How this is calculated
rate = target income × (1 + overhead %) ÷ (billable hours/week × (52 − weeks off))
New freelancers price by converting their old salary to an hourly rate and adding a little. It fails because employees are paid for 2,080 hours a year while freelancers bill far fewer: after admin, marketing, proposals, invoicing and the gaps between projects, 25 billable hours in a 40-hour week is a healthy reality, not laziness.
This calculator divides your target income (grossed up for business overhead) by your true billable hours: billable hours per week × working weeks. With 25 billable hours and six weeks off, a $70,000 target needs roughly double the hourly rate an employee would earn for the same income — before even accounting for self-employment taxes and unpaid benefits.
Speaking of which: employees receive employer-paid payroll tax shares, health insurance, paid leave and retirement matching. Freelancers buy all of that from their rate. Many pricing guides suggest your freelance rate should be 1.5-2× the equivalent employee hourly — this tool shows the multiplier your own numbers produce.
Frequently asked questions
Why so much higher than an employee's hourly rate?
Because the rate must cover unbillable working time, unpaid time off, business costs, self-employment taxes and self-funded benefits. The employee comparison hides all of that inside the employer's costs.
Should I charge hourly or per project?
Per-project usually pays better once you can estimate accurately — you keep the gains of working fast. But you still need this hourly floor to price projects: estimated hours × rate is the sanity check under every quote.
What about taxes?
The target income here is pre-tax. In the US, self-employment tax adds ~15.3% (both halves of FICA) on top of income tax, so set your income target with that in mind or add it into overhead.
My market won't pay this rate. Now what?
Then the numbers are telling you something real: raise billable efficiency, lower the income target, cut overhead, or move upmarket. Undercharging doesn't fix the math — it just hides the shortfall in your savings.