HesapHanem

Billing Rate Calculator

Enter target salary, billable hours, overhead and profit margin to get the required hourly billing rate.

How it is calculated

rate = (target salary / billable hours) × (1 + overhead% / 100) × (1 + profit% / 100). Target salary is the income you want for the year, billable hours is how many hours you can actually invoice in that year, and overhead and profit are percentages. Overhead and profit are optional and count as 0 if left empty. The result is an hourly rate in dollars.

The two percentages are applied one after another, as multipliers, not added together: 25% overhead and 20% profit raise the base rate by a factor of 1.25 × 1.20 = 1.50, not 1.45. Billable hours must be above zero and the other values cannot be negative. Taxes are not calculated separately, so if your target is after tax, include them in the salary or overhead.

Worked example

You want 72,000 a year and expect 1,200 billable hours. The base rate is 72,000 / 1,200 = 60 per hour. Overhead of 25% gives 60 × 1.25 = 75. A 20% profit margin on top gives 75 × 1.20 = $90.00 per hour. Without overhead and profit, the rate would be only $60.00, which would leave nothing to cover software, insurance or slow months.

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Common mistakes

  • Using 2,080 (full-time working hours) as billable hours: that is all working hours, while time for admin, sales, holidays and sick days is not billable, so the rate comes out too low.
  • Entering overhead as an amount instead of a percentage: the field is a percentage of the base rate, so 25 means 25%.
  • Adding the percentages (25% + 20% = 45%) when checking by hand: the tool multiplies them, giving a 50% total uplift.
  • Treating the result as the price for every client: it is the minimum to reach the target, and fixed-price jobs or a client's budget may differ.

About this calculator

This calculator works out the hourly rate a freelancer or consultant must charge to hit a real income target, not just an arbitrary number. Starting from a desired annual salary, it divides by the number of billable hours actually available in a year — after accounting for vacation, admin time and non-billable work — then layers on overhead and profit margin: (Salary ÷ Billable Hours) × (1 + Overhead%) × (1 + Profit%).

It's the pricing method taught in most freelance and agency business courses, because charging only for salary and ignoring overhead (software, insurance, taxes, downtime) is one of the most common reasons independent businesses fail to actually break even.

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  • Editorial team

    If your overhead is a yearly dollar amount, convert it before typing: divide it by your target salary and multiply by 100. For example, 9,000 of software, insurance and equipment against a 72,000 target is 12.5. Estimate billable hours from weeks you really work, say 46 weeks at 26 invoiced hours, which is 1,196. What share of your week do you manage to invoice?

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