What is Freelance Rate?
Your freelance rate is the hourly, daily, or project-based price you charge clients for your work. Unlike a salary, it must cover not just your living expenses but also taxes, health insurance, retirement savings, business expenses, and non-billable time. Setting it too low means working more hours for less money than a comparable full-time role.
The Formula
Minimum Hourly Rate = (Desired Salary + Annual Expenses) ÷ (1 − Tax Rate) ÷ (Billable Hours/Week × Working Weeks/Year)
Add a 20% buffer to your minimum rate for profit margin, growth, and unexpected non-billable time.
Worked Example
A freelance designer wants to earn $80,000/year, has $12,000 in annual business expenses, works 30 billable hours/week, takes 4 weeks off, and pays a 25% effective tax rate.
- Pre-tax need = ($80,000 + $12,000) ÷ (1 − 0.25) = $122,667
- Billable hours = 30 hours × (52 − 4 weeks) = 1,440 hours/year
- Minimum rate = $122,667 ÷ 1,440 = $85.19/hour
- Recommended rate (+20%) = $85.19 × 1.2 = $102.23/hour
📌 The designer should charge at least $102/hour to earn a $80K salary after taxes, expenses, and a 20% profit buffer.
Why This Matters
Income sustainability
Without proper rate calculation, many freelancers earn less than they would as employees. Use the Employee Cost Calculator to compare your true freelance income vs. a salaried position.
Scope creep protection
Knowing your hourly cost basis helps you price projects accurately. Use the Project Estimator to break down scope and identify when projects become unprofitable.
Rate negotiation
Having a calculated minimum rate gives you a walk-away number during negotiations. Check your profit margin to ensure you're not subsidizing your client's business.
Common Mistakes
❌ Using gross salary as the target
Freelancers pay self-employment tax (15.3% in the US) plus income tax. A $100K salary target requires earning ~$135K in freelance revenue.
❌ Assuming 40 billable hours/week
Most freelancers bill only 25-30 hours/week. The rest goes to admin, marketing, invoicing, sales calls, and learning. Using 40 hours dramatically underprices your work.
❌ Not increasing rates annually
Inflation, experience, and market demand all increase your value. Failing to raise rates 5-10% annually means your real income decreases every year.
Industry Benchmarks
| Category | Good | Average | Poor |
|---|---|---|---|
| Software Development | $125-200+/hr | $75-125/hr | Below $60/hr |
| Design (UI/UX/Brand) | $100-175/hr | $50-100/hr | Below $40/hr |
| Content & Copywriting | $75-150/hr | $40-75/hr | Below $30/hr |
Source: Payoneer Global Freelancer Income Report
Benchmark data sourced from Payoneer Global Freelancer Income Report.