finance
The Freelance Rate Formula Explained
Published: 2026-05-02·5 min read
Undercharging is the silent killer of freelance businesses. Most people look at what their employer used to pay them per hour and add 20%. This is a recipe for burnout.
The Missing Pieces
When you are an employee, your employer pays for:
- Your health insurance
- Your equipment
- Your office space
- Your taxes (half of them)
- Your vacation time
When you freelance, you are the employer.
The Formula
The formula for a sustainable rate is:
(Annual Desired Net + Annual Expenses + Taxes) / (Billable Weeks * Billable Hours)
Don't forget that you can't bill 40 hours a week. You have to spend time on marketing, invoicing, and learning.
Ready to find your number? Use our Freelance Rate Calculator.