How this calculator works
Freelancers often set rates by guessing at what sounds competitive, then discover the number doesn't actually cover a full year's expenses and time off. This calculator works backward from a target take-home salary: it adds business expenses, builds in a profit margin, and divides by the number of hours you can actually bill in a year — not the number of hours you work.
That distinction matters. Billable hours are the hours a client pays for. Hours spent on invoicing, marketing, proposals, professional development, and unpaid pitching are real work but are not billable, so a freelancer working a 40-hour week might only have 20-25 billable hours in it. Enter your realistic billable hours per week, not your total working hours, for an accurate rate.
The formulas
Working weeks = 52 − weeks offEffective annual billable hours = working weeks × billable hours per weekRevenue needed = (target salary + annual business expenses) ÷ (1 − profit margin)Minimum hourly rate = revenue needed ÷ effective annual billable hoursDay rate = minimum hourly rate × (billable hours per week ÷ 5), assuming a 5-day work weekThe profit margin here is applied to revenue (not marked up on cost): a 15% margin means 15% of total revenue is left over after covering salary and expenses, the same convention used for gross margin in a small business.
Worked example: $80,000 target salary
- $80,000 target salary + $8,000 annual business expenses, 4 weeks off, 25 billable hours/week, 15% profit margin.
- Working weeks = 52 − 4 = 48. Effective annual billable hours = 48 × 25 = 1,200 hours.
- Revenue needed = (80,000 + 8,000) ÷ (1 − 0.15) = 88,000 ÷ 0.85 ≈ $103,529.
- Minimum hourly rate = 103,529 ÷ 1,200 ≈ $86.27/hour, or a day rate of about $431.37 assuming a 5-day billable week.
Frequently asked questions
Why is my billable-hours number so much lower than 40 hours a week?
Because unpaid work — client acquisition, admin, invoicing, learning new tools — is real time that a full-time employee's salary already covers, but a freelancer's rate has to cover it too. Many freelancers find their realistic billable hours land between 20 and 30 a week even when they work full-time.
What counts as a business expense here?
Anything the business itself pays for that an employer would normally cover for a salaried employee: software subscriptions, business insurance, equipment, a portion of home-office costs, accounting or bookkeeping fees, and similar recurring costs. Personal living expenses are not business expenses — they are already covered by the target salary figure.
Why include a profit margin if I'm the only person in the business?
A margin covers the gap between a rough estimate and reality: slow months, scope creep, bad debt from a client who doesn't pay, and the cost of eventually reinvesting in the business (new equipment, training, marketing). Without it, a single slow quarter can erase the target salary entirely.
How is a day rate different from hourly rate × 8?
This calculator derives the day rate from your billable hours per week divided by a 5-day week, not from a fixed 8-hour assumption, since freelancers rarely bill a full 8 hours in a single day. If your billable hours per week are, say, 25, the day rate reflects 5 billable hours per working day, not 8.
How many weeks off should I enter if I don't know my exact schedule?
Enter your best realistic estimate of weeks you won't be billing clients, including vacation, holidays, sick days, and slow stretches between projects — not just the vacation days on your calendar. Since working weeks are calculated as 52 minus weeks off, and effective annual billable hours as working weeks times billable hours per week, understating your weeks off inflates your effective billable hours and therefore understates the rate you actually need to hit your target salary.