How to Calculate Your Hourly Rate
Although self-employed workers can set their own hourly rates, it's not an exact science. A great deal of research and numbers-crunching is necessary to set rates that won't scare off customers or cheapen your work. While the task may sound simple, it will take several attempts to come up with a workable hourly rate. Generally, the more research and self-inventory you put into this, the more realistic your hourly rates will be.
Other People Are Reading
Instructions
-
-
1
Choose a solid, workable annual income. This is what you'd like to make from your freelance work, but you'll need to be realistic and consider your level of expertise. The $40,000 figure used here is strictly as an example. View the number as a goal instead of a number carved in granite.
-
2
Freelance writing involves details that have little to do with writing. Add in fixed expenses such as taxes, Social Security and medical insurance. Also include some of your other expenses, such as office supplies. According to salary.com, your taxes, insurance and operating expenses will probably add 30 percent to your baseline income, so $40,000 becomes $52,000.
-
-
3
Determine how many hours you will bill for the year. Keep in mind, not all your working hours are billable; you will spend time building and running your business, and you will have down time. Generally, count 30 percent of your hours as nonbillable. This figure can go up to 50 percent while launching the business, but you won't be able to maintain that level for long and expect to make money. If you're billing 30 hours per week, that amounts to 1,500 over 50 weeks.
-
4
Divide your proposed income by the number of annual billable hours. Using the figures in the example--the actual salary of $52,000 and 1,500 billable hours per year--your rate becomes $34.67 per hour.
-
5
Check your figures. Go online and find out what other people in your line of business are charging per hour, particularly in your region. After considering your level of expertise, see how your numbers stack up against prevailing rates, and adjust accordingly.
-
6
Tweak the numbers if your figures are too high. Try working with a smaller annual income. Consider more billable hours. Try to cut some of the excess from your operation. Don't expect to make that $40,000 in your first year in business.
-
1
Tips & Warnings
If you're getting more work than you can handle, raise your rates.
Try to avoid multitasking. Trying to do many things at once blurs the lines between work and nonwork activities. Plus, single-tasking is better for productivity.
Keep in mind what competitors may charge; you don't want to sell yourself cheap or price yourself out of the market.
Forget about 40-hour work weeks when you're self employed, particularly in the early going.
Depending on your work habits, an hourly rate may not be the best way to charge for services.
References
Resources
- Photo Credit Calculator image by Alhazm Salemi from Fotolia.com writer on the tracks image by Trevor Goodwin from Fotolia.com
