One of the most common mistakes when starting out as a freelancer is setting your hourly rate by simply comparing it to the salary you earned as an employee, without accounting for all the additional costs a freelancer has to cover on their own.
Why you can't directly compare it to an employee's salary
An employee's salary already has the employee's contribution deducted, but the company also covers its own employer contribution, paid vacation, sick leave, and other costs that, as a freelancer, you have to cover yourself out of your invoicing. Setting your rate to match only the net amount of an equivalent salary usually leaves you earning less than you actually need.
The elements you should include in the calculation
- Target net income: how much you actually want to earn per month, after taxes.
- Self-employment contribution and a provision for the installment payment of IRPF.
- Fixed business expenses: tools, insurance, an accountant, workspace rental if applicable.
- Actually billable hours, not total hours worked: you need to subtract time spent on admin, client acquisition, training, and periods without work (vacation, sick leave, gaps between projects).
A rough formula
Hourly rate = (Target monthly net income + Monthly fixed expenses + Provision for taxes and contributions) ÷ Billable hours per month
Billable hours tend to be considerably lower than initially estimated: a realistic figure for many freelancers is around 80 to 120 billable hours a month, not the 160 hours of a theoretical full-time schedule.
Why underestimating billable hours is the most frequent mistake
Many freelancers calculate their hourly rate assuming they'll bill practically every hour of their working day, without subtracting time spent on administrative tasks, sales, and running the business, which leads them to set rates that fall short of their real income target.
Review and adjust periodically
Your hourly rate shouldn't be a fixed figure forever: it's worth reviewing it periodically as your expenses, your self-employment contribution (based on the income bracket you declare), or your experience and market positioning change.
Estimate your contribution and tax burden
Our net salary calculator can serve as a helpful reference for comparing your target net income against an equivalent salaried employee position.