Converting a Salary Into a Freelance Rate

Updated 2026-08-31 · ProfitKit

The most common way new freelancers set a rate is to divide their old salary by the hours in a working year. It produces a number that is roughly half of what they actually need, because employment quietly paid for four things that self-employment does not.

The naive version

$52,000 a year ÷ 2,080 hours = $25/hour. That figure is wrong in four separate ways.

Adjustment 1 — Unbillable hours

Nobody bills 40 hours a week. Finding clients, quoting, invoicing, chasing payment, admin, bookkeeping and learning are all real work that no client pays for. Realistic billable ratios run from 50% to 70%.

At 60% billable, 2,080 hours becomes about 1,250 billable hours.

Adjustment 2 — Time off

Paid holiday and sick leave were part of the salary. Self-employed, unworked time earns nothing. Four weeks of holiday and a week of illness removes five weeks — roughly 10% of the year — and it must be funded by the weeks you do work.

Adjustment 3 — Costs the employer covered

Now yours: equipment and software, insurance, any pension contribution, accountancy, subscriptions, workspace, and in many countries a larger share of social contributions. For a service freelancer this frequently adds 15–25% on top of the target income.

Adjustment 4 — Tax

A salary is quoted after employer deductions; a freelance rate is quoted before everything. You must earn your target income plus the tax on it. The rate applicable to you depends entirely on your country and structure — use your real figure, and confirm it with a local accountant rather than a rule of thumb from the internet.

Putting it together

Work backwards in this order:

1. Target take-home income
2. Add business expenses for the year
3. Gross that total up for tax
4. Divide by billable hours, not total hours

Take-home target $52,000, expenses $8,000, and a 25% effective tax rate: ($52,000 + $8,000) ÷ 0.75 = $80,000 to invoice. Across 1,250 billable hours that is $64/hour — two and a half times the naive $25.

That number is a floor, not a price

$64 is what you must average to match your old salary. What you can charge depends on your market and the value of the work. But knowing the floor tells you immediately whether a quoted project is worth accepting — and it is the reason experienced freelancers turn down work that looks well paid.

The calculator runs this backwards calculation with your own income target, expenses, tax rate and billable percentage.

Do the calculation