Business
Hourly Rate Calculator
Works an hourly rate, where billable hours rather than working hours is the divisor.
Result
The billable share is the number people get most wrong. Working 45 hours does not mean invoicing 45 hours: quoting, travel, admin and chasing payment are all unpaid.
Get a Free Business AuditHow the calculation works
Target income plus business costs divided by the hours that will actually be billed, giving the rate required. The billable hours figure is the sensitive input, since administration, marketing, quoting and travel all consume working hours that nobody pays for.
What moves the number
- Realistic billable hours per year.
- Business costs including insurance, equipment and software.
- Target income before tax.
- Non-billable obligations that reduce available hours.
Where this one goes wrong
Dividing by a full working year produces a rate that cannot support the business, because the unbillable share is large and structural rather than a sign of poor discipline. Count the hours honestly. Tax is the other omission in self-employed rate setting, since the target income is before income and self-employment tax and a rate set against the after-tax figure needed leaves the business short every year.
Before you quote
- Divide by realistic billable hours, not working hours.
- Set the target income before tax, not after.
- Include all business costs, not just the obvious ones.
Questions
About this calculator
How many billable hours should I assume?
Considerably fewer than a working year, because administration, marketing, quoting and travel consume real hours nobody pays for. The unbillable share is structural rather than a discipline problem, and counting it honestly is what makes the rate work.
Should the target income be before or after tax?
Before, since income and self-employment tax both come out of it. A rate set against the after-tax figure you want to keep leaves the business short by the whole tax amount every year, which is a large error.
What business costs get forgotten?
Insurance, equipment replacement, software subscriptions, vehicle costs, professional development and accounting. Each is modest and collectively they are substantial, and a rate that omits them is funding them from the owner's income.
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How to use this calculator
- Target annual income ($). Enter your own figure; the page starts at $95,000.
- Annual business expenses ($). Enter your own figure; the page starts at $28,000.
- Working weeks per year. Enter your own figure; the page starts at 46.
- Hours worked per week. Enter your own figure; the page starts at 45.
- Share of hours that are billable (%). The rest goes on admin, quoting, travel and unpaid work.
- Tax and contributions (%). Enter your own figure; the page starts at 25%.
The result updates as you type, so you can try a figure, see what it does to hourly rate to charge, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Target annual income | $95,000 |
| Annual business expenses | $28,000 |
| Working weeks per year | 46 |
| Hours worked per week | 45 |
| Share of hours that are billable | 65% |
| Tax and contributions | 25% |
What comes out
| Result | Value |
|---|---|
| Hourly rate to charge main result | $114.95 |
| Billable hours per year | 1,346 |
| Revenue needed per year | $154,667 |
| Equivalent day rate | $919.61 |
To take home 95,000 you need $154,667 of revenue across 1,346 billable hours: a rate of $114.95 an hour.
How sensitive the answer is
Holding everything else steady and changing only target annual income, this is what happens to hourly rate to charge. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Target annual income ($) | Hourly rate to charge |
|---|---|
| $47,500 | $67.88 |
| $71,250 | $91.42 |
| $95,000 example above | $114.95 |
| $142,500 | $162.02 |
| $190,000 | $209.09 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Target annual income ($)
- A money amount, starting at $95,000.
- Annual business expenses ($)
- A money amount, starting at $28,000.
- Working weeks per year
- A number, between 0 and 52, starting at 46.
- Hours worked per week
- A number, between 0 and 168, starting at 45.
- Share of hours that are billable (%)
- The rest goes on admin, quoting, travel and unpaid work.
- Tax and contributions (%)
- A percentage, between 0 and 100, starting at 25%.
What the results tell you
| Result | What it is |
|---|---|
| Hourly rate to charge | The headline result. A money figure. |
| Billable hours per year | A number. |
| Revenue needed per year | A money figure. |
| Equivalent day rate | A money figure. |
Where these figures usually mislead
Business calculations assume the inputs are steady. Seasonality, a few large customers, and slow payment all break that assumption. A figure that looks healthy annually can still leave you short in a given month.
Keep going
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