How to actually work out your freelance hourly rate

Last updated: July 2026

The most common pricing mistake freelancers make isn't picking a number that's too low on purpose — it's reverse-engineering a rate from an old payslip without accounting for everything that payslip was quietly covering. An employer paying you $80,000 a year wasn't just paying for your time; they were also funding your super, your annual leave, your sick days, your equipment, and the gaps between projects. As a sole trader, all of that comes out of your rate now.

1. Start from what you need to earn, not what you used to earn

Rather than starting from a past salary, start from your target annual income — what you actually need or want to take home after tax. Then work backwards through everything standing between that number and an hourly rate.

2. Your billable hours are lower than you think

A full-time employee works roughly 2,080 hours a year (52 weeks × 40 hours), but almost none of that is directly comparable to freelance billable time. Once you subtract:

• Annual leave and public holidays you no longer get paid for
• Sick days, which now cost you income rather than nothing
• Admin, invoicing, marketing, and finding the next client — none of it billable
• Gaps between contracts or projects

Most freelancers land somewhere between 1,000 and 1,400 genuinely billable hours a year — often 50–65% of a full-time year, even when they're working just as hard, if not harder.

3. Add back what an employer used to pay for

As a sole trader, several costs that used to be invisible to you as an employee now sit directly inside your rate:

• Superannuation — nobody contributes 11.5% on your behalf unless you do it yourself
• Business running costs — software, insurance, a portion of home office costs, equipment
• Income tax and the Medicare levy — see the sole trader tax guide for how this actually breaks down
• A buffer for slow periods — income as a freelancer is lumpier than a salary, and your rate needs to absorb that

4. A rough worked example

The exact figures will differ for you — your target income, your actual billable hours, and your real running costs all move the number. The point of the exercise isn't this specific figure; it's seeing how far off a naive "salary ÷ 2,080" calculation actually is.

5. The most common mistake

Underpricing based on last year's payslip is the single biggest reason freelancers feel like they're working harder for less. The fix isn't guessing higher — it's running the actual numbers once, properly, and treating that as your floor rather than a starting point to negotiate down from.