How to set your freelance hourly rate (and when to raise it)

Most freelancers set their first rate by asking someone else what they charge, then adjusting by vibes. It works well enough to get started and badly enough to be worth fixing.

Here is a method that starts from what you actually need rather than from what someone else quoted.

Start from target income, not from an hourly figure

Pick the annual amount you need to earn before tax. Not aspire to — need. Call it $90,000.

Now add the costs an employer would have covered: health insurance, equipment, software, accounting, pension contributions, and the self-employment portion of your taxes. For a lot of independents this lands somewhere between 25% and 40% on top. At 30%, $90,000 becomes $117,000 of revenue.

Then subtract the hours you cannot bill

This is where most calculations go wrong. There are roughly 2,080 working hours in a year. You will not bill 2,080 hours. You need to subtract:

• Holiday and sick time — say 5 weeks, so 200 hours
• Sales, proposals and calls that go nowhere
• Admin, invoicing, bookkeeping
• Your own marketing, writing, and learning

Realistic billable utilisation for a solo freelancer is 50-65%. Anyone claiming 85% is either counting badly or heading for burnout. At 60% of 1,880 remaining hours, you have about 1,128 billable hours a year.

Divide

$117,000 / 1,128 = roughly $104 per hour. Round to $105 or $110.

The number is usually higher than people expect, and that is the point of doing the arithmetic. If $110 feels impossible for your market, the honest conclusions are that you need to charge more, need to increase utilisation, or need to earn less — not that the maths is wrong.

Sanity-check against the market

Now, and only now, compare to what others charge. If you are 40% above the going rate for your experience level, you need a reason a client would pay it — a specialism, a track record, a faster turnaround. If you are 40% below, you are subsidising your clients.

When to raise it

Three reliable signals:

1. You are turning work away. Demand above capacity is the market telling you the price is low.
2. Nobody has pushed back in a year. If every prospect accepts immediately, you are leaving money on the table.
3. Your work has visibly changed. New skill, new credential, better outcomes.

Raise for new clients first, then existing ones at a natural boundary — a new project or a contract renewal — with 30 to 60 days notice. Most clients accept a well-signposted 10% increase without comment.

One trap worth avoiding

When you do raise your rate, make sure your tooling applies it from that date forward rather than recalculating past work. A system that stores one rate per project and multiplies it against historical hours will silently restate what last quarter was worth. Clockd stamps the rate onto each entry as it is recorded, so history stays fixed.