How Much Should You Charge? A Freelancer's Guide to Setting Your Hourly Rate

Setting your hourly rate is one of the hardest parts of going freelance. Price too high and you worry you'll scare off clients; price too low and you'll work yourself into the ground for less than you made as an employee. The good news: your rate isn't a guess. It's a number you can build from the ground up. Here's a simple framework for setting a freelance hourly rate that actually pays the bills — and leaves room for profit.

Start with the salary you want to replace

The most common mistake new freelancers make is taking their old salary, dividing by 2,080 (the number of working hours in a year), and calling that their rate. That math ignores a hard truth: you can't bill 40 hours a week. Between admin, marketing, invoicing, and downtime between projects, most freelancers bill only 50–60% of their working hours.

Start instead with the annual income you want. Say you're aiming for $80,000 a year. If you realistically bill 25 hours a week across 48 working weeks, that's 1,200 billable hours. Eighty thousand divided by 1,200 is about $67 an hour — and you haven't covered a single cost yet.

Add your business costs

As a freelancer, you are the business. Your rate has to cover everything an employer used to: taxes, health insurance, retirement contributions, software, equipment, and time off. These can easily add 25–35% on top of your target income.

• Self-employment and income taxes (often 25–30% of profit)
• Health insurance and retirement savings
• Software, hardware, and subscriptions
• Unpaid time: holidays, sick days, and vacation

Fold those numbers in and that $67 rate climbs closer to $90. This is exactly why freelance rates look high next to an hourly salary — they're not comparable. A $90 freelance hour and a $45 employee hour can take home roughly the same pay.

Layer in a profit margin

Covering your costs keeps you afloat; a profit margin lets your business grow. Build in 10–20% on top of your break-even rate so you have room to invest in better tools, take a course, or weather a slow month without panic. Profit isn't greed — it's what separates a sustainable business from a stressful job you gave yourself.

Check it against the market

Your costs set the floor; the market sets the ceiling. Research what others in your niche and region charge by browsing job boards, asking peers, and reading competitor pricing pages. If your calculated rate lands far below the going rate, you're leaving money on the table. If it's far above, you'll need a portfolio and positioning that justify the premium.

Specialization moves that ceiling. A generalist "web designer" competes with thousands; a "Shopify conversion specialist for skincare brands" competes with a handful — and can charge multiples more for the very same hours.

Track your real hours before you commit

Every rate calculation rests on one number: how many hours you actually bill. Guess wrong and the whole formula falls apart. Before locking in your rate, track your time for a few weeks — billable and non-billable — so you know your real utilization. Tools like HelmBill make this effortless: start a timer when you begin work, and your billable hours roll straight into an invoice when the project's done. After a month of real data, you can recalculate your rate with actual numbers instead of optimistic estimates.

A simple formula to start

If you just want one place to begin, use this:

1. Pick your target annual income.
2. Divide it by your realistic yearly billable hours (weekly billable hours × working weeks).
3. Add about 30% for costs and taxes.
4. Add a 15% profit margin.
5. Compare the result to market rates and adjust.

It won't be perfect on day one, and it doesn't need to be. A rate you can calculate is a rate you can defend.

Revisit your rate every few months

Your rate is not a one-time decision. As your skills, portfolio, and demand grow, your rate should grow with them. Raise it with new clients first, where there's no awkward conversation, and review it at least twice a year. The freelancers who thrive aren't the ones who found the perfect number — they're the ones who kept adjusting it.

Set a rate that covers your costs, pays you fairly, and leaves room for profit. Track your hours so you know it's working. Then raise it as you grow. That's the whole game.