How to Set Your Freelance Hourly Rate
The most common freelancing mistake is charging too little — usually because the rate was set by dividing an old salary by working hours. Here is the better way.
New freelancers often pick a rate by taking their old salary, dividing it by a year's working hours, and quoting that number. It feels logical. It is also a serious underpricing trap. A freelance rate has to cover things a salary quietly covered for you. This guide explains how to set a rate that actually sustains you.
Why "Salary ÷ Hours" Fails
When you were employed, your salary was only part of what your employer spent on you. They also provided paid leave, covered business costs, contributed to your retirement, and gave you a steady flow of work. As a freelancer, you now carry all of that yourself — out of your hourly rate. Dividing an old salary by hours ignores every one of those costs, which is why it produces a rate that is too low to live on.
Not Every Hour Is Billable
Here is the single biggest insight. A freelancer does not get paid for every working hour. A large share of your time goes to non-billable work: finding clients, sending quotes, invoicing, admin, marketing, and learning. These hours are essential, but no client pays for them directly.
If only, say, 60% of your working hours are billable, then your rate for those billable hours must also fund the other 40%. A rate set as though every hour were billable will leave you badly short.
Building the Rate Up
Instead of dividing a salary down, build the rate up from what you actually need:
- Start with your target income — what you genuinely need to earn in a year.
- Add your business costs — software, equipment, insurance, fees, workspace.
- Add a provision for time off — you have no paid leave, so your rate must cover holidays and sick days.
- Add tax and retirement — you are responsible for your own, so set money aside.
- Divide by your realistic billable hours — not total hours, only the ones clients actually pay for.
The result is usually well above the naive "salary divided by hours" figure — and that is correct, not greedy.
Build a freelance rate from your real numbers.
Try the Plantrino Hourly to Salary CalculatorA Simple Illustration
Imagine you want 70,000 of income, plus 10,000 of business costs, plus provisions for leave, tax, and retirement that bring the total you must generate to, say, 110,000. If you realistically bill 1,000 hours in a year (allowing for all that non-billable work and time off), your rate is 110,000 ÷ 1,000 = 110 an hour. A freelancer who simply divided a 70,000 salary by 1,800 hours would have charged about 39 — and slowly gone broke.
Frequently Asked Questions
Why is my freelance rate so much higher than my old wage?
Because it must cover what an employer used to provide — leave, costs, retirement, tax handling — and because only some of your hours are billable.
What are billable hours?
Hours a client actually pays for. Admin, marketing, quoting, and learning are real work but non-billable, so your billable rate has to fund them.
Should I charge hourly or per project?
Either can work. Even with project pricing, knowing your true hourly rate tells you whether a project price is high enough to be worth your time.
A sound freelance rate is built up from what you need, not divided down from an old salary. Account for non-billable time, business costs, your own leave, and tax, then divide by the hours clients genuinely pay for. The number may look high — but it is the number that lets freelancing actually support you.