From Salary to Freelance Rate: How to Convert Your Pay
If you are leaving a job to freelance, the first number most people calculate is the hourly equivalent of their salary. It is a useful start, but it is also a trap: charging that number would almost certainly mean you earn less than you did as an employee.
Step 1: your salary as an hourly wage
A standard working year has about 2,080 hours (40 hours for 52 weeks). On a salary of 60,000, that is 60,000 / 2,080 = about 28.85 per hour. Our salary to hourly calculator does this conversion and lets you change the hours and weeks.
Step 2: add what the employer paid for
As an employee you get more than your salary. An employer often pays part of your taxes and social contributions, covers paid vacation, sick leave and public holidays, provides equipment and software, and may offer insurance or a pension plan. As a freelancer you cover all of that yourself. The value differs by country and employer, but 20 to 30 percent of salary is a common rough estimate for these extras. Check your own situation.
For the example, add 25 percent: 60,000 x 1.25 = 75,000.
Step 3: add your business expenses
Freelancers pay for software, a workspace, equipment, accounting, insurance and marketing. If these cost 5,000 a year, the total you need to earn from clients is 80,000.
Step 4: divide by billable hours, not working hours
You will not bill 2,080 hours. Time off, sales, admin and gaps between projects take a big share. If you can bill 1,200 hours a year, the rate is 80,000 / 1,200 = about 66.67 per hour. That is more than double the 28.85 employee equivalent, and it is typical.
Step 5: compare with the market
Look at what freelancers with your skills and experience charge. If your required rate is higher than the market, you can improve specialization, reduce costs or aim at clients who value the work more. If the market pays more, you can charge more.
What about taxes?
The numbers above are gross income needed before income tax. Taxes depend on your country and your income, so a local accountant is the best person to check them. Our guide to saving for freelance taxes gives a rule of thumb for setting money aside.
Ramp-up time
Most freelancers do not bill full time from day one. Plan for a slower first few months, and consider keeping some savings or part-time income during the transition.
Try your own numbers
Our freelance rate calculator takes your income goal, tax rate, expenses and billable hours and gives you a rate. Use the day rate calculator if you prefer to quote by the day.