Work guide
Set a freelance rate that covers unpaid reality
New freelancers often divide a desired salary by 2,000 hours and call it a rate. That ignores unpaid marketing, admin, sick days, software, health insurance, and self-employment tax. A true rate starts from net income goals and works backward through utilization.
Updated 2026-09-05
The utilization trap
If you can realistically bill 20–25 hours per week after sales and delivery overhead, your rate must support the year on those hours—not on a fantasy 40. At 1,000 billable hours/year, a $80,000 take-home-style target needs a much higher sticker rate than an employee mindset expects.
Stack the missing employee benefits
Add health premiums, retirement contributions, equipment refresh, accounting, and a profit buffer. Then apply a tax estimate for your jurisdiction. Only after that divide by expected billable hours.
Package the rate
Hourly is fine for unclear scopes. Fixed project fees with clear change-order rules often protect both sides better. Either way, know your floor rate so discounts stay intentional.
Key takeaways
- Billable hours drive the math—not calendar hours.
- Replace benefits and taxes before you compare to salary peers.
- Protect a floor rate; discount with eyes open.