HourlyfloorHow to calculate a freelance hourly rate that survives unpaid work
If you take a salary, divide it by 2,000, and call that your freelance rate, you will be busy and broke. Employees get paid for meetings, sick days, and the hour spent resetting a password. You do not.
A rate is just a machine with four inputs: the money you need to keep, the hours you can invoice, the tax that comes off the top, and the costs of staying in business. Everything else is folklore — “designers in my city charge $75” is not a plan for your rent.
The formula
Required revenue = (desired take-home ÷ (1 − tax rate)) + annual expenses, then add a 10% buffer so January is not a crisis.
Billable hours = weeks you will actually work × hours in a week × utilization.
Hourly rate = required revenue ÷ billable hours.
Run the numbers in the freelance rate calculator if you do not want a spreadsheet. The logic is the same.
Utilization is the number people lie about
Utilization is the share of your week that becomes an invoice line. New independents often type 80% because it feels professional. Then they spend Monday on proposals, Wednesday on revisions that were “just a tweak,” and Friday on bookkeeping.
- 40% — still finding clients every week
- 55% — a normal mix of delivery and overhead
- 70% — incoming work is already there; you are protecting focus
If you only invoice 20 hours in a 40-hour week, your $80 “rate” is a $40 job with extra anxiety. Price the real week, not the fantasy week.
Worked example
You want $72,000 take-home. Expenses are $6,000 (software, accountant, hardware). You plan 46 working weeks, 40 hours, 55% billed. You set tax at 30% as a planning figure — not because that is your legal rate, but because pretending tax is zero is how people underquote.
Gross-up: 72,000 / 0.70 = $102,857. Add expenses: $108,857. Buffer 10%: about $119,700 you must book. Billable hours: 46 × 40 × 0.55 = 1,012. Rate: about $118/hour.
That is the floor. If a client’s budget only supports $70, the honest answers are: shrink the scope, raise utilization somehow, or decline. “I’ll do it cheaper to get the logo in my deck” is a donation.
Tax is local. The method is not.
Do not copy a blog’s tax percentage. If you are a salaried employee adding freelance income, the extra work is often taxed at your marginal bracket, not from zero. In Israel, self-employed people also pay Bituach Leumi on business income. In the US, self-employment tax sits on top of income tax. Use a conservative percentage in the calculator, then confirm with an accountant in your country. Hourlyfloor does not file your return.
Hourly is a floor. Packages are how you talk.
Once you have the hourly number, stop leading with it. Clients buy outcomes. Convert the floor into a day rate (cap a “day” at 6 billable hours so it stays honest) and into project quotes with revisions and risk priced in. That is the project quote calculator.
When someone asks you to “meet them in the middle,” you need a written rate card, not a feeling. That is the Rate Card System.