Hourly Rate Calculator

Use this calculator to estimate an hourly rate based on income target, overhead, and billable hours.

What this calculator does

The hourly rate calculator helps freelancers, consultants, and service businesses set a sustainable hourly rate.

It is useful for:

• pricing services
• setting consulting rates
• freelance planning
• profitability checks

Hourly Rate Formula

Hourly Rate = (Target Income + Overhead) ÷ Billable Hours

Where:

• Target Income = desired annual income
• Overhead = annual business costs
• Billable Hours = hours you expect to charge clients for

Example calculation

If:

• Target income = 80000
• Overhead = 20000
• Billable hours = 1600

Then:

• Hourly rate = (80000 + 20000) ÷ 1600
• Hourly rate = 62.50

What is an hourly rate?

An hourly rate is the amount charged for each billable hour of work.

It should cover income goals, business costs, and enough margin for sustainability.

Why hourly rate matters

Hourly rate helps service businesses:

• price work more accurately
• protect profitability
• avoid undercharging
• plan income with more confidence

When to use this calculator

Use this calculator when you want to:

• set a freelance rate
• price consulting work
• compare project economics
• review whether your current pricing is sustainable

Common mistakes

Common mistakes include:

• overestimating billable hours
• ignoring overhead
• basing pricing only on desired salary
• not reviewing rates regularly

Hourly rate vs contractor rate

These are similar but not identical.

• Hourly rate often focuses on income plus overhead
• Contractor rate may also include desired profit margin

Related calculations

You may also want to use:

• Contractor Rate Calculator
• Employee Cost Calculator
• Target Profit Calculator

FAQs

What is an hourly rate?

An hourly rate is the amount charged for each billable hour of work.

How do you calculate an hourly rate?

Hourly Rate = (Target Income + Overhead) ÷ Billable Hours.

Why is hourly rate important?

It helps ensure your work is priced to support your income goals and business costs.

What happens if you undercharge your hourly rate?

You may struggle to cover expenses or earn enough profit.