Our hourly rate calculator will help you set the right hourly price as an independent consultant. When you are self-employed, you need to consider yourself a small business and your hourly rate is for a number of reasons an entirely different thing than the hourly salary as a permanent employee. Especially, if you have just changed from being self-employed to a career as an independent consultant or contractor, make sure not to compare your hourly wage as a permanent employee with the hourly rate you should take as a self-employed person.
Let’s look into what you need to take into account before deciding on your hourly rate. The objective is to have a rate that is high enough to create a sustainable business for your one-(wo)man company and still, while still offering your services as at a competitive price to potential customers.
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What should your hourly rate as self-employed be to match your salary as a permanent employee?
Let’s say you have or had a solid annual salary of 60,000 Euro when you were employed – or 5000 Euro a month.
Possibly, you also received contributions to your pension on top of that, say 10 %, or 6000 Euro annually
This would equal a total annual salary of 66,000 Euro.
If you take into account holiday, illness, further education etc., a full-time employee working 40 hours a week in the UK works approx. 1800 hours a year. How high a percentage of your working hours you will actually be able to invoice as self-employed depends both on you and the type of business. In any case, you should probably calculate with spending at least 25 percent of your time with meetings, offers and administration that you cannot invoice. If you have many small projects, this number can easily be higher and vice versa lower if you work full time on a long onsite project. With a billing rate of 75 per cent of the time, you will have 1350 working hours left for the year – given that you don’t work long hours and take a standard number of days off.
If we divide 66000 with the 1350 working hours, you expect to be able to invoice, you should operate with an hourly rate of 49 Euro to match your previous salary.
BUT, we have not yet taken into account expenses for equipment, administration, accounting, rent, insurance, and similar.
These costs are highly dependent on your specific setup, so calculate the expected fixed costs for your small business and ad those to the annual salary you aim for. If we set the cost to 10,000 Euro annually, then you will need to get an hourly rate of 56 Euro if you want to match your old salary. Your business costs can of course be both far lower and far higher, depending on your setup.
Also take into consideration that you might need to pay for private health insurance that your employer previously took care of.
How to calculate your hourly rate
Basically, you start with your actual or desired salary as a permanent employee, add the costs of running your business, and now divide it with a realistic number of billable hours per year (e.g. 1350 if you expect to have a regular 40-hour week and be able to bill 3 out of 4 hours). Here you go: your hourly rate. We have made it easy for you and created an hourly rate calculator that shows you both the hourly rate, monthly wage (relevant if you take on a full time contract position) and the annual salary.
What hourly rates do other self-employed in your field take?
The realistic and fair hourly rate for you depends on many aspects: industry, demand, your level of experience, etc. Often trade unions have guiding tariffs (especially if you are in a field where it is normal to work freelance) that can give you an indication of the prices in the market. It’s also a good idea to use your network to investigate what others are paying for comparable services or ask contractors with a similar profile as yours what they charge for their work.
Hourly rate calculator for independent consultants
We have made a hourly rate calculator targeted freelance consultants. It will guide you through the various items that you need to take into account, so you can easily fix a suitable hourly rate. Keep in mind that there may be parameters that apply to you, which we have not taken into account, so our salary calculator is only indicative.