Short answer
- Start with a sustainable hourly floor based on your annual target and realistic billable hours.
- Use hourly pricing when scope is uncertain or the client controls the workload.
- Use a project quote when the deliverable and revision boundary are clear, then include contingency for uncertainty.
A transparent freelance rate formula
Add the annual income you want to keep and your business expenses. Gross that amount up with a tax reserve, add a safety or profit buffer, then divide by realistic annual billable hours.
Billable hours should exclude sales, admin, bookkeeping, learning, sick time, vacation, and other work a client does not directly pay for.
Annual revenue target = ((take-home goal + expenses) / (1 - tax reserve)) × (1 + safety buffer) Hourly floor = annual revenue target / annual billable hours
Hourly, day, and project pricing compared
| Pricing method | Works well when | Main risk | Useful check |
|---|---|---|---|
| Hourly | Scope or workload may change | Efficient work can reduce revenue | Track actual billable time |
| Day rate | Work is booked in focused blocks | Partial-day expectations can blur | Define the day length and availability |
| Project | Deliverables and revisions are clear | Scope creep can erase margin | Write assumptions and contingency into the quote |
Turn the rate into a project quote
Estimate the hours for discovery, production, review, meetings, handoff, and revisions. Multiply the total by the sustainable hourly rate, then add a contingency percentage for uncertainty.
A contingency is not a substitute for a clear scope. State what is included, how many revision rounds are covered, and what triggers a change order.
Project quote = sustainable hourly rate × estimated project hours × (1 + contingency)
What the calculator cannot decide
- The right tax reserve for your jurisdiction or business structure.
- The market rate for your specialty, experience, or client segment.
- Whether value-based pricing, a retainer, or a fixed bid is best for a particular engagement.
- The legal, contract, insurance, and payment terms that should accompany a quote.
FAQ
Should freelancers charge hourly or per project?
Hourly pricing can fit uncertain scope. Project pricing can fit a defined deliverable and revision boundary. In both cases, start from a sustainable rate floor and make assumptions explicit.
How many billable hours should I assume?
Use your own realistic capacity after removing admin, sales, learning, vacation, sick time, and other non-billable work. Do not assume every working hour can be billed.
Is a tax reserve the same as a tax estimate?
No. It is a planning input. Use professional guidance or official resources for your actual obligations.