Your hourly rate = (income + taxes + business costs) ÷ billable hours, plus margin. Most people divide by all the hours they work and undercharge. This calculator counts only the hours clients pay for and shows your break-even rate, the rate to quote and your day rate. Free, no sign-up.
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Hourly rate to charge
$116.73
Day rate $934 (8 h) · 15% margin
Your current $85.00 is $31.73 per hour below target. At 1,196 billable hours that is $37,948 a year. It is also below your break-even rate.
What each hour pays for
| Billable share | Billable h / yr | Rate to charge |
|---|---|---|
| 50% | 920 h | $151.75 |
| 60% | 1,104 h | $126.46 |
| 70% | 1,288 h | $108.39 |
| 80% | 1,472 h | $94.84 |
| 90% | 1,656 h | $84.30 |
Your numbers stay in your browser. Nothing is stored. This is a planning estimate, not tax advice.
To calculate your hourly rate as a freelancer, add up the money you need in a year (take-home income, income tax and business costs), divide it by the hours you can bill and add your profit margin:
Hourly rate = (income + income tax + business costs) ÷ billable hours a year ÷ (1 - margin)
Set your take-home income
The amount you want to keep each year after income tax, for example $80,000.
Add income tax
Divide your take-home income by (1 - tax rate). At 25%, $80,000 becomes $106,667 before tax, so $26,667 goes to tax.
Add your business costs
Software, hardware, insurance, accounting and everything else your business pays for, for example $12,000 a year.
Count your billable hours a year
Working days × hours per day × billable share. 40 hours a week with 30 days off is 230 days × 8 h = 1,840 h; at 65% billable that is 1,196 h.
Add your profit margin
Divide the break-even rate by (1 - margin). A 15% margin leaves room for slow months, rising prices and growth.
Example with the calculator's default values: ($80,000 + $26,667 + $12,000) ÷ 1,196 h = $99.22, your break-even rate. With a 15% margin, $99.22 ÷ 0.85 = $116.73 an hour, or a $934 day rate for 8 hours. Billing 1,196 hours at that rate brings in $139,608 a year. Once you know your rate, plan your billable hours for the year with the Billable Hours Calculator.
Dividing your income by 2,080 hours (52 weeks × 40 hours) is the most common shortcut, and it undercharges you by about two-thirds. $80,000 ÷ 2,080 = $38.46 an hour, while the calculator gives $116.73 for the same take-home income. The shortcut leaves out four things: the income tax you pay as a freelancer, your business costs, your 30 days off and the non-billable hours (admin, sales, invoicing) that no client pays for. 2,080 hours is the paid year of a salaried employee whose employer covers all of that; a freelancer with the same week bills 1,196 of them.
Include every cost of running your business that an employer would otherwise pay, and the tax on your income. A cost you leave out lowers your break-even rate on paper, not in your bank account. Check this list before you fill in the business costs field:
Spread large purchases over the years you use them: a $2,400 laptop used for 3 years is an $800 cost each year. Add up a year of bank statements to find costs you pay without noticing, such as small subscriptions and card fees.
Overhead per person is your annual overhead divided by the number of billable people. Overhead is every cost that does not belong to one client: rent, software, management and admin salaries, sales and marketing, insurance. If an agency with 8 billable people spends $120,000 a year on these, overhead is $15,000 per person, the default in the calculator's employee mode. Divide by billable people only, because the salaries of non-billable staff are part of the overhead. Recalculate when the team grows or a large cost changes.
At 50% billable time you need $151.75 an hour; at 80% you need $94.84 for the same income. Your billable share is the part of your working hours that clients pay for, and every hour that is not billable has to be paid for by the hours that are. The table uses the calculator's defaults: $80,000 take-home income, 25% tax, $12,000 of costs and a 15% margin over 1,840 working hours.
| Billable share | Billable hours / year | Rate to charge |
|---|---|---|
| 50% | 920 h | $151.75 |
| 60% | 1,104 h | $126.46 |
| 70% | 1,288 h | $108.39 |
| 80% | 1,472 h | $94.84 |
| 90% | 1,656 h | $84.30 |
Moving from 50% to 80% billable time lowers the rate you need by $56.91 an hour, a bigger change than most clients would accept as a price increase. For comparison, freelancers work 42 hours a week on average, and 46% of them spend 10 to 20% of that time on non-billable tasks, so they bill 80 to 90% of it (freelancermap Freelancer Study 2026). Professional services firms averaged 66.4% billable utilization in 2025 (SPI Research 2026 Professional Services Maturity Benchmark).
Your effective hourly rate is your revenue divided by all the hours you worked, billable or not. At $116.73 for 1,196 billable hours out of 1,840 working hours, revenue is $139,608 and the effective hourly rate is $75.87. It shows what an hour of your time really earns: the closer it is to your quoted rate, the less time goes to unpaid work. Calculate your effective hourly rate from a week of real hours with the Billable Hours Calculator.
To calculate a billable rate for an employee, add the employer's costs and a share of overhead to the salary, divide by the hours the employee can bill in a year and add the firm's margin. This is the bill rate, or billing rate, you quote to clients:
Billable rate = (salary × (1 + employer costs) + overhead) ÷ billable hours ÷ (1 - margin)
Example with the defaults of the calculator's employee mode: a $70,000 salary with 20% employer costs ($14,000 for payroll taxes, benefits and pension) and $15,000 of overhead costs the firm $99,000 a year. At 40 hours a week, 30 days off and 70% billable time, the employee bills 1,288 hours. The cost rate is $99,000 ÷ 1,288 h = $76.86, and with a 30% margin the billable rate is $76.86 ÷ 0.7 = $109.80 an hour, or $878 a day. Billed in full, that is $141,429 a year.
A cost rate is what one hour of an employee costs the firm: salary, employer costs and overhead divided by billable hours ($76.86 in the example). A billable rate, or bill rate, is what the firm charges the client for that hour: the cost rate plus margin ($109.80). Charge-out rate is the UK and Australian name for the billable rate. The gap between the two is the firm's margin on every billed hour. In TimeCamp you can set a cost rate and a billable rate separately, so reports show both the revenue and the profit of each project.
Margin is profit as a share of the price; markup is profit as a share of the cost. The same profit is a higher markup than margin: a 30% margin equals a 42.9% markup, and a 25% margin equals a 33.3% markup (markup = margin ÷ (1 - margin)). This calculator asks for margin, so if your firm sets prices by markup, convert it first with the markup calculator.
Hourly, day and project pricing all start from the same number: the hourly rate that covers your costs and margin. A day rate is that rate times the hours in a working day, and a project price is that rate times the hours you expect the project to take. What changes is who carries the risk of the work taking longer: the client with hourly and day rates, you with a fixed project price.
Day rate = hourly rate × hours per day. At $116.73 an hour and 8-hour days, the day rate is $116.73 × 8 = $934 (rounded). Day rates are common for consultants, contractors and on-site work, where clients book whole days. Agree how many hours a day covers: a day that runs to 10 hours at a $934 day rate pays about $93 an hour.
Use a project price when the scope is clear and you can estimate the hours, and a retainer when a client needs a steady amount of work every month. Price both from your hourly rate: estimated hours × hourly rate, plus a buffer for revisions and risk. A retainer of 20 hours a month at $116.73 is $2,335 a month; agree in advance what happens to unused or extra hours. Value-based pricing, where the price follows the value to the client rather than the hours, is a further option once you know your hourly floor.
Consultants and contractors calculate their hourly rate like other freelancers, with different inputs: consultants usually bill a smaller share of their time and need a higher margin, and contractors have to cover the benefits an employer would otherwise pay.
To calculate a consulting rate, use the freelancer mode with consulting inputs. Consultants spend more unbilled time on sales, proposals and research between engagements, so their billable share is often lower, and the margin has to carry the gaps between projects. If sales and proposals leave you 50% billable time and you want a 25% margin, the same $80,000 take-home income, 25% tax and $12,000 of costs need $171.98 an hour. The calculator's management consultant preset starts at 70% billable time, 45 hours a week and a 25% margin; replace them with your own numbers. Professional services firms averaged 66.4% billable utilization in 2025 (SPI Research 2026), so treat a higher share as a target, not a given.
A contractor's hourly rate has to cover what an employer pays on top of a salary: payroll taxes, health insurance, retirement contributions and paid time off. US private employers spent $14.07 an hour on benefits on top of $32.82 in wages in June 2026, 30.0% of total compensation (BLS Employer Costs for Employee Compensation, 2026). A $70,000 salary is $33.65 an hour over 2,080 hours. To earn the same $70,000 before tax as a contractor, enter $52,500 take-home income at a 25% tax rate, add $12,000 of your own costs (health insurance, equipment, accounting) and bill 65% of a 40-hour week with a 15% margin: the rate is $80.66 an hour, more than twice the hourly wage.
Average hourly rates range from about $100 to $149 for US agencies in design, SEO, web development and management consulting to $362 for lawyers. The table lists published billing rates, and employee wages where no current billing-rate survey is public, each with its source and year. Billing rates sit far above wages: lawyers earn a median $76.76 an hour as employees (US Bureau of Labor Statistics, May 2025) but bill $362.
| Profession | Typical hourly rate (US) | What it measures | Source |
|---|---|---|---|
| Lawyers | $362 on average; $132-$484 by practice area | Billing rate charged to clients (2026) | Clio Legal Trends, lawyer rates, 2026 |
| Paralegals and other non-lawyer legal staff | $194 on average | Billing rate charged to clients (2026) | Clio Legal Trends, lawyer rates, 2026 |
| Management consultants | $100-$149 | Consulting firm rate (2026) | Clutch Business Consulting Pricing Guide, 2026 |
| Web developers | $100-$149 | Agency rate (2026) | Clutch Web Development Pricing Guide, 2026 |
| SEO consultants | $100-$149 | Agency rate (2026) | Clutch SEO Agency Pricing Guide, 2026 |
| Graphic designers | $100-$149 | Agency rate (2026) | Clutch Graphic Design Pricing Guide, 2026 |
| Accountants and auditors | $40.23 median | Employee wage, not a billing rate (May 2025) | US Bureau of Labor Statistics, 2026 (May 2025 data) |
| Bookkeepers | $24.36 median | Employee wage, not a billing rate (May 2025) | US Bureau of Labor Statistics, 2026 (May 2025 data) |
| Virtual assistants | $10-$20 median | Freelance rate on Upwork contracts worldwide, not only US (accessed October 2026) | Upwork, Virtual Assistant Hourly Rates |
Clutch rates are what agencies and firms listed on Clutch charge; a freelancer's rate can be lower or higher. No current public survey of accountants' billing rates was available, so the table shows their wage as employees.
Use these as a sanity check, not as your rate - your costs and billable hours decide what you need to charge.
Your hourly rate holds only if you really bill the hours it assumes, so track every working hour and tag it billable or non-billable. TimeCamp is a time tracking software that automatically records billable and non-billable hours and turns them into invoices and reports.
Calculate the value of your billable hours, your utilization and your effective hourly rate.
Turn a cost into a selling price and convert between markup and margin.
Convert hours and minutes to decimal hours for timesheets and invoices.
What separates the rate a client pays from the wage the worker gets.
Calculate your hourly rate by adding your take-home income, income tax and business costs, dividing the total by your billable hours a year and dividing again by (1 - margin). With $80,000 take-home income, 25% tax, $12,000 of costs and 1,196 billable hours, the break-even rate is $99.22 and the rate with a 15% margin is $116.73 an hour.
There is no single right rate: charge at least the rate that covers your income, taxes, business costs and the hours no client pays for. A freelancer who wants $80,000 a year after 25% tax, has $12,000 of costs and bills 65% of a 40-hour week needs $116.73 an hour with a 15% margin. Use the average hourly rates by profession as a sanity check, not as your rate.
A freelancer working 40 hours a week with 30 days off has 1,840 working hours a year (230 days × 8 hours). 46% of freelancers spend 10 to 20% of their time on non-billable tasks such as client acquisition and accounting (freelancermap Freelancer Study 2026), so they bill 80 to 90%: 1,472 to 1,656 billable hours. At the calculator's default 65% billable share it is 1,196 billable hours a year.
A break-even hourly rate is the lowest rate that covers your income, taxes and business costs, with no profit left over. It equals your annual costs divided by your billable hours. For $80,000 take-home income, 25% tax and $12,000 of costs over 1,196 billable hours, the break-even rate is $99.22. Every hour billed below it loses money.
Yes, include income tax in your hourly rate, because clients pay you before tax. Divide your take-home income by (1 - tax rate): $80,000 at a 25% tax rate needs $106,667 before tax. In the US, self-employed people also pay a 15.3% self-employment tax (12.4% Social Security and 2.9% Medicare) on 92.35% of their net earnings (IRS Topic no. 554), so include it in your tax rate.
Margin is profit as a share of the price; markup is profit as a share of the cost. A 30% margin equals a 42.9% markup, and a 25% margin equals a 33.3% markup. This calculator uses margin: rate = break-even rate ÷ (1 - margin). To convert between the two, use our markup calculator.
Add employer costs and overhead to the salary, divide by the employee's billable hours a year and divide again by (1 - margin). A $70,000 salary with 20% employer costs and $15,000 of overhead, over 1,288 billable hours (70% of 1,840), gives a cost rate of $76.86 and a billable rate of $109.80 an hour at a 30% margin.
A charge-out rate is the hourly rate a firm charges clients for an employee's time; the term is common in the UK and Australia and means the same as billable rate. Calculate it as (salary + employer costs + overhead) ÷ billable hours ÷ (1 - margin). The section on how to calculate a billable rate for employees has a worked example: $109.80 an hour for a $70,000 salary.
Multiply your hourly rate by the hours in your working day: $116.73 × 8 hours = $934 a day. To go the other way, divide the day rate by the hours it covers: a $934 day rate over 8 hours is about $117 an hour. Agree with the client how many hours a day includes, because longer days lower the hourly rate you actually earn.
Charge hourly when the scope is unclear or likely to change, and per project or on a retainer when the scope is clear and repeatable. Price a project from the same hourly rate: estimated hours × rate, plus a buffer for revisions and risk. At $116.73 an hour, a 40-hour project with a 15% buffer is about $5,370.
Review your hourly rate at least once a year, and raise it sooner when your costs rise, when you add skills or credentials, or when your calendar stays fuller than your target billable share. Recalculate it with your current income goal and costs, give existing clients notice before the new rate applies and quote it to new clients right away.
State your hourly rate plainly, with what it covers and how you bill, before any work starts. For example: "My rate is $117 an hour, billed in 15-minute increments. This project should take 35 to 40 hours, so I expect $4,095 to $4,680." Put the rate, the billing increment and your payment terms in the proposal or contract.
No, the rate from this calculator is a net rate, before VAT or sales tax. If you have to charge VAT or sales tax, add it on the invoice on top of your hourly rate: you collect it for the tax authority and it is not part of your income. Income tax is different, and the calculator includes it, because you pay it out of your rate.
Yes, the hourly rate calculator is free and needs no sign-up. Your numbers stay in your browser and nothing is stored. TimeCamp is a time tracking software that automatically records billable and non-billable hours and turns them into invoices and reports. Use it to compare the billable hours you actually work with the plan behind your rate.