Guide freelancers on setting an hourly rate that covers admin and billable time — Complete Guide

Setting the right hourly rate as a freelancer is crucial to ensure that you not only cover your expenses but also make a profit. Many freelancers overlook the time spent on administrative tasks, leading to underpricing their services. This guide will help you calculate an hourly rate that includes both billable and non-billable hours, ensuring you’re compensated fairly for all your work.

Background

As a freelancer, your time is your most valuable asset. Besides the hours spent on client work, you’ll also need to account for time spent on administrative tasks like emails, invoicing, marketing, and professional development. It's essential to set an hourly rate that covers both types of work.

Let’s break down the components:

1. Billable Hours: The time you spend working directly for clients.
2. Non-Billable Hours: The time spent on tasks that don’t directly generate income, such as administration.

To set an effective hourly rate, you need to consider both your desired income and the total hours you will work, including both billable and non-billable time.

Method

Step 1: Determine Your Desired Annual Income

Let’s say you want to earn 60,000 annually.

Step 2: Estimate Total Working Hours

Estimate how many hours a week you can realistically work. For example, if you plan to work 40 hours per week for 50 weeks a year, that gives you:

$
Total\ Working\ Hours = 40\ hours/week \times 50\ weeks = 2000\ hours

Billable\ Hours = 2000\ hours \times 0.6 = 1200\ hours

Non-Billable\ Hours = Total\ Working\ Hours - Billable\ Hours = 2000\ hours - 1200\ hours = 800\ hours

Hourly\ Rate = \frac{Desired\ Annual\ Income}{Billable\ Hours}

Hourly\ Rate = \frac{60000}{1200} = 50
$

So, you should charge 50 per hour to reach your goal of 60,000.

To ensure you cover your non-billable hours, you can also calculate a "total" hourly rate:

$
Total\ Hourly\ Rate = \frac{Desired\ Annual\ Income}{Total\ Working\ Hours} = \frac{60000}{2000} = 30
$

In this case, you should charge at least 30 for every hour worked, even for non-billable tasks.

Examples

Let’s say a freelance graphic designer wants to earn 70,000 annually. Following the same steps:

1. Desired Income: 70,000
2. Total Working Hours: 40 \times 50 = 2000 hours
3. Estimate Billable Hours: 60% of 2000 = 1200 hours
4. Calculate Hourly Rate:

$
Hourly\ Rate = \frac{70000}{1200} \approx 58.33
$

In this case, the designer should charge approximately 58.33 per hour for billable work.

Common Mistakes to Avoid

1. **Underestimating Non-Billable

Try our calculators

• ROI Calculator
• Savings Calculator
• Expense Split Deluxe

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Next step: Explore our calculators for hands-on planning — try ROI Calculator, Break-even Calculator, or Mortgage Calculator.