TidyToolsWhy your freelance rate must be higher than your salary
A common mistake is to take a $60,000 salary, divide by 2,080 hours (40 hours × 52 weeks), and call ~$29/hour your freelance rate. That number is far too low, for three reasons. First, as an employee a big chunk of your value came from benefits — health insurance, pension contributions, paid holidays, sick days, and the employer's share of taxes. As a freelancer you fund all of that yourself. Second, you can't bill 40 hours a week — admin, sales, and gaps between clients mean your billable hours are lower. Third, you have business expenses a salary never had to cover.
This calculator accounts for all three. It takes the salary you want to match, adds a percentage for lost benefits and buffer, adds your business expenses, then divides by your realistic billable hours for the year — not your working hours. The result is the rate you'd actually need to charge to end up as well off as the salaried job.
A worked example
To match a $60,000 salary with $4,000 of expenses, 25 billable hours a week, 6 weeks off, and a 25% benefits buffer: you need to earn about $79,000 across roughly 1,150 billable hours — around $69/hour. Notice that's more than double the naive $29 figure. That gap is exactly why freelancers who price off their old salary end up underpaid.
Choosing your inputs
- Benefits & buffer: 20–30% is typical; go higher if you had strong employer benefits or want a safety margin.
- Billable hours: most freelancers realistically bill 50–70% of their working time — be honest here.
- Weeks off: include holidays and expected slow/unpaid weeks.
Frequently asked questions
Why can't I just divide my salary by 2,080 hours?
Because that ignores lost benefits, unpaid non-billable time, and business expenses. Doing so typically undercharges by 50% or more. This calculator adjusts for all three.
What percentage should I add for benefits?
20–30% is a common range to cover health cover, pension, paid time off, and the employer tax share you now pay yourself. Adjust to your situation.
How many hours can a freelancer actually bill?
Usually 50–70% of working hours — the rest goes to admin, marketing, and gaps between clients. Enter your realistic billable hours per week, not your total.