The formula, and the part everyone omits

Rate = (income target + business costs + benefits you now buy yourself) ÷ billable hours

The mistake that sinks new freelancers is dividing by 2,080. That figure is the employee working year, and it assumes every hour is paid. Freelance hours are not.

Where the hours actually go

Start from 2,080 and subtract what you will not bill:

• Four weeks of leave: −160
• Ten public holidays: −80
• Available: 1,840 hours

Then apply utilisation — the share of available hours that are billable. The rest goes to finding work, writing proposals, invoicing and chasing payment, bookkeeping, admin, learning, and unbillable revisions. For an established solo freelancer, 60 to 70% is realistic. In the first year it is often below 50%.

A worked example

Target: the equivalent of a 60,000 salary. As a freelancer you now also pay:

Now divide by billable hours at different utilisation rates:

Compare that with the employed equivalent: 60,000 ÷ 2,080 = 28.85 per hour. At realistic utilisation, the freelance rate needs to be around 2.45 times the employee hourly rate to leave you in the same place. This is the origin of the common rule of thumb that a contractor should charge roughly double to two and a half times, and it is arithmetic rather than greed.

The clients who ask you to justify it

The useful response is that the comparison is not your rate against a salaried hourly rate. It is your rate against the client fully loaded cost of an employee — salary plus employer contributions, plus recruitment, equipment, office space, training, management overhead, and the risk of having to keep paying that person when the work runs out. A freelancer at 70 an hour for eight weeks is frequently cheaper than a permanent hire, and always more reversible.

Honest limits

This calculation gives you a floor, not a price. Three things it cannot tell you:

• Whether the market will pay it. If comparable freelancers in your niche charge 45, a spreadsheet saying 70 does not create demand. The fix is usually to narrow the specialism rather than to cut the rate — a generalist competes on price, a specialist does not.
• Whether hourly is the right unit at all. Hourly billing penalises you for getting faster and caps your income at your available hours. Fixed project fees priced against the client outcome break that ceiling, but they transfer estimation risk to you, so they require a clear scope and a written change process.
• Your actual tax position. Self-employment tax, VAT or sales-tax registration thresholds, allowable deductions and contractor-classification rules vary enormously by country and change often. The 12,000 above is a placeholder. Get a local accountant before you set a rate — it is one of the highest-return purchases a freelancer makes. Nothing here is tax or financial advice.

Also budget for non-payment. A realistic plan assumes some invoices arrive late and a small share never arrive, which is an argument for deposits and staged payments rather than for a higher rate.

Questions people actually ask

How do I convert to a day rate?

Multiply by billable hours per day, which is 6 to 7 rather than 8 — nobody sustains eight focused billable hours daily. At 70.65 that gives roughly 425 to 495 per day.

Should I discount for a long contract?

A modest discount is defensible because it raises utilisation and removes sales cost. Ten per cent for guaranteed months of work is reasonable; thirty is not, and long engagements at low rates crowd out better-paying work.

When should I raise my rate?

When you are consistently booked and turning work away, and at least annually to keep pace with inflation. Raising with new clients first, and existing clients at renewal with notice, is the least disruptive route.

Are my figures stored?

No. Every number you enter stays in your browser and nothing is transmitted or saved.