Why freelance rates come out too low
The arithmetic that produces an underpriced rate is always the same: take a salary you would accept, divide by 2,080 hours, quote that. It omits three things at once — the weeks you do not work, the hours you work but cannot bill, and the costs an employer used to cover.
Each is worth tens of percent. Together they roughly double the necessary rate.
The billable share is the big one
| Billable share | Billable hours (44w × 30h) | Rate for a 2.1M target | | --- | --- | --- | | 100% | 1,320 | 1,591 | | 70% | 924 | 2,273 | | 60% | 792 | 2,652 | | 50% | 660 | 3,182 |
Dropping from an imagined 100% to a realistic 60% raises the necessary rate by two-thirds. That is not greed; it is the cost of the work that makes billable work possible.
What an employer used to pay for
Holiday, sick leave, equipment, software licences, training, the employer's half of social contributions, and the gaps between projects. As a freelancer all of it comes out of your rate. Putting it in the expenses field is what turns a rate that looks generous into one that actually is.
Which leaves the question this all starts from: what target income do you actually need. For remote work that is a question about the city — our neighbouring project works out what you need to earn in a given city, adjusted for what living there costs.
Questions
What is a realistic billable share?+
Between 50% and 70% for most independent work. Sales calls, proposals, invoicing, bookkeeping, email and the hours between projects are all real and none of them are billed. Assuming 100% is the single biggest reason freelance rates come out too low.
Why does the naive rate appear beside the real one?+
To make the gap visible. If every hour were billable the rate would be far lower — and that lower number is the one most people quote, then wonder why the year fell short.
Should the target be before or after tax?+
Whatever you are comfortable tracking, but be consistent. As a self-employed person you pay both sides of any social contribution, so the gap between billing and keeping is wider than for an employee.
What expenses count?+
Anything you would not pay if you stopped: software, hardware amortised over its life, accounting, insurance, coworking, professional subscriptions. They come out of billings before anything reaches you.