Why is my rate so much higher than an employee's salary per hour?

Because an employee's employer is carrying overhead, unbillable time, holiday, sick pay, equipment and tax on top of the salary. Comparing a freelance rate to an hourly salary compares a whole business to one line of its cost.

How do I find my real billable ratio?

Take last quarter. Divide the hours you actually invoiced by the hours you actually worked. For most solo consultants and trades the answer lands between 50% and 65% — people who have never measured it usually guess 80%.

What if the market will not pay my calculated rate?

Then the arithmetic has told you something useful early. Either the overhead is too high, the billable ratio is too low, or the work you are selling is not the work you should be selling.

Freelance hourly rate calculator

Dividing a target salary by 2,080 hours produces a rate that guarantees you earn less than the salary you wanted. This divides by billable hours instead.

Target income

$ / year

Overhead

$ / year

Software, insurance, accounting, equipment, unpaid weeks off.Working weeks

/ year

Hours per week

Billable ratio

Hours actually invoiced last quarter ÷ hours worked. Usually 50–65%, not 80%.Target margin

Hourly rate: $78.86
Billable hours: 1,104 / yr
Revenue needed: $87,059

1,840 paid hours a year, of which 1,104 are billable at that ratio. Dividing the target income by 2,080 hours instead gives $28.85 an hour — the arithmetic almost everyone starts from, and the one that pays roughly a third less than planned.

The formulas

required revenue = target income + overhead

with margin = required revenue / (1 - target margin)

paid hours = working weeks x hours per week

billable hours = paid hours x billable ratio

rate = revenue with margin / billable hours

The billable ratio is the whole game. Quoting, invoicing, admin, marketing and learning are all unpaid and all necessary, and for most solo operators they consume between a third and a half of the week.

A worked example

A $60,000 target income, $14,000 of overhead, 46 working weeks, 40 hour weeks, a 60% billable ratio and a 15% margin:

required revenue = 60,000 + 14,000 = 74,000

with margin = 74,000 / 0.85 = 87,059

paid hours = 46 x 40 = 1,840

billable hours = 1,840 x 0.60 = 1,104

rate = 87,059 / 1,104 = 78.86

About $79 an hour to take home $60,000. Dividing the target by 2,080 hours gives $29 and would leave you earning roughly a third of what you planned.

Assumptions and limits

Before tax. The target income is what the business needs to generate, not what lands in your account after tax.
Assumes a solo operator. With employees, price against their loaded cost per billable hour rather than your own.
Excludes bad debt, which for some trades is significant and belongs either in overhead or in the margin.
An hourly rate punishes you for getting faster. For outcome-priced work, use this as a floor and a check, not the price itself.

Doing this more than once?

This page prices one rate. These keep it against real invoices, multiple clients and fixed-fee quotes as the work actually comes in.

Questions

Why is my rate so much higher than an employee's salary per hour?: Because an employee's employer is carrying overhead, unbillable time, holiday, sick pay, equipment and tax on top of the salary. Comparing a freelance rate to an hourly salary compares a whole business to one line of its cost.
How do I find my real billable ratio?: Take last quarter. Divide the hours you actually invoiced by the hours you actually worked. For most solo consultants and trades the answer lands between 50% and 65% — people who have never measured it usually guess 80%.
What if the market will not pay my calculated rate?: Then the arithmetic has told you something useful early. Either the overhead is too high, the billable ratio is too low, or the work you are selling is not the work you should be selling.

Last updated 24 August 2026.