Enter the salary you're replacing and your real freelance economics — billable hours, time off, insurance — and get the hourly and day rate you actually need.
The freelance rate formula
revenue target = (salary + insurance + overhead) × (1 + tax buffer)
hourly rate = revenue target ÷ (billable hrs/week × working weeks)
The formula's power is in what it refuses to ignore: the costs an employer used to absorb and the hours nobody pays for. Both push the required rate far above the naive salary-divided-by-2,080 number — and the gap is exactly why new freelancers who price from that naive number earn less than they did employed.
A worked example
Replacing a $90,000 salary with $600/month insurance and $300/month overhead, an 8% tax buffer, 25 billable hours a week and 6 weeks off: revenue target ≈ $108,864, billable hours = 25 × 46 = 1,150, required rate ≈ $95/hour. The naive calculation says $43/hour — pricing there would deliver roughly half the target lifestyle.
Rate anxiety and the market check
If the required rate feels unsellable, the levers are (in order of real-world effectiveness): raise billable hours by niching down so projects come to you, lower the revenue target honestly, or move from hourly to project pricing where your efficiency isn't penalized. What doesn't work is quietly discounting the rate and hoping volume saves you — the hours aren't there, as the math above shows.
Frequently asked questions
How do I set my freelance hourly rate?
Start from the salary you want to replace, add the benefits you now pay yourself (health insurance, retirement, self-employment tax), then divide by your realistic billable hours — not 2,080. Most freelancers bill 20-30 hours in a 40-hour week once admin, sales, and gaps are counted.
Why should a freelance rate be higher than the salary equivalent?
Because a W-2 salary hides costs the freelancer pays directly: the employer half of payroll tax (7.65%), health insurance, paid time off, retirement match, and equipment. A common rule of thumb is salary-equivalent hourly × 1.5 to 2.
What is self-employment tax?
Freelancers pay both halves of Social Security and Medicare — 15.3% on net earnings (an employee pays 7.65% and the employer covers the rest). Half of it is deductible, but it's still roughly an extra 7% versus employment.
How many billable hours per year is realistic?
A full-time freelancer billing 25 hours/week for 46 working weeks logs about 1,150 billable hours — barely half of the 2,080 'work year.' Overestimating billable hours is the most common reason freelance rates end up too low.