Your freelance hourly rate floor is what you have to charge to cover costs and pay yourself. It comes out of billable capacity, not total hours worked: take what you need to cover for the year and divide it by the hours you can realistically invoice.
Which denominator you pick decides whether the number works. Here's the worksheet, the arithmetic, and what moves it.
Start with what you need to cover, not what you used to earn
Two numbers go in the numerator: the pretax money you want to take out as the owner, and what the business costs to run. If you hold a separate reserve for slow months, add it only if it isn't already in your costs.
This is a hypothetical example, not real experience, and nothing here is typical:
- Pretax owner pay: $60,000
- Business costs: $12,000
- Separate reserve: none in this example
- Working weeks after leave: 46
- Weekly work capacity: 35 hours
- Billable share: 60%
Numerator: $60,000 + $12,000 = $72,000.
Divide by billable hours, not by every hour you work
Here's the blank worksheet, with units:
Pretax owner pay you need: $________ per year
Business costs: $________ per year
Separate reserve: $________ per year (if not already in costs)
Numerator: $________ per year
Working weeks after leave: ________ weeks
Weekly work capacity: ________ hours per week
Billable share: ________ percent
Billable share as decimal: ________ (percent / 100, so 60 / 100 = 0.60)
Annual billable hours = weeks x hours per week x decimal share = ________ hours per year
Hourly floor = numerator / annual billable hours = $________ per hour
Run the example through it: annual billable hours = 46 × 35 × 0.60 = 966, or 21 billable hours out of the 35 you work each week.
$72,000 ÷ 966 = $74.53 per hour. That's the illustrative floor for these numbers.
Now the wrong denominator. Forty-six weeks at 35 hours is 1,610 worked hours, and $72,000 ÷ 1,610 = $44.72. At a 60% share, 966 of those hours are billable and 644 aren't. Dividing by all 1,610 spreads $72,000 across hours you can't sell.
Rounding $74.53 up to $75 is a pricing choice, not a guarantee. The floor is the point below which the arithmetic stops working.
How sensitive the floor is to billable share
Same $72,000 numerator, same 46 weeks and 35 hours, three billable shares:
| Billable share | Annual billable hours | Hourly floor |
|---|---|---|
| 50% | 805 | $89.44 |
| 60% | 966 | $74.53 |
| 70% | 1,127 | $63.89 |
Read that column as a sensitivity check, not a ranking. From the rounded figures: $89.44 − $74.53 = $14.91, and $74.53 − $63.89 = $10.64. Since the floor divides by hours, the same ten points moves less money the higher your share already is.
Billable share is a planning assumption, not a benchmark. Replace 60% with what your own records show. If you don't have them yet, track a few weeks and count the hours that reach an invoice.
Four places the worksheet slips
Counting leave twice. If your 46 weeks are already net of vacation, don't also shave billable hours for the same time off. That subtracts the holiday twice and pushes the floor up.
Counting a reserve twice. If the set-aside is already inside your business costs, don't add it again as its own line. Same direction: an inflated numerator and a floor harsher than reality.
Calling pretax pay take-home. The $60,000 in this worksheet is pretax owner pay: what the business pays you before any tax. After-tax take-home is a different, smaller number — what reaches your bank account once income tax and other deductions come out. Personal tax set-asides sit outside this simplified worksheet, and how much to hold back depends on your circumstances: where you live, how you're registered, what deductions apply. This worksheet doesn't calculate that for you and doesn't name a rate.
Putting unpaid admin in the wrong column. The hours you spend on proposals that go nowhere and email you'll never invoice are your time, not a business expense. They don't belong in the numerator; they shrink billable share, which means fewer hours to sell. Money you pay out — an accountant, software, insurance — is a business cost, and that does sit in the numerator.
Your floor is not your rate
A floor is arithmetic. What a client pays is scope, demand, terms, and risk. Quoting $75 because that's your floor says nothing about the value of the work, and it won't stop a client negotiating you below what covers the year.
Set the floor, then quote above it. If a project lands under the floor, you know exactly what you're agreeing to.
One thing the floor doesn't cover: an hour you bill isn't automatically an hour you collect. If late payment is a real problem for you, handle it as its own issue instead of padding the floor with a guessed collection percentage.
Swap in your own numbers
The example numbers are annualized estimates, not income promises. The useful part is that every field is something you can measure: weeks you work, hours you have, hours that end up on invoices.
Start there — time tracking for consultants covers capturing what you work, and invoicing a week of tracked time from a CSV covers turning it into billable hours. When those fields come from your own records, the floor is still an estimate — but one built from your numbers, and it moves when your capacity does.