How much to charge per hour as a freelancer

The classic mistake when going freelance is dividing the salary you want by the hours in a month. That ignores costs, holidays and above all the hours spent on admin, proposals and clients who never sign.

The tool works out how many genuinely billable hours you have in a year and divides your income target plus costs by that number. The result is the minimum rate that keeps you from losing money.

Not all your hours are billable

This is the mistake that sinks most rates. A freelancer spends a substantial part of their time finding clients, quoting, invoicing, learning and administering. A realistic billable percentage is between fifty and seventy per cent, not a hundred. Calculating a rate by dividing your annual target across every hour of the year leaves a price that does not work.

What a salary includes and an invoice does not

Paid holidays, sick leave, employer social contributions, redundancy pay, training and equipment. The freelancer covers all of it, so their rate must fund it in addition to profit. Comparing an hourly rate with an employee's hourly wage compares different things.

Fixed costs belong inside

Self-employment contributions, insurance, software, accountancy, equipment, connectivity and workspace. Add them to your income target before dividing by hours, or you will be paying for them out of your margin.

Hourly or per project

Charging by the hour penalises efficiency: the better you get, the less you earn for the same result. Charging per project or by value shifts the focus to the outcome delivered, though it demands accurate scoping.