Unlike an employee’s salary-to-hourly conversion, a freelancer must also cover business overhead and typically has far fewer billable hours than total working hours.
How it works
Desired annual income plus annual business overhead, divided by billable hours per year, gives the required hourly rate to hit that income target.
What this does not include
This doesn’t build in a profit margin or buffer beyond the target income itself — many freelancers add an additional cushion on top of the bare-minimum required rate this calculator computes.
How to use this calculator
- Enter desired annual income, annual overhead, and billable hours per year.
A worked example
A desired $80,000 annual income, $10,000 in annual overhead, 1,200 billable hours per year: required rate = (80,000+10,000) ÷ 1,200 = $75/hour.
What the variables mean
| Variable | Meaning |
|---|---|
| Desired annual income | Target take-home earnings for the year |
| Annual overhead | Business expenses — software, insurance, equipment, etc. |
| Billable hours per year | Hours actually billed to clients, not total hours worked |
Edge cases worth knowing
Billable hours are almost always less than total working hours. Time spent on admin, marketing, and unpaid client communication doesn’t count toward billable hours, which is why this figure is usually well below a full 2,000+ hour work year.
Zero billable hours makes the required rate undefined — there’s no billing base to spread income and overhead across, so the calculator returns no result.
Frequently asked questions
Why are billable hours so much lower than total working hours?
Marketing, admin, invoicing, client communication, and unpaid pitch work all take real time but aren’t directly billable — many freelancers find only 50%-70% of their working hours are actually billable.
What counts as business overhead?
Software subscriptions, business insurance, self-employment tax, equipment, and any other cost of running the freelance business beyond direct project costs.
Should this rate include a profit margin?
This calculator computes the break-even rate to hit a target income — adding an explicit profit margin or buffer on top is a separate decision beyond this baseline.
