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Career · 6 min read · Last updated September 2026
Worked example: you want 1,500,000 a year after a 1,200,000 salary-equivalent plus 300,000 for insurance, software, taxes and dead time. Working 1,920 hours a year (48 weeks × 40) at 60% billable = 1,152 hours. Rate = 1,500,000 ÷ 1,152 ≈ 1,302.
Sales calls, proposals, invoicing, learning and admin are real work that generates no invoice. Early-career freelancers often overestimate billable share (70–80%) and underprice as a result; 55–65% is the honest planning band once a client pipeline exists. Newer freelancers with empty pipelines should bill higher rates, not lower — every hour is scarce.
| Basis | Math | Equivalent |
|---|---|---|
| Naive (salary ÷ 2,080) | 1,200,000 ÷ 2,080 | 577/hr |
| Reality (target ÷ billable) | 1,500,000 ÷ 1,152 | 1,302/hr |
Freelance rates at "salary equivalence" quietly donate your benefits, taxes and unbilled hours to clients. The Freelance Hourly Rate Calculator runs the full computation with your own inputs; the Contractor vs Employee tool compares total packages side by side.
Add your target income to business costs, then divide by billable hours: working hours × utilization. Example: 1,500,000 ÷ 1,152 (60% of 1,920 hours) ≈ 1,302 per hour.
Plan on 55–65% once you have steady clients; proposals, admin and sales consume the rest. Newer freelancers effectively have fewer billable hours, which argues for higher rates, not lower.
A salary hides taxes, benefits, paid leave and all the hours that never get billed. Dividing salary by 2,080 ignores all of it — your rate must cover those costs plus profit.
Hourly is the honest starting point; per-project pricing shifts efficiency gains to you but requires experience estimating scope. Compute your hourly minimum first either way — never quote below it.