The first freelance rate most developers set comes from a salary. You earned $90,000 in a job, a year has 2,080 working hours (40 hours times 52 weeks), so you divide and get about $43 an hour. Maybe you round up to $50 to feel safe.
That number is almost always wrong by about half, and the error is not in the income. It is in the 2,080.
Why 2,080 Is the Wrong Divisor
An employer pays you for 2,080 hours whether or not every one of them is productive. Holidays are paid. Sick days are paid. The meeting where nothing happened is paid. As a freelancer, you are paid only for the hours a client is billed for, and that is a much smaller number.
Start with the year and take out the time you will not work:
52 weeks - 4 weeks of vacation - 2 weeks of public holidays - 1 week of sick days = 45 working weeks 45 weeks × 40 hours = 1,800 available hours Those figures are assumptions, not statistics; put in your own. The point is that you have already lost more than 13% of the hours before doing any freelancing at all.
The Hours That Don't Bill
Of those 1,800 hours, only some go to client work. The rest go to the business of being a freelancer: finding the next client, writing proposals, calls that do not turn into projects, invoicing, chasing invoices, bookkeeping, keeping your tools and skills current.
The share of your available time that you can actually bill is your billable share. Nobody can tell you what yours is without you tracking it, but it is never 100%, and for someone working alone it is often well short of that. Say it is 60%:
1,800 available hours × 60% = 1,080 billable hours That is the real divisor. Not 2,080: about half of it.
The Rate, Done Properly
Two more adjustments before dividing. A salary does not include the costs an employer quietly covered: your laptop, software, insurance, accounting, the coworking desk. Add a figure for those. Say $10,000 a year.
($90,000 target income + $10,000 business costs) ÷ 1,080 billable hours = $92.59 an hour Compared with the salary conversion:
$90,000 ÷ 2,080 = $43.27 an hour The same $90,000 needs a rate more than twice as high once you divide by the hours you can actually bill. A freelancer charging $43 an hour at a 60% billable share earns well under half of what they think they are earning.
This is before tax and before anything employer-provided like retirement contributions, which work differently depending on where you live. If you used to receive them, add them to the target income too.
How Much the Billable Share Matters
The billable share is the input people guess most optimistically, and it moves the rate more than anything else. Same $100,000 of income plus costs, same 1,800 available hours:
| Billable share | Billable hours | Rate needed |
|---|---|---|
| 50% | 900 | $111 |
| 60% | 1,080 | $93 |
| 70% | 1,260 | $79 |
| 80% | 1,440 | $69 |
Moving from 80% to 50% raises the rate you need by 60%. If you set your price assuming 80% and you actually manage 60%, you have quietly cut your revenue by a quarter.
It is safer to set the rate on a conservative share and be pleasantly surprised than to set it on an optimistic one and make up the difference with evenings.
The Gap Between Clients
The billable share hides one more cost: the weeks between projects. A project ends, the next one starts three weeks later, and those three weeks bill nothing.
You can either fold that into a lower billable share, or treat it separately. If you expect four weeks of gaps across a year, take them off the available weeks before applying the share:
(45 - 4) weeks × 40 hours = 1,640 available hours 1,640 × 60% = 984 billable hours $100,000 ÷ 984 = $101.63 an hour Four quiet weeks add about $9 to every hour you do bill.
Check Your Own Rate in Five Minutes
- Write down the income you want before tax.
- Add a realistic figure for business costs.
- Count your available weeks: 52, minus vacation, holidays, sick days and expected gaps.
- Multiply by your weekly hours, then by an honest billable share. If you have never tracked it, track one normal month first.
- Divide step 2 by step 4.
If the answer is far above what you charge now, the fix is not working more hours. It is either raising the rate, or moving to project and retainer pricing, where the rate is built into the price and the client never sees an hourly number to compare against a salary.
