When I started freelancing, I did what most people do: I took my old salary, divided by 2,080 hours (40h × 52 weeks), and used that as my hourly rate.
That was a $30,000/year mistake.
Here's why — and the formula I wish someone had shown me on day one.
The 3 hidden costs employees don't pay
When you're employed, your employer covers a lot of costs you never see. Go freelance, and they all land on you:
1. Self-employment taxes & insurance (25-35%)
As an employee, your employer pays half your Social Security and Medicare taxes (7.65%), plus health insurance, retirement matching, and workers' comp. As a freelancer, you pay all of it.
For a $70,000 take-home target, you actually need to gross $100,000 just to cover taxes and insurance.
2. Business overhead (10-20%)
Software subscriptions (IDE, design tools, project management), equipment, a workspace, accounting fees, professional development. These add up to $5,000-15,000/year that your employer used to cover.
3. Non-billable time (25-40%)
This is the one that kills you. Between finding clients, writing proposals, invoicing, emails, bookkeeping, and admin — most freelancers only bill 60-75% of their working hours.
A 40-hour week might only yield 28-30 billable hours.
The actual formula
Working weeks = 52 - (vacation_days / 5) - (sick_days / 5)
Total hours = working_weeks × hours_per_week
Billable hours = total_hours × billable_percentage
Pre-tax needed = desired_income / (1 - tax_rate)
With overhead = pre_tax_needed × (1 + overhead_rate)
Hourly rate = with_overhead / billable_hours
Let's run the numbers for $70k take-home:
| Factor | Value |
|---|---|
| Desired take-home | $70,000 |
| Tax + insurance (30%) | +$30,000 |
| Overhead (15%) | +$15,000 |
| Annual gross needed | $115,000 |
| Working weeks (15 vacation + 5 sick days) | 48 |
| Hours/week | 40 |
| Billable % | 70% |
| Billable hours/year | 1,344 |
| Required hourly rate | $86/h |
Compare that to the naive calculation: $70,000 ÷ 2,080 = $34/h.
That's a 2.5x difference. At $34/h, you'd actually take home about $27,000 — less than half your target.
How rates vary by profession
| Profession | Entry | Typical | Senior |
|---|---|---|---|
| Web Developer | $50/h | $95/h | $175/h |
| Graphic Designer | $35/h | $65/h | $120/h |
| Copywriter | $30/h | $65/h | $150/h |
| Video Editor | $30/h | $60/h | $130/h |
| Marketing Consultant | $50/h | $100/h | $200/h |
| Social Media Manager | $25/h | $50/h | $100/h |
| Bookkeeper | $25/h | $42/h | $75/h |
| Writer | $25/h | $50/h | $100/h |
Try it yourself
I built a free calculator that does all this math for you — plug in your numbers and it shows your rate instantly:
It also has pre-filled versions for web developers, graphic
designers, copywriters, and 5 other professions.
No signup, no email gate — just a calculator.
TL;DR
- Don't divide your salary by 2,080. You'll undercharge by 2-3x.
- Account for taxes (25-35%), overhead (10-20%), and non-billable time (25-40%).
- Most freelancers need to charge $60-100/h to match a $70k salary.
- Use a rate calculator to find your actual number.
Top comments (1)
This is a really well-structured breakdown of freelance pricing. The non-billable time factor is something I see so many freelancers underestimate when they're starting out. I've found that using AI tools and automation for tasks like proposal writing and invoicing can help reclaim some of those lost hours and effectively raise your effective hourly rate without changing your prices.