A freelance rate is not a salary divided by 2,080 hours. It has to fund business expenses, both halves of payroll tax, the hours nobody pays for, and the holidays an employer used to pay for.
Minimum hourly rate
$184.72
Replacing a $100,000 salary with $12,000 of benefits and 15 days off, billed across 1,080 hours a year
| Step | Amount |
|---|---|
| Income you want to take home | $100,000.00 |
| Business expenses | +$20,000.00 |
| Profit needed before tax | $120,000.00 |
| Grossed up for a 30% tax rate | $171,428.57 |
| Divided by 1,200 billable hours | $142.86 |
| Rate before unpaid time off is counted | $142.86 |
Revenue is grossed up before dividing: a rate that ignores tax leaves the tax bill to be paid out of the income you intended to keep.
| Measure | Value |
|---|---|
| Billable hours a week | 25 |
| Total working hours a week | 40 |
| Utilisation | 62.5% |
| Billable hours a year | 1,200 |
| Revenue needed a year | $171,428.57 |
| Effective rate across all working hours | $89.29 |
| Take-home per billable hour | $83.33 |
The last line is the number that matters when you feel busy but not paid: the same revenue spread over every hour in the week is always a lower rate than the one on the invoice.
| Line | Amount |
|---|---|
| Salary to replace | $100,000.00 |
| Employer's payroll tax you now pay | +$7,650.00 |
| Benefits and equipment you now fund | +$12,000.00 |
| Total package | $119,650.00 |
| Paid days off you now fund | 15 days (120 hours) |
| Billable hours after those days off | 1,080 |
| Rate needed to match the package | $184.72 |
This is why a freelance rate looks high next to a salary: the package is bigger than the salary, and the billable hours are fewer once unpaid time off is taken out.
This calculator works backwards from the income you want to keep, grosses it up for tax, divides it by the hours you can actually bill, and then adds the cost of the benefits and paid time off you no longer receive.
Start with the income you want before personal tax, add business expenses, and gross the total up for your combined tax rate: revenue = (income + expenses) / (1 - tax rate). At a 30% rate, $120,000 of income and expenses needs $171,429 of revenue.
Divide that by billable hours, not working hours. Someone who bills 25 hours a week for 48 weeks has 1,200 billable hours, so the rate is about $143 an hour before unpaid holiday is counted.
Admin, invoicing, proposals, marketing, learning and answering email are all real work and none of it is billable. A freelancer billing 25 of 40 working hours has a utilisation rate of 62.5%, and every unbilled hour lowers the effective rate.
The effective rate across all working hours is the honest comparison against a salaried job: the same revenue spread across 1,920 hours is $89 an hour, not $143.
A salaried package is bigger than the salary: the employer also pays 7.65% payroll tax, health insurance, retirement match, equipment and training. Those costs move to you when you go freelance, so the income target has to include them.
Paid time off cuts the other way. Fifteen days of vacation and holidays is 120 hours of billable time you now have to fund from the remaining hours, which is why the same annual revenue needs a higher rate.
A day rate of eight billable hours is the simplest way to quote project work, and a monthly retainer is the rate times the billable hours a month. Retainers usually hide a discount, so check the implied hourly rate before signing.
Charge a minimum engagement so that a fifteen-minute call is not billed as a fraction of an hour, and price rush work, extra revisions and out-of-scope requests separately rather than absorbing them into the rate.
Each example below was run through the calculator on this page when the site was built, so the numbers match what you see when you enter the same inputs.
Minimum hourly rate
$184.72
Replacing a $100,000 salary with $12,000 of benefits and 15 days off, billed across 1,080 hours a year
The pure revenue calculation gives $143 an hour, but 15 days off and the lost benefits push the number that actually replaces a job to $185.
Minimum hourly rate
$203.57
Replacing a $100,000 salary with $12,000 of benefits and 15 days off, billed across 980 hours a year
Four extra weeks off cuts billable hours by 100, so the rate needed for the same income rises by about $15 an hour.
Minimum hourly rate
$245.65
Replacing a $80,000 salary with $12,000 of benefits and 15 days off, billed across 600 hours a year
Utilisation falls to a third, and the effective rate across every working hour lands near $41 even though the billed rate is close to $124.
Add the income you want to keep to your annual business expenses, divide by one minus your tax rate to gross it up, then divide by the hours you can actually bill in a year. A 25-hour billing week over 48 weeks is 1,200 billable hours.
Most freelancers and agencies bill between 55% and 75% of working hours. Long-term retained work runs higher, project and proposal-heavy work runs lower. If you are not sure, start at 60% and treat the extra billable time as upside.
Day rates work well for project work because they price the outcome rather than the clock, and they reduce the incentive for a client to watch hours. Keep an hourly equivalent in your head so the day rate cannot drift below your floor.
Between 25% and 40% of every payment depending on your state and income, which is what the combined tax rate field is for. Setting aside a fixed percentage of each invoice is simpler and safer than estimating the bill once a year.
Because the salary was never the whole cost of employing you. Add payroll tax, health insurance, pension, equipment and training, then remove the paid holidays from your billable hours, and a $100,000 salary needs roughly $185 an hour.
Give notice, tie the increase to a specific date, and apply it to new work rather than billing old work at the new rate. Raising prices for new clients first is the lowest-risk way to test a new number.
Last reviewed 2026-09-14. This page is an estimate tool, not financial, tax or legal advice.Read the full disclaimer.