Why your freelance rate must be much higher than your salary suggests
An employer pays for far more than your salary: health insurance, retirement contributions, payroll taxes, equipment, paid vacation, and sick leave. For most full-time roles that adds 25–40% on top of the stated salary. When you freelance, every one of those costs moves to your side of the table.
On top of that, you can't bill every working hour. Prospecting, proposals, admin, and invoicing are unpaid. A 60% utilization rate — about 24 billable hours in a 40-hour week — is a realistic planning number for an established freelancer.
Put those together and the rule of thumb emerges: your freelance hourly rate usually needs to be roughly double the hourly equivalent of your old salary just to break even on total compensation.
Frequently asked questions
- What's a quick rule of thumb for converting salary to freelance rate?
- Take the salary, divide by 1,000, and charge that per hour — e.g., a $90,000 salary suggests roughly $90/hour. It approximates the same math this calculator does explicitly: benefits plus unpaid downtime roughly double the naive salary-divided-by-2,080 figure.
- What is billable utilization?
- The share of your working time you can actually invoice a client for. Time spent on marketing, sales calls, bookkeeping, and email is real work, but nobody pays for it — your billable hours have to cover it.
- Should I charge more than the break-even rate?
- Yes. The converter shows the rate at which freelancing matches your old total compensation. It doesn't price in the extra risk of irregular income, gaps between contracts, or the value of your specialization — those justify a premium.