The formula, explained
Every number this tool produces is traceable to a source. Here is the full four-step methodology.
Set your floor
Your floor is the minimum hourly rate that covers your actual costs. It is not a market rate — it is the rate below which you lose money. Most freelancers never calculate this.
// Step 1: Gross needed after SE tax
grossNeeded = income × 1.153
// Step 2: Total annual costs
annualCosts = grossNeeded + (softwareCost × 12) + (aiCost × 12)
// Step 3: Annual billable hours
workingWeeks = 52 − weeksOff
billableHrs = (hoursPerWeek − acqHours) × workingWeeks
// Step 4: Floor rate
floorRate = annualCosts / billableHrs
Why floor ≠ rate
The floor tells you the minimum. The market tells you what is possible. Your actual rate should sit above the floor and be positioned thoughtfully within the market range. Charging at floor rate means you have zero margin for bad months, slow clients, or professional development.
Benchmark the market
The base rate is checked against BLS OEWS May 2024 data for the closest matching occupation. The tool tells you which percentile your rate lands at — p10 through p90.
Market context prevents two common errors: pricing too low (leaving money on the table) and pricing too high without the portfolio to support it.
Example — Web Developer, National
p10
$45k
p25
$55k
Median
$80k
p75
$107k
p90
$135k
Adjust for leverage
Two multipliers adjust the base rate based on your specific situation.
Skill level multiplier
Competent (×0.85) — Can do the job. Occasionally needs to look things up.
Proficient (×1.0) — Reliable and efficient. Clients return.
Expert (×1.3) — Sought out specifically. Strategic, not just execution.
Work complexity multiplier
Routine (×0.85) — Repeatable, clear specs.
Standard (×1.0) — Typical project complexity.
Complex (×1.2) — Research, multiple stakeholders.
High-Stakes (×1.4) — Tight deadlines, significant impact.
Strategic (×1.65) — Advisory. Your judgment is the deliverable.
Show your reasoning
Regional Price Parities (BEA RPP) adjust the final rate for local cost of living. San Francisco commands more; Austin commands less. The same formula produces appropriate rates for each market.
adjustedRate = round(baseHourly × skillMult × intensityMult × rpp, step=5)
The formula breakdown panel in every calculator shows every input, every multiplier, and every source — so you can explain any number to any client.
See it applied
Transparency
Every number on this site is sourced, explained, and reproducible.
BLS OEWS May 2024 · BEA RPP · Self-Employment Tax Rate 15.3%