Self-employment: How to calculate the ideal hourly rate with 5 simple questions

For many who have never been self-employed before, calculating the actual hourly rate is often a great challenge.

Here is a small simplified guide on how to calculate your hourly rate:

1. What gross income do you need?

As a self-employed person you usually need a higher gross income than an employee to get the same net salary. For example, in countries like Germany or Austria, you also have to pay the employer’s share of social and health insurance. In addition, you have to pay taxes just as you would if you were an employee. So it is best to find out in advance what gross income you need to achieve your net income target.

2. How many weeks a year can you work?

Even as a self-employed person, you might get sick or want to go on holiday. There are also public holidays. Calculate how many days per year you can work.

A calculation could look like this:

Working days excluding public holidays: 250 days
minus holidays: 25 days
minus sick days: 5 days

= 220 working days per year
Working weeks per year: 220 / 5 = 44

3. How many hours can you ultimately sell?

A regular working week as a self-employed person is very varied. You have to take care of marketing, finances and enquiries, answer e-mails and do many other things. Ultimately, you can therefore only sell a limited number of hours to your customers. Depending on how much you want to work per week/month, this can be more or less hours.

Calculate how many billable hours you can spend per week. A sample calculation could look like this:

Working hours per week: 45
– Effort for new customer acquisition: 8 hours
– Replying to e-mails/enquiries: 6 hours
– External events/meetings: 6 hours
– Finances & bills: 1 hour
– Planning: 3 hours
= Billable hours per week: 21

4. What other costs will arise?

In addition to your living expenses, you also have operating expenses. These too must be included in the hourly rate. These can be, for example, costs for office rent, electricity, heating, advertising, insurance, chamber fees, software, office supplies.

You should calculate the annual budget for this. This could look like this, for example:

Office rent, electricity, heating: €6,000
Software licences, website: 400 €
Accounting & tax consultancy: 2.000 €
Advertising & new customer acquisition: 4.000 €
office supplies: 200 €
Chamber fee: 100 €
Total: €12,700

5. What does the hourly rate look like?

You can then calculate the actual hourly rate in a final step as follows:

Desired personal gross income: 60.000 € (see point 1)
Other costs: €12,700 (see point 4)
Total turnover needed: 72.700 €

Billable hours per week: 21 (see point 3)
x working weeks per year: 44 (see point 2)
Billable working hours per year: 924

Hourly rate: Required turnover per year / Billable working hours per year
Required hourly rate: 72.700 € / 924 = 78,74 €

 

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Christian Wagner
Christian Wagner
Founder RiskPlayWin | Owner & Founder of the digital marketing agencies morethandigital.com & PEAKFOCUS.agency