Your hourly rate is the price you charge for one hour of your professional time. It's the foundation of time-based billing and directly impacts your income as a freelancer or consultant.
Why Your Rate Matters
Most freelancers undercharge because they compare themselves to employee salaries without accounting for the full picture. Your hourly rate must cover:
- Your desired annual income
- Taxes (often 25-40% for freelancers)
- Business expenses (software, equipment, workspace)
- Unbillable time (admin, sales, learning)
- Benefits you provide yourself (health insurance, retirement)
- Time off (vacation, sick days)
Calculating Your Hourly Rate
Here's a simple formula:
- Decide your target annual income (e.g., $80,000)
- Add taxes and expenses (e.g., $40,000)
- Total needed revenue: $120,000
- Divide by billable hours per year (not 2,080)
- 40 hours/week × 52 weeks = 2,080 total hours
- Realistically: 20-25 billable hours/week = 1,000-1,300 hours/year
- $120,000 ÷ 1,200 hours = $100/hour
Common Hourly Rate Mistakes
Comparing to employee wages - A $50/hour employee costs employers $75-100/hour after benefits and taxes.
Not tracking actual hours - Billing at $100/hour but working 60 hours means you're actually earning $67/hour.
Charging the same for all work - Different clients and projects have different value. Premium clients can pay premium rates.
Hourly vs. Other Models
Hourly billing is transparent but caps your income to your available time. As you gain expertise, consider value-based or fixed-fee pricing where appropriate. But for new freelancers, hourly rates provide predictable income and clear client expectations.
Chronobill automatically calculates your effective hourly rate by comparing total time tracked to revenue earned, showing you the real numbers behind your pricing.