How Much Should a Freelancer Charge to Cover Benefits?

Someone leaves a job paying a certain salary, divides it by the number of working hours in a year, and sets that as their hourly rate. It feels reasonable. It's wrong by a wide margin, and the gap is where a lot of freelance burnout comes from.

There are two separate errors stacked on top of each other.

Error one: not every working hour is billable

Proposals, invoicing, marketing, client emails, admin, learning, chasing payments. None of it is billed, all of it is necessary.

Estimates vary, but Harvest's rate calculator works on most freelancers billing somewhere around 50–70% of their working hours, and treats raising that percentage as one of the main levers on your required rate. Whatever your actual figure, it isn't 100%, and building your rate on the assumption that it is guarantees a shortfall.

Error two: a salary was never the whole package

A salary came with things you now buy yourself. Health insurance. Retirement contributions, possibly matched. Paid holiday and sick leave — time you now take unpaid, or don't take. Equipment, software, and training. Sometimes insurance and professional memberships.

And the tax one people forget: your employer paid half of your Social Security and Medicare contributions. Self-employed, the full 15.3% is yours — the employer half alone is 7.65% of earnings that simply wasn't visible before.

The arithmetic that works

Work backwards, as this freelance rate guide sets out: start from the salary you want, add the value of the benefits and employer taxes you're replacing, add your business overheads, then divide by your realistic billable hours — not total hours.

The result is usually a meaningful multiple of the naive calculation, and that's not greed. It's the actual cost of replacing an employment package.

Two things to add

A buffer, for slow periods and scope creep. And a review date, because rates left unexamined drift downward in real terms every year.

One honest caveat: the market has a view too. If your calculated rate exceeds what clients in your field will pay, the answer isn't to ignore the arithmetic — it's to change something structural, like specialising, raising your billable percentage, or moving to project pricing.

To work out your true business overheads, StatementOrganizer.com will pull them from your statements.

References

• Self-employment tax (Social Security and Medicare taxes) — Internal Revenue Service
• Freelance Rate Calculator — Harvest
• How to Set Your Rates as a Freelancer — Anna B. Yang

This article is for general information only and is not financial or tax advice. The 15.3% self-employment tax figure is US-specific; equivalent social contribution structures differ substantially by country. Billable-hour percentages are widely cited estimates, not measured statistics — track your own.