Argo Books

Hourly Rate Calculator

What you have to charge to actually take home what you want, once unbillable hours, business costs, and tax are all paid for.

$

After tax, in your pocket. Not turnover.

$

Tools, insurance, software, vehicle, accountant, phone, workspace, training.

%

Income tax plus self-employment or national insurance contributions. A rough figure is fine.

Holiday, sickness, and the quiet weeks. Nobody bills 52.

%

Quoting, admin, travel, and marketing are real work that nobody pays for directly.

Charge at least $0.00 per billable hour
Day rate (8 hours)
$0.00
To make that work
Take-home target
$0.00
Income before tax
$0.00
Business costs
$0.00
Revenue you must bill
$0.00
Your year
Weeks worked
0
Hours worked
0
Hours you can bill
0
Unbillable hours
0

Why dividing salary by hours gives the wrong answer

The instinct when going self-employed is to take the salary you want, divide by roughly 2,000 hours, and quote that. It produces a number that feels reasonable and cannot possibly work.

Rate = (take-home ÷ (1 − tax) + business costs) ÷ billable hours

Three things sit between the hours you work and the money you keep:

  • You cannot bill every hour. Quoting, invoicing, chasing late payers, buying materials, driving between jobs, marketing, and bookkeeping are unpaid. For most people the billable share is between 55% and 80%.
  • The business has costs. Insurance, tools, software, an accountant, a vehicle, a phone. As an employee somebody else bought all of that.
  • Tax comes out afterwards. Nobody is withholding it for you, so a rate that ignores tax leaves you with a bill you have already spent.

A worked example

You want $60,000 in your pocket. Business costs run $12,000 a year. You work 40 hours a week, take 6 weeks off, bill 60% of your time, and pay about 25% in tax.

  • Working weeks: 46. Hours worked: 1,840. Billable: 1,104.
  • To keep $60,000 after 25% tax you must earn $80,000 before it.
  • Plus $12,000 of costs: you need to bill $92,000.
  • $92,000 ÷ 1,104 = $83.33 an hour.

The naive calculation, $60,000 divided by 1,840 hours worked, gives $32.61. Charging that would leave you roughly $27,000 short of your target before you had noticed anything was wrong.

Being honest about billable hours

This input moves the answer more than any other, and almost everyone overstates it.

Type of workTypically billableWhere the rest goes
Trades and site work 75% Travel between jobs and quoting eat the rest.
Freelance and consulting 60% Pitching, admin, and business development are unpaid.
Design and creative 55% Revisions, sourcing, and client wrangling add up fast.
Cleaning and services 80% Mostly on site, but travel and supplies runs are not billed.

If you want a real figure rather than an estimate, track one ordinary fortnight. Write down every hour and mark it billable or not. The result is usually sobering and it makes every future pricing decision better.

What to do when the number feels too high

The calculator will often produce a rate above what you have been charging. That is the point, but it is not always the whole story, and there are four honest responses.

  1. Raise the billable percentage. Better systems for quoting, invoicing, and scheduling convert unpaid hours into paid ones. Going from 55% to 65% cuts your required rate by roughly 15%.
  2. Cut a real cost. Look at subscriptions, insurance, and vehicle costs. Small annual figures move the hourly rate less than people expect, but they compound.
  3. Work more weeks, deliberately. Taking four weeks off instead of eight lowers the rate you need. Do this with your eyes open rather than by accident.
  4. Change what you sell. Move from hours to outcomes, packages, or retainers so the price reflects the value rather than the clock.

What is not on the list is dropping your take-home target to make the arithmetic comfortable. That is not a pricing decision, it is a pay cut you have chosen not to notice.

Hourly, day rate, or fixed price?

Work out the hourly number first regardless, because it is the floor everything else has to clear.

Day rates suit work that fills a day anyway and stop the argument about half hours. Fixed prices reward you for getting faster, which hourly billing punishes, but they carry the risk if a job runs long. Retainers smooth your income and are worth a discount against your hourly rate because they remove the gaps.

Whichever you quote, check it against the hourly figure. If a fixed price divided by the hours it will really take comes out below your number, it is a job that costs you money to accept.

Where a calculator stops helping

This gives you a rate from figures you estimated. Next year you should be using figures you actually measured: what your costs really were, how many hours you really billed, and what you really took home.

Argo Books records your income and expenses so that number comes from your books rather than a guess, and shows whether the rate you set is actually delivering. It runs on your own computer and it is free to start.

Frequently asked questions

Start from what you need to take home, not from what competitors charge. Add your business costs, gross the total up for tax, then divide by the hours you can actually bill, which is never the hours you work. A target of $60,000 with $12,000 of costs and 60% billable time usually needs a rate above $80 an hour, not the $30 that dividing salary by hours suggests.

Because an employed hourly rate hides three things your business now pays for. You only bill a fraction of the hours you work; you cover your own equipment, insurance, software, and travel; and nobody withholds your tax. Once those are added back, a rate two to three times the employed equivalent is normal rather than greedy.

Rarely more than 80% and often nearer 55%. Quoting, invoicing, chasing payment, buying materials, travelling, marketing, and bookkeeping are all real work that no client pays for directly. Track a normal fortnight honestly before you guess, because most people overestimate this by a wide margin.

Yes. As an employee, tax came out before you saw the money. Self-employed, it comes out after, so a rate that ignores it leaves you with a bill you have already spent. Enter your marginal rate and the calculator grosses your target up so what lands is what you actually wanted.

Everything the business pays for over a year: tools and equipment, software subscriptions, insurance, accountancy, phone and internet, vehicle costs, materials you do not bill on, workspace, training, and bank charges. Annual figures are easier to be honest about than monthly ones, and they are what this calculator wants.

That is worth knowing rather than ignoring. Either your costs are higher than theirs, your billable percentage is lower, or they are undercharging and will not last. The useful responses are to increase billable time, reduce overheads, or move to work that pays for expertise rather than hours. Quietly dropping the rate to match just moves the problem to next year.

Often yes. Day rates suit work that fills a day anyway, reduce the argument about half hours, and read as more professional in some markets. Work the hourly rate out first and multiply, which is what the day rate shown here does, so you are never quoting a day rate that undercuts your own number.

At least once a year, and whenever your costs jump. Insurance renewals, a new vehicle, or a software price rise all come straight out of your take-home unless the rate moves with them. Rerun this calculation each January with real figures from the previous year.