How much to charge per hour as a freelancer: calculating your minimum rate

Many freelancers set their rate by looking at what colleagues charge, or by picking a number that sounds right. At the end of the year they have worked plenty of hours and earned less than they expected. Your minimum rate can be calculated, and it takes five minutes.

What you want to keep

Start from the net income you need in a year, after taxes and contributions. In the example, €32,000.

Fixed costs

Computer, software, phone, accountant, courses: what you pay even in months with no clients. €250 a month makes €3,000 a year.

Taxes and contributions

They depend on your country, your tax regime and the kind of work you do, and your accountant can give you the right percentage. For the example we take a common Italian case: the flat-rate regime (forfettario), a professional activity with a 78% coefficient, registered with the INPS separate pension scheme.

Contributions are 26.07% of 78% of what you bill. The tax is 15% of what is left of that 78% once contributions are taken out. Put together, about 29% of your billing goes. If you qualify for the 5% tax rate in your first five years, it drops to about 23%.

In this regime expenses can't be deducted: that is why fixed costs are added to the net income before dividing.

(32,000 + 3,000) ÷ (1 − 0.29) = €49,296 to bill in a year

The hours you can actually bill

A year doesn't have 52 working weeks. Take out holidays, public holidays and a few sick days: say 46.

A week doesn't have 40 billable hours either. Part of it goes to quotes, email, invoices and finding clients. Working alone, 24 billed hours a week is already a good result.

46 weeks × 24 hours = 1,104 hours a year

The final number

49,296 ÷ 1,104 = €44.65 an hour, rounded to €45. Below that, you don't reach the goal you set yourself. How much to charge above it depends on experience, clients and market.

With the 5% tax rate the calculation becomes 35,000 ÷ 0.77 = €45,455 to bill, which is €41.17 an hour.

The other prices follow from here:

• an 8-hour day is worth at least €357;
• a project is priced by estimating the hours and adding 20% for surprises: 30 estimated hours become 36, which is €1,607.40;
• if the clients you find pay less than your minimum, lowering your price means working more to earn less. Better to change the kind of client or the way you sell your work: packages, project pricing, recurring services.

The calculation in three lines

billing you need = (desired net + fixed costs) ÷ (1 − taxes and contributions)

billable hours = working weeks × hours billed per week

minimum rate = billing you need ÷ billable hours

Redo the calculation every year, or when your costs and goals change. At the end of each job, compare the estimated hours with the real ones: after a few projects you know which work pays and which doesn't. If you are on the Italian flat-rate regime, how much to set aside each month for taxes and contributions is in the flat-rate tax set-aside calculator (in Italian).