Question 1

Why is my freelance rate so much higher than my old W-2 rate?

Accepted Answer

Three reasons: (1) you pay both halves of payroll tax (15.3% self-employment tax) instead of just the employee half (7.65%), (2) you self-fund benefits your employer used to provide (health insurance $5K-$15K/yr, retirement match, paid time off, sick leave, training), (3) you bill 60-75% of your hours, not 100% — admin, sales, marketing, and learning eat the rest. Most freelance rate calculators show the same surprising 2-3x markup over your previous salaried hourly equivalent.

Question 2

Why is billable percentage so low?

Accepted Answer

Most full-time freelancers bill 1,200-1,500 hours per year out of 2,000 total worked. The other 500-800 hours: prospecting and sales, contracts and admin, accounting and taxes, learning and skill development, marketing and content, and the inevitable email triage. New freelancers often forget this and price as if they'll bill all 2,000 hours, then wonder why they're working 60-hour weeks for less than their old salary.

Question 3

What's a reasonable profit margin to bake in?

Accepted Answer

10-20% covers variability (some months are slower), reinvestment (better tools, training, marketing), and the eventual transition to retainer or value-based pricing. Without a margin, every slow month puts you under your income target. Margin isn't greed; it's prudence.

Question 4

Should I quote based on my hourly rate or on value?

Accepted Answer

Hourly rates work for ongoing work where scope is unclear (consulting, dev support, ongoing design). Value-based pricing works for project work with clear deliverables and measurable outcomes. The hourly rate from this calculator is your floor — value-based engagements should always pay above it. Use the rate as a sanity check, not a list price you publish to clients.

Question 5

How does this differ from a US-based vs international comparison?

Accepted Answer

US freelancers face the 15.3% SE tax + state/federal income tax, fund their own health insurance, and operate without statutory protections. UK freelancers (sole traders or limited company contractors) have NICs (~25-30% combined) but the NHS handles healthcare. Continental European freelancers may have substantially higher payroll-equivalent taxes but stronger statutory benefits. Adjust the SE tax % field to your jurisdiction; the rest of the math is universal.

Question 6

Should I include income tax in the SE-tax field?

Accepted Answer

No — the field is just for self-employment payroll-style tax (Social Security + Medicare in the US). Federal and state income tax come out of your take-home figure, not the gross. Set the "target take-home" to your desired pre-income-tax income and budget for income tax separately. (Or set take-home to your post-tax target and adjust your gross revenue figure accordingly.)

Question 7

Is the calculated rate what I should publish?

Accepted Answer

It's your floor, not your published rate. Most freelancers publish slightly higher to leave room for negotiation: "My rate is $150/hr" when their floor is $135. For project-based work, multiply the hours estimate by 1.2-1.5x to anchor on the higher end (clients negotiate down). The calculator gives you the number you need to hit your goals; the market determines what you can actually charge.

Freelance Hourly Rate Calculator

Hourly Rate FAQ