Most freelancers set their rate by looking at what others charge. That tells you what the market tolerates, not whether the rate keeps you in business. A better start is a floor: the lowest rate at which you still earn what you need. Here is the formula and a worked example.

The formula

Minimum hourly rate = (target net income + business costs + taxes) / billable hours

Each part is easy to underestimate.

  • Target net income: what you want to take home in a year, after everything.
  • Business costs: software, equipment, insurance, accounting, coworking, training. Add them up for a full year.
  • Taxes and social contributions: as self-employed you pay them yourself, so include them in the total you need to cover.
  • Billable hours: not 40 per week. Sales, emails, invoicing, unpaid revisions, holidays and sick days all cut into it. Many freelancers bill 20 to 30 hours a week over 44 to 46 working weeks.

A worked example

Say you want 50,000 net. Costs add 8,000 and taxes add 12,000, so you need to bring in 70,000.

You work 45 weeks and bill 22 hours a week, which is 990 billable hours.

70,000 / 990 = about 71 per hour. That is your floor, not your price. Anything below it means you pay to work.

Check the result against a real project

Rates are easy to misjudge, projects are not. If you quote a fixed price of 3,000 and the job takes 60 hours, you earned 50 per hour. Compare that number with your floor, not with the price you quoted.

Day rate and salary comparisons

Two conversions come up all the time:

  • Hourly to day rate: multiply by the hours you can really bill in a day (often 5 to 6), not by 8.
  • Salary to freelance rate: do not just divide a salary by 2,080 hours. Add the costs an employer used to cover, and divide by billable hours instead.

Three habits that protect your rate

  1. Track your time for one month to find your real billable ratio.
  2. Raise rates for new clients first. Existing clients are harder to move.
  3. Revisit the floor every year, because costs and taxes change.

Run it with your own numbers

I work on KIWI, and we published free calculators for exactly these steps. No signup is needed:

If your numbers differ from the example, I would like to hear which part felt off: the billable hours, the tax estimate or the costs.