Why freelancers charge more than employees earn per hour
A $80,000 salary works out to about $38 an hour, but a freelancer charging $38 an hour earns far less. As a freelancer you also pay:
- The employer's half of payroll taxes: an extra 7.65% of your earnings in self-employment tax.
- Benefits: health insurance, retirement contributions and paid time off are now your cost.
- Business expenses: software, hardware, insurance, accounting and marketing.
- Non-billable time: finding clients, invoicing and admin typically take 20% to 40% of your week.
The formula
Hourly rate = (Income + Extra SE tax + Benefits + Expenses) × (1 + Margin) ÷ Billable hours per year
Billable hours = Hours per week × (52 − Weeks off) × Billable %
Example: to match an $80,000 salary with $9,000 of benefits and $6,000 of expenses, add $6,120 for the employer half of payroll tax and a 10% buffer: about $111,232 of revenue. Working 40 hours a week, 46 weeks a year, 70% billable gives 1,288 billable hours, so you need to charge about $86 an hour.
Turning an hourly rate into project prices
Many experienced freelancers quote per project or per month instead of hourly. Estimate the hours, multiply by your rate, then add 15% to 25% for revisions and scope creep. Over time, price on the value you deliver rather than the time it takes.
Frequently asked questions
How do I calculate my freelance hourly rate?
Add your target income, the extra self-employment tax, benefits and business expenses, add a margin, then divide by the hours you can realistically bill in a year.
What is a good billable percentage?
60% to 75% is typical for established freelancers. New freelancers who spend a lot of time finding clients may bill 50% or less.
Should I include income tax in my rate?
Income tax is already covered because the target is a pre-tax salary, just like a job offer. The calculator adds only the extra 7.65% of payroll tax an employer would normally pay.
Last reviewed: 2026-10-09