Most freelancers undercharge. Not because they do not know their worth — because they calculate their day rate wrong.
The standard formula is: salary equivalent divided by 230 working days. That is it. That is the advice.
It is wrong.
What the standard formula misses
1. Billable days are not working days.
You work 230 days. You do not bill 230 days. Admin, business development, sick days, training, gaps between contracts — all unpaid. Realistic billable days for most freelancers: 160-180.
2. It ignores costs.
Software. Accountant. Insurance. Pension (you are funding this yourself now). Home office. Phone. These are not optional — they are the cost of running a business.
3. It ignores tax.
Employed salary and freelance revenue are not the same. You need to gross up for NI, income tax, and the fact there is no employer pension contribution.
The actual formula
- Target take-home (what you want in your pocket)
- Add: pension contributions
- Add: business costs
- Add: tax and NI (gross up)
- Divide by realistic billable days
That is your minimum day rate. Price below it and you are losing money every day you work.
The calculator
I built one that walks through every variable: landolio.com/tools/day-rate-calculator
Free, no login. Takes about 2 minutes.
The uncomfortable result
Most people who run the numbers find they need to charge 30-50% more than they thought. The good news: most of the market is also undercharging, so raising your rate is more viable than it feels.
What is your current day rate? Have you ever run the full numbers including costs and tax?
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