Ask ten freelancers how they set their rate and most will tell you some version of "it felt about right." That instinct is almost always too low, because it quietly assumes you'll bill 40 hours a week, never get sick, owe no taxes, and have no business costs. None of that is true.
Your rate isn't a salary divided by 2,080 hours. It has to absorb the gaps a full-time job used to cover for you. Here's how to work out a number that actually pays your bills.
Start with what you need to earn
Begin with the take-home income you want in a year. Be honest, and use a real figure — say $60,000. This is the money you want left for yourself after the business has paid for itself.
Add the costs a job used to hide
As a freelancer you cover things an employer used to. These add up faster than people expect:
- Self-employment and income tax. Depending on where you live, set aside roughly 25–30% of income. It's the biggest line and the one most likely to ambush you.
- Business costs — software, hardware, a co-working desk, insurance, an accountant. Call it a few thousand a year at minimum.
- Unpaid time — holidays, sick days, and slow weeks when no client work comes in.
Once you account for taxes and costs, a $60,000 take-home target often means billing closer to $90,000. That gap is exactly what trips up freelancers who price like an employee.
Count your real billable hours
This is the step nearly everyone gets wrong. You do not bill 40 hours a week. A big share of your time goes to work nobody pays for directly: finding clients, sending proposals, answering email, bookkeeping, and the invoicing itself.
A realistic number for most solo freelancers is 20 to 25 billable hours a week. Take 22 hours a week across about 46 working weeks (you took some time off, remember) and you land near 1,000 billable hours a year.
Do the division
Now the rate falls out of the math. You need to bill $90,000, and you have about 1,000 billable hours to do it in:
$90,000 ÷ 1,000 hours = $90 an hour.
If your gut said "$45 sounds fair," you can see the problem. At $45 you'd have to bill 2,000 hours — a full, uninterrupted year with no admin, no gaps, and no time off — just to hit the same take-home. That pace is how freelancers burn out and still feel broke.
Hourly, or per project?
You don't have to quote clients by the hour. Many freelancers move to project pricing, which rewards you for being fast and spares the client a running meter. But you still need your hourly number behind the scenes, because that's how you sanity-check a fixed quote. If a project will take 30 hours, your $90 rate tells you the quote shouldn't dip below about $2,700. Without that anchor, project pricing is just guessing.
This is also why tracking your time matters even on flat-fee work. When you log hours against a project, you find out your effective rate — what you really earned per hour after the work ran long. A project that looked great at $2,500 feels different when the time log shows it ate 50 hours. Our guide to time tracking for freelancers covers how to capture that without much effort.
Raise it before you feel ready
Rates drift out of date. Your skills grow, your costs rise, and the number you set two years ago slowly becomes a discount you're giving every client without meaning to. A good habit is to review your rate once a year and raise it for new clients first, where there's no awkward conversation. Existing clients can follow with reasonable notice.
The clearest signal that you're due for a raise is being fully booked. If you can't take on more work, your rate is too low — the market is telling you so.
Know your real numbers
A rate set on a spreadsheet is a guess until you measure against it. Track your hours by client and project, and you'll see which work actually pays and which has been quietly costing you. Gigtime keeps your time, clients, and invoices together so the effective-rate math is there whenever you look. Try it free — 30-day Pro trial, no credit card required.