How to Calculate a Freelance Hourly Rate Without Underpricing Yourself

Hamza Sabri — Thu, 25 Jun 2026 08:02:30 +0000

A common mistake many beginner freelancers make is calculating their rate like an employee salary.

For example:

“I want to earn $60,000 per year, so I’ll divide that by 40 hours per week.”

That sounds logical at first, but it usually leads to underpricing.

Freelancers do not get paid for every working hour. A lot of time goes into admin, sales, client calls, revisions, learning, proposals, and unpaid communication.

So the real question is not:

“How many hours do I work?”

The better question is:

“How many hours can I realistically bill?”

Why salary-based pricing can be misleading

A full-time employee may be paid for a normal work week, but freelancers have to cover many things themselves:

taxes
software subscriptions
equipment
marketing
unpaid sales time
admin work
sick days
holidays
client communication
revisions
late payments
non-billable hours

If you ignore those factors, your hourly rate may look affordable, but your actual income can become much lower than expected.

A better way to calculate your freelance rate

A more realistic formula is:

Desired yearly income + taxes + business expenses
divided by realistic yearly billable hours

The most important part is “realistic billable hours”.

If you work 40 hours per week, you may only bill 20 to 28 hours per week.

The rest of your time may go to:

finding clients
answering emails
preparing proposals
meetings
revisions
bookkeeping
improving skills
managing projects

That means your freelance hourly rate usually needs to be higher than a normal employee hourly rate.

Example

Let’s say a freelancer wants to earn:

$60,000 per year

They estimate:

$8,000 per year in expenses
25% for taxes
25 billable hours per week
46 working weeks per year

That gives:

25 × 46 = 1,150 billable hours per year

If the freelancer needs to cover income, taxes, and expenses, their hourly rate may need to be much higher than simply dividing $60,000 by 2,080 hours.

This is why many freelancers feel busy but still underpaid.

They are working a lot, but not all of that time is billable.

Hourly pricing vs project pricing

Hourly pricing is useful when:

scope is unclear
the client needs ongoing support
tasks change often
time tracking is important

Project pricing works better when:

the scope is clear
the deliverables are defined
revision limits are agreed
the value is higher than the time spent

For beginners, hourly pricing can be easier to understand. But as experience grows, project pricing can become more profitable.

Common beginner mistake

One of the biggest mistakes is charging only for execution time.

For example, if a website takes 10 hours to build, a beginner may charge only for those 10 hours.

But the real work may also include:

discovery call
proposal
planning
communication
revisions
testing
handoff
admin

If those are not included, the project becomes less profitable.

Practical takeaway

A freelance rate should not be based only on what feels affordable to the client.

It should be based on:

your income goal
your expenses
your taxes
your available billable hours
the value of the work
the risk of unpaid time

I recently built a small free calculator to help visualize this logic:

https://www.freelanceworktools.com/tools/freelance-hourly-rate-calculator

It does not require an account. The goal is simply to help freelancers understand how income goals, taxes, expenses, time off, and billable hours affect the final rate.

I would love feedback from other freelancers and developers:

What factor do you include when calculating your rate?
Do you prefer hourly pricing or project pricing?
What pricing mistake did you make when starting out?

DEV Community: Hamza Sabri

How to Calculate a Freelance Hourly Rate Without Underpricing Yourself