How to price freelance work

Most freelance rates are set by looking at a salary, dividing by the number of working hours in a year, and rounding up a little. It is an understandable shortcut and it is almost always wrong. It ignores the benefits an employer used to pay for, the taxes a freelancer covers on both sides, and the large share of the week that is never billable. The result is a rate that looks generous against a payslip and leaves the freelancer short at tax time. This guide builds a rate from the bottom up, then covers how to quote, when to raise, and how to discount without giving away the business.

Why salary ÷ 2,080 undercharges you

A full-time job at $75,000 a year, 40 hours a week for 52 weeks, works out to $75,000 ÷ 2,080 = $36.06 an hour. The salary to hourly converter performs exactly that conversion, and it is the correct answer to the question “what is this salary worth per hour?”

But that is not a freelance rate. As an employee, the $75,000 came on top of paid leave, employer contributions, training, software, a desk, and a steady stream of work the employer found and managed. As a freelancer, all of that comes out of the same number. You also pay self-employment tax and cover your own health cover, equipment, insurance and downtime. Comparing a freelance rate to an employee hourly rate without adjusting for those costs is the most common pricing error there is.

Step 1: start with the income you want to keep

Begin with take-home income, the amount you actually want to live on. This is not the same as revenue. If you want to keep $70,000 after business expenses and tax, $70,000 is the target. Writing it down first stops the rate from being anchored to whatever a client happens to offer.

Step 2: add business expenses

Everything you spend to operate goes here: software subscriptions, a computer every few years, internet, accounting, insurance, a co-working desk, professional memberships, marketing, and a portion of your home. A solo freelancer commonly spends several thousand dollars a year. In the example below the figure is $6,000.

Step 3: gross up for tax

Tax is charged on profit, not on take-home pay, so the revenue you need is larger than income plus expenses. If the effective tax rate is 25%, then every dollar of gross revenue leaves 75 cents after tax. To end up with a target amount you divide by the fraction you keep, not multiply by the rate. The freelance hourly rate calculator uses exactly this gross-up:

gross revenue needed = (target income + expenses) ÷ (1 − tax rate)

With $70,000 income, $6,000 expenses and a 25% tax rate, the gross needed is ($70,000 + $6,000) ÷ 0.75 = $101,333.33. Charging only $76,000 would leave nothing for tax; the extra is what funds it.

Step 4: count only billable hours

Nobody bills every working hour. Quoting, invoicing, chasing payment, email, admin, bookkeeping, marketing, learning, and the gaps between projects are all unpaid but necessary. If 70% of a 2,080-hour year is billable, that is 1,456 billable hours, not 2,080. The other 624 hours still have to be paid for by the rate you charge on the 1,456.

Step 5: divide

The required rate is gross revenue divided by billable hours. In the worked example, $101,333.33 ÷ 1,456 = $69.60 an hour. The calculator rounds this to $70 an hour, because whole-dollar rates are easier to quote. The build looks like this:

The billable percentage is the quiet lever

Changing the billable share moves the rate more than most people expect, because the same revenue is spread across fewer or more hours. Holding the other inputs at $70,000 income, $6,000 expenses and 25% tax, the required rate at each level is:

That is why improving your admin efficiency, templating your proposals and cutting low-value calls raises your effective pay as much as finding new clients. Every hour you stop wasting is an hour you can either bill or drop.

Hourly, day and project pricing

The rate is the unit underneath all three pricing models. Which model you use depends on how well the scope is defined and who should carry the risk.

• Hourly. Transparent and fair when the work is open-ended, such as ongoing maintenance or advisory work. The downside is that it rewards slow work and penalises the efficiency you have spent years building.
• Day rate. Common when you need to be available on site for a full day, including travel and setup. A day is usually six to eight working hours. Many freelancers price the day slightly below the hourly rate times hours to encourage full-day bookings.
• Project or fixed price. Quote a single number for a defined deliverable. Clients like the certainty, and you can sometimes price on value rather than hours. The risk sits with you, so add a contingency of 10–20% and define the scope precisely.
• Retainer. A client pre-buys a set number of hours each month, often at a small discount, in exchange for predictable income. Cap the hours and say what happens when they run out.

How to quote

1. Write the scope down. Deliverables, number of revision rounds, what is explicitly excluded, and what you need from the client and when.
2. Estimate hours honestly. Use past projects rather than optimism, then add 15–20% for the things that always take longer.
3. Multiply by your rate. Estimated hours × rate, plus contingency for fixed-price work.
4. Set payment terms. A deposit of 25–50% upfront is normal for project work; milestone payments suit larger jobs. State the due date and a late fee in writing.
5. Invoice clearly. Itemise deliverables rather than rounding everything into one line, so the client can see what they are buying. The invoice generator applies a tax percentage to the subtotal and totals it for you.

A quote with no revision limit and no change process invites scope creep. The fix is not a higher number, it is a written boundary: additional rounds or new requests are quoted separately at your rate. For late invoices, an agreed interest charge is more persuasive when it is on the contract from the start; the late payment interest calculator shows how a monthly or annual rate works out on an overdue balance.

Raising your rates

Rates should rise as experience, demand and costs rise. A few principles make it less painful:

• Raise for new clients first. New work at the new rate proves it holds before you touch existing relationships.
• Give notice and pick the boundary. Tell existing clients 30–60 days ahead, and apply the increase at the start of the next project, not midway through one.
• Ten to twenty percent is a normal step. If you are turning work away and rarely lose a proposal on price, you are underpricing and can move further, faster.
• State it, do not justify it. Send a short, clear note with the new rate and the date it applies. Long explanations read as negotiable.
• Let the market answer. Some clients will leave and most will stay. If nobody pushes back, the increase was too small.

Discounts, rush fees and protecting the rate

Discounts are sometimes necessary, but a blanket percentage cut teaches clients to wait for the next one. Better to trade a discount for something of equal value: a longer commitment, payment upfront, a reduced scope, or the right to use the work as a case study. Keep the headline rate visible and discount the scope instead.

The other side of the same coin is charging more when the client needs more. A rush fee of 25–50% for compressed timelines is standard, because the work displaces other paid work. The number from the calculator is a floor that covers your costs and target income, not a ceiling. The clients who pay it are usually the ones who value speed and certainty, and they are worth keeping.

Frequently asked questions

Should I charge by the hour or by the project?

Use hourly for open-ended or exploratory work where the scope cannot be fixed. Use a project price when the deliverable is clear, because clients prefer certainty and you can price the outcome rather than the clock. Day rates sit between the two and suit on-site work. Whatever the model, calculate it from the same underlying hourly rate.

How do I know if my rate is too low?

You are likely underpricing if you are booked solid for months, rarely lose a proposal on price, dread quoting, or find that a full workload still leaves you short after tax and expenses. Any of those is a signal to raise for new clients and test the reaction.

How much deposit should I ask for?

For project work, 25–50% upfront is common, with the balance on delivery or at milestones. The deposit covers the cost of starting and filters out clients who were never going to pay. Larger projects often use three or more staged payments.

Do I need to add sales tax or GST to my invoices?

It depends on where you are registered and where the client is. Many small freelancers fall below registration thresholds and do not charge it; others must. Check the rules for your jurisdiction rather than assuming, and if you do charge it, keep it as a separate line on every invoice.

To set a number you can defend, the freelance hourly rate calculator takes your target income, expenses, tax rate and billable share and returns the minimum rate. The salary to hourly converter turns a salary into an hourly equivalent for comparison, and the invoice generator turns the agreed rate into a clean, itemised invoice with tax and a due date.