45 of 52 after leave and slow periods |
| Transmitted | Nothing, income figures stay in the page |
Frequently asked questions
How many billable hours should I assume?
20 to 26 in a 40-hour week, meaning 50 to 65 percent utilisation. Proposals, invoicing, bookkeeping, and marketing all take real time and none of it invoices.
How many weeks should I plan to work?
About 45. Four weeks vacation, public holidays, sick days, and predictable slow periods remove roughly 13 percent of the calendar year.
What is self-employment tax?
In the United States, 15.3 percent of net earnings covering both employer and employee shares of Social Security and Medicare. It applies on top of income tax.
Should I bill hourly at all?
Often not. Hourly billing caps income at available hours and penalises efficiency. Use this rate as an internal floor and price projects or retainers on deliverables.
Read more
Pricing and pay — Margin is not markup, a 20 percent discount can halve your profit, and a 40-hour week does not contain 40 billable hours.