One of things I learned early on in my career as a freelance Web designer is the nausea that comes with determining an hourly rate. It’s a gut-check that makes you think about how much you are worth and what others think of your work once you tell them how much you charge.
Determining Your Rate
The first thing to do when determining an hourly rate is to start with a goal. For the sake of demonstration, let’s say you want to make US$40,000 per year.
Now, we need to figure out how much time you want to work for that year. The first step is to realize how much time you do not want to work. What do I mean by that?
Actually, I mean a couple of things by that. The first thing is figuring out vacation time and realizing that not every waking moment on this earth is billable. In America, we typically take two weeks of vacation. That’s 50 weeks you will be working per year.
Another time factor to think about is your weekly schedule. Let’s not forget to exclude the weekends otherwise chores aren’t going to get done.
So, that gets us 50 weeks with five days of total work per week for a total number of 250 work days:
(50wks) x (5d) = 250days
Hours in the Day
Now that we have the number of days figured out, we need to move onto the number of hours of actual work done in a day.
It’s no secret, anymore. Not everyone actually works a full work day. Even if you are the best and most efficient freelancer, there’s going be time that’s not billable. You’re going to need to make time to deal with taxes, internal management of computers, time to make the coffee (and the doughnuts), long phone calls to whomever about whatever, and then consider those trips to the office supply store, and so on.
Even salaried employees don’t work a full day as they have to have time at the water cooler to discuss important topics like Britney Spears or the Patriot’s winning season.
For the sake of argument, let’s say that every day you are able to bill 60% of a typical work day. If we assume an eight hour work day, that comes to about 4.8 hours. But let’s round that up for five hours to make the math easier.
Hours in a Year
Now, to get the full number of working hours worked in a year, we multiply the five hours in a day we would work by the number of days. So, that comes to 1,250 working hours:
(5hr/d) x (250d) = 1250hrs
Since we now know how much we want to make and how many hours we are going to work, finding the hourly rate becomes a simple matter of division. Take the amount you want to work and divide that number by the number of hours you are going to work in a year.
($40,000) / (1,250hrs) = $32/hr
What’s Your Hourly Rate?
Now, you don’t have to stick with the salary I did. While we started with $40k/year, feel free to try different amounts and work your way backwards. Also, feel free to adjust the amount of hours you work in a day.
Need a calculator to figure out your hourly rate? Well, chances are you already have one handy if you use a Mac or Windows OS. Dig around your applications folders or you can use one of the many free caclulators online.