How to Calculate Your Hourly Rate as a Maker or Freelancer

By Syed M. Tahir · Published 2026-11-09 · 7 min read

When you work for yourself, nobody hands you a pay rate. You have to choose one, and the first number most people pick is too low. They take the hourly wage they earned in a job, or the rate a competitor advertises, and start charging it. A few months later the money does not add up, because a self-employed hour has to pay for far more than the hour itself. This guide shows how to work out an hourly rate from the life you want to fund, step by step, so the number you quote is one you can actually live on. It applies to freelancers who bill clients by the hour and to makers who need a fair labour cost for each product they sell.

Quick answer. Hourly rate = (take-home pay you want ÷ (1 − tax set-aside) + yearly business expenses) ÷ billable hours per year. Billable hours = hours per week × working weeks × the share of time you can charge for. Our free hourly rate calculator does the sums and shows a day rate too.

Why a self-employed rate is higher than a wage

An employee’s hourly wage is only part of what an employer pays. The employer also pays for the desk, the computer, the software, paid holidays, sick days and, in many countries, a share of social security and pension contributions. The employee is paid for every working hour, including meetings, training and quiet afternoons.

When you are self-employed, all of those costs move to you, and only some of your hours earn money. If you simply copy your old wage, you are paying for the extras out of your own pocket. Working out a rate from the bottom up makes each of those hidden costs visible.

Step 1: Decide the take-home pay you need

Start with the amount you want to keep for yourself over a year, after setting money aside for tax. Base it on your real budget: housing, food, transport, debt repayments and savings. Then add the benefits an employer would normally provide, such as a pension contribution and an emergency fund for the months when work is slow.

Be honest rather than modest. A rate built on a target that is too low will not suddenly become enough later, and it is much easier to start at a sustainable rate than to double it once clients are used to a cheaper one.

Step 2: Add a tax set-aside

Self-employed income usually arrives without tax taken off, so you need to set some aside from every payment. The calculator treats the set-aside as a percentage of profit. To keep a take-home figure after tax, divide it by one minus the set-aside rate: with a target of 40,000 and a 25% set-aside, profit before tax needs to be 40,000 ÷ 0.75 = 53,333.33.

The right percentage depends on where you live, your total income and your deductions. In the US, the IRS explains that the self-employment tax rate is 15.3%, made up of 12.4% for Social Security and 2.9% for Medicare, and that it is figured on Schedule SE. Income tax is charged on top. The IRS also says that people who are in business for themselves generally need to make estimated tax payments during the year, in four payment periods. If you are unsure which percentage to use, ask an accountant or follow your own tax authority’s guidance, and review it after your first tax return.

Step 3: Add your business expenses

Next, list everything the business pays for in a year that clients or buyers do not reimburse directly. Typical lines include:

• Software and subscriptions: design, accounting, email, cloud storage, a website or a marketplace plan
• Equipment and its replacement: a computer, a sewing machine, hand tools, a camera
• Insurance, professional memberships and training
• A share of rent, electricity and internet if you work from home or a studio
• Accounting or bookkeeping help, bank charges and payment fees that are not passed on
• Marketing: samples, photography, advertising and trade show fees

For makers, leave out the materials and packaging for each product here. Those are per-item costs, and they belong in the product price alongside your labour rather than in your hourly rate. The guide on cost of goods sold explains which costs sit where.

Step 4: Count your real billable hours

This is the step that changes the answer most. Start with the hours you plan to work in a normal week, then take away the weeks you will not work at all: holidays, public holidays and an allowance for illness. A 40-hour week for 46 weeks is 1,840 working hours.

Not all of those hours can be billed. Answering enquiries, writing quotes, invoicing, bookkeeping, learning, marketing, photographing products and writing listings are all necessary, but none of them appear on a client’s invoice. The share of your time that is billable varies a lot from person to person, so measure your own: track every hour for two to four weeks and divide the billable hours by the total. Until you have your own figure, choose a cautious estimate rather than assuming every hour is paid.

Step 5: Divide, then sense-check

Add the profit before tax and the expenses to get the revenue you need, then divide by your billable hours. Here is a full example for a jewellery maker:

If the same maker cut admin time so that 70% of hours were productive, billable hours would rise to 1,102.5 and the rate needed would fall to 45.18 (49,800 ÷ 1,102.5 = 45.170, rounded up). That is why systems that save time, such as listing templates, batch production and shipping presets, are often worth more than they first appear.

Now sense-check the result against the market. Look at what comparable freelancers or makers charge and what your best customers already pay. If your number is far above the market, you can work more billable hours, cut expenses, specialise in work that commands a higher price or accept a lower take-home for a while. If it is below the market, you may be undercharging. The calculation tells you your floor; it does not have to be your price.

Turning an hourly rate into a day rate or a project price

Many clients prefer a day rate or a fixed project price. A day rate is the hourly rate multiplied by the hours in a full working day: at 63.24 an hour and a 7-hour day, a day is 442.68. Charge the full day, because the hours you cannot bill still have to be paid for by the hours you can.

For a fixed price, estimate the hours, multiply by your rate and add a contingency for revisions and surprises. Keep a record of how long projects really take, and adjust your estimates when they turn out to be wrong.

Using your rate in product prices

For makers, the hourly rate becomes the labour line of each product. Time a batch from start to finish, divide by the number of items, and multiply by your rate. If a pair of earrings takes 40 minutes, labour at 63.24 an hour is 42.16 per pair before materials, packaging and overhead. Our guide on how to price handmade products shows how labour combines with the other costs, and the product pricing calculator turns the total into wholesale and retail prices. If the retail price that results is more than buyers will pay, the answer is usually to make the item faster, change the design or sell it through a channel with lower fees, not to quietly stop paying yourself.

Common mistakes

• Assuming every hour is billable. It makes the rate look affordable and leaves a gap at the end of the year.
• Forgetting holidays and illness. A year of 52 paid weeks is unusual when you are self-employed.
• Leaving out tax. A take-home target without a set-aside will fall short when the tax bill arrives.
• Never reviewing the rate. Costs rise. Revisit the numbers at least once a year, and whenever your expenses or hours change.

Tax figures in this guide were last checked on 9 November 2026 against the IRS pages listed below. They apply to the US only. This guide is general information, not tax advice.

Sources

• IRS – Self-employment tax (Social Security and Medicare taxes)
• IRS – Estimated taxes

This guide is general information for self-employed people and small sellers and is not financial, tax or legal advice. Tax rules differ by country and change over time; the US figures quoted were last checked on 9 November 2026.