Setting a Freelance Rate That Actually Covers What a Salary Covers
A freelance rate needs to cover more than just take-home pay equivalent to a salaried role — it also needs to fund self-paid taxes (including the employer-side portion a company would normally cover), benefits like health insurance and retirement contributions that an employer would otherwise provide, and non-billable time spent on admin, marketing, and finding new work, none of which a simple salary-to-hourly conversion accounts for.
This is one of the most common miscalculations new freelancers make — treating a salaried hourly-equivalent figure as if it were already a viable freelance rate.
Self-employment taxes
An employee's employer typically covers a portion of certain payroll taxes on their behalf — a self-employed freelancer generally needs to cover both the employee and employer portions themselves, a real cost that a simple salary conversion doesn't include.
Self-funded benefits
Health insurance, retirement contributions, and paid time off are commonly provided or subsidized by an employer for a salaried role — a freelancer needs to fund all of these independently, and their cost needs to be built into the rate rather than assumed to be covered elsewhere.
Non-billable time
A salaried role's full working hours are paid, but a freelancer's rate only compensates for actual billable hours — time spent on administration, invoicing, marketing, and finding new clients is real time that isn't directly billed to anyone, meaning the effective hourly rate needs to be higher than the target income divided by total working hours, to account for the portion of time that isn't billable.