Billing
How do you set a freelance hourly rate?
Work backwards. Decide the annual income you need, add the costs an employer would have covered — tax, insurance, software, pension, unpaid holiday — and divide by the hours you can realistically bill in a year, which is far fewer than the hours you will work. Then check the result against what your market pays, and adjust the number of hours rather than the arithmetic.
Why
Almost every rate that turns out to be too low was calculated by dividing by the wrong denominator. A full working year is not billable: a large share of it goes to pitching, admin, invoicing, learning and the gaps between contracts. Dividing your target income by hours-worked rather than hours-billed produces a rate that only works if you are busy every single week, which nobody is.
Do this
- Count your real billable hours from a few tracked months rather than assuming a number.
- Include the costs an employer used to absorb: tax, healthcare, equipment, software, holiday and sick days.
- Set the rate per project when the work differs in value, rather than carrying one rate everywhere.
- Revisit it on a schedule — once a year — so a raise is a routine event rather than a confrontation.
Avoid this
- Dividing by 2,000 hours because that is what a salaried year looks like.
- Pricing against the cheapest person you can find rather than the value of the outcome.
- Quoting a rate you have never tested against your own tracked hours.
- Discounting on the rate rather than on the scope, which teaches the client the rate was never real.
What it looks like in the log
The same advice, as the row a tracked session actually leaves behind.
Rate review — Q2
- Period
- Jan – Mar
- Hours tracked
- 412h
- Of which billable
- 268h
- Billable share
- 65%
All of this is easier when the hours were written down as they happened. Punch O'Clock is a free tracker that does it in one tap, works offline, and exports the range you are billing.
Free. No ads, and no account unless you want sync.
Related questions
Should my rate be the same for every client?
It does not have to be, and for most freelancers it is not. Rush work, difficult scopes and clients who need a lot of hand-holding cost you more to serve. Keeping the rate per project rather than per person makes that easy to manage and easy to explain.
How often should I raise it?
Review it once a year and raise it deliberately rather than waiting until resentment forces the conversation. A scheduled, modest increase announced in advance is far easier for a client to accept than a large correction after three years of standing still.