A full-time year is about 2,080 hours. So if you want the equivalent of a $90,000 salary, $43 an hour should do it. This is the calculation almost every new freelancer makes, and it is wrong by roughly a factor of two.
You cannot bill 2,080 hours
An employee is paid for 2,080 hours. A freelancer is paid only for the hours a client agrees to pay for. Everything else — pitching, quoting, invoicing, chasing late payments, bookkeeping, marketing, admin, learning, and the gaps between contracts — is unpaid.
Established freelancers typically bill somewhere between 50% and 70% of their working hours. Take four weeks of holiday and a fortnight of public holidays and sick days, and you have roughly 46 working weeks. At 40 hours a week that is 1,840 hours, of which perhaps 1,100 to 1,300 are billable. Use 1,200 as a working figure until you have your own data.
Try it freeFreelance & Contractor Rate CalculatorPrice contract work with tax, benefits and downtime built in.You are also paying the employer’s share
Employment quietly hides a set of costs. In Canada, an employer matches your CPP contribution and pays 1.4 times your EI premium. In the US, an employer pays half of FICA — 6.2% for Social Security and 1.45% for Medicare. Self-employed, you pay both halves: US self-employment tax runs to 15.3% on the first tranche of net earnings, and a self-employed Canadian pays both sides of CPP.
On top of that sit the things an employer provided and you now buy yourself: health and dental coverage, disability insurance, professional liability insurance, a pension or RRSP contribution with no match, equipment, software, accounting fees, and paid leave that no longer exists. Costed honestly, these commonly add 20% to 35% on top of the headline salary you are trying to replace.
Building the number
Work forwards from what you need rather than backwards from what feels reasonable.
Advertisement
- Start with the salary equivalent you want to take home — say $90,000.
- Add business overheads for the year: software, insurance, equipment, accounting, subscriptions, a co-working desk. Assume $9,000.
- Add the extra tax and benefits burden — roughly 25% of the salary figure, so $22,500.
- Total annual revenue required: $121,500.
- Divide by realistic billable hours, not calendar hours: 121,500 ÷ 1,200 = $101 an hour.
The naive calculation said $43. The honest one says $101. Both are aiming at the same standard of living.
If your rate feels uncomfortably high, check it against the alternative: what would a client pay an agency for the same work? Agency day rates are frequently three to five times what an experienced freelancer charges, and the agency is not better at the work — it is better at pricing.
Charge for value where you can, hours where you must
Hourly billing has a structural flaw: getting faster reduces your income. As you get better at the work, hourly rates punish you for it. Fixed-price and retainer arrangements break that link, and the hourly figure becomes an internal floor — the number you use to sanity-check whether a fixed quote is worth taking, not the number on the invoice.
Use your rate to price the estimated hours plus a buffer for revision rounds, then quote the total. Clients generally prefer a known number, and you keep the upside from being efficient.
Try it freeHourly Rate CalculatorConvert a target salary into an hourly billing rate.Revisit it every year
Track your actual billable hours for a quarter and you will almost certainly find the ratio is worse than you assumed. That is not a reason for discouragement — it is the number that justifies your next rate increase. Freelancers who raise rates annually tend to do so from evidence; those who never raise them tend to be guessing in both directions.
Recommended tool
Cloud accounting for small business
Track income, expenses and sales tax in one place, with GST/HST and US state tax reporting built in. Most small teams are set up in an afternoon.
Compare accounting softwareRecommendation coming soon.
Frequently asked questions
- How many hours can a freelancer realistically bill?
- Most sustainable freelance practices bill 50% to 70% of working hours, or roughly 1,100 to 1,300 hours a year after holidays. Track your own for a quarter rather than assuming.
- How much should I add for tax and benefits?
- As a rough planning figure, 20% to 35% on top of the salary you are replacing, covering the employer’s share of payroll taxes, insurance, retirement saving and unpaid leave.
- Should I tell clients my hourly rate?
- Not necessarily. Use it internally to price fixed quotes. Hourly transparency invites negotiation about hours rather than about value, and it penalises you for working quickly.
- Is it better to charge a day rate?
- Day rates are easier to sell and reduce time-tracking friction, but only work if a day genuinely means a day. If clients expect a day rate to cover scattered hours across a week, you have given away the premium.
General information only — not tax, legal, accounting or financial advice. Rates change and individual circumstances vary. Confirm figures with the CRA, the IRS, your state or provincial authority, or a licensed professional before acting on them.
Calculators for this
Advertisement