How the calculation works
Four inputs, one division. It is deliberately simple, because the hard part of pricing is not the arithmetic, it is being honest about the inputs.
- Target income. What you need to actually live on, before tax. Not what you would like to earn in a good year.
- Tax and costs. Everything an employer used to absorb: income tax, social contributions, health insurance, accountant, software, hardware, pension. Added on top of the target, because they come out of the money before you see it.
- Weeks worked. 52 minus holiday, minus illness, minus the weeks nothing is booked. 44 is a reasonable planning figure for a solo freelancer.
- Billable hours per week. Hours a client pays for. Not hours at the desk. Sales, scoping calls, invoicing, admin and unpaid proposals all come out of the same week, which is why 20 to 25 is a realistic ceiling and 40 is a fantasy.
Multiply the target by the cost percentage to get what you need to gross. Multiply weeks by billable hours to get the hours you have to sell. Divide one by the other. Everything else on this page, the day rate, the week rate, the sensitivity table, is that hourly figure multiplied out.
Why this is a floor and not a price
The number this produces is the point at which the work covers what you need. It is not what you should charge, and treating it as a target is how people end up busy and broke.
What you charge above the floor depends on things arithmetic cannot see: how specialised the work is, how urgent it is for the client, how much risk you are taking on a fixed price, whether you have a queue, and how good you are at saying no. If you are turning work away, your price is too low. If nothing is coming in, the answer is almost never to cut it, because cutting the price makes the phone ring with exactly the clients you do not want.
Then stop selling hours
The hourly number is for your own reference. What you quote should usually be a price for an outcome. Fixed price for a defined slice of work is better for both sides once you can estimate: the client knows what they are spending before they commit, and getting faster earns you more rather than less.
The catch is estimating, and the fix is scope. Quote fixed prices for work small enough that you can see the end of it, a week or two. For anything longer, quote in phases with a price each.
Worked examples
Three sets of inputs and what they produce, so the method can be checked against something concrete. These are illustrations of the arithmetic, not claims about what anyone earns.
| Situation | Target | Costs | Weeks × hours | Hourly floor |
|---|---|---|---|---|
| Part-time, building up | $30,000 | 30% | 40 × 15 | $65 |
| Solo, established | $60,000 | 35% | 44 × 22 | $84 |
| Senior, low volume | $120,000 | 40% | 44 × 20 | $191 |
All three assume the same currency you selected above. Change the inputs in the form to run your own.
Questions
Why divide by 22 hours a week instead of 40?
Because nobody bills 40. Sales calls, scoping, invoicing, admin, and the weeks with no work booked all come out of the same 40. For a solo freelancer, 20 to 25 billable hours a week is a realistic ceiling, and hitting it consistently is a good year. Dividing by 40 produces a rate you cannot actually live on.
Is this my rate or my minimum?
Your minimum. It is the number below which the work does not cover what you need. What you charge above it depends on demand, specialism and how good you are at saying no, none of which arithmetic can tell you.
What should I put for tax and costs?
Everything an employer used to absorb: income tax, self-employment or social contributions, health insurance, accountant, software, hardware, pension. The share varies enormously by country, so use your own figures. If you genuinely do not know yet, a placeholder in the 30 to 40 percent range gets you a starting number to refine once you have real ones.
Should I quote hourly or fixed price?
Quote fixed prices for work small enough that you can see the end of it, and keep the hourly number for your own reference. Fixed price means getting faster earns you more rather than less, and the client knows what they are spending before they commit.
Does this tell me the going market rate?
No, and be wary of anything that claims to. This calculator only does arithmetic on the numbers you enter. It has no opinion about what other people charge, because we do not have that data.
Longer read: How much should you charge as a freelance developer? covers raising your rate, handling "that is too expensive", and what to do in a slow month.