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Calculate Hourly Billing Rate

Harvest helps you calculate your hourly billing rate by tracking billable hours and overhead costs, ensuring profitability and growth.

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What should you charge per hour?

Most freelancers and consultants dramatically undercharge. This calculator accounts for what most people miss: non-billable time, taxes, and overhead.

$
Accounting for vacation, holidays, sick days
60%
Most freelancers can bill 50-70% of their time. The rest goes to admin, marketing, proposals, and learning.
$
Software, insurance, equipment, accounting, taxes beyond income tax, etc.
Your break-even rate $0
Recommended rate (+20% buffer) $0
Billable hours per week 0h
Equivalent daily rate $0

Start tracking your billable hours

Walk through the entire flow below. Start a timer, check your reports, and create a real invoice — all in three clicks.

Go ahead — start tracking!

One click and you're timing. Try it right here: start a timer, add an entry, edit the details. This is exactly how it feels in Harvest.

  • One-click timer from browser, desktop & mobile
  • Works inside Jira, Asana, Trello, GitHub & 50+ tools
  • Duration or start/end — your call
  • Day, week & calendar views to stay on top of it all
  • Friendly reminders so no hour gets left behind
Acme Corp
Website Redesign
Homepage layout revisions
1:24:09
Content Strategy
Blog calendar planning
1:30:00
SEO Audit
Technical audit report
0:45:00
Brand Guidelines
Color system documentation
2:15:00
Logo Concepts
Initial sketches round 1
1:00:00
Today's total 6:54:09

Understanding the Fundamentals of Hourly Billing Rates

Calculating an hourly billing rate is essential for professionals aiming to cover their costs and achieve desired profit margins. An hourly billing rate is the amount charged to clients for each hour of work. It must incorporate key components: desired salary, business expenses, non-billable time, and a profit margin. Non-billable hours, which include administrative tasks and professional development, can comprise 20-30% of total working hours, meaning only 50-70% of hours are typically billable. This distinction is crucial for accurate rate setting.

Overhead costs, accounting for expenses such as rent and utilities, should ideally remain under 35% of total costs. Additionally, a healthy profit margin—often 15-25%—ensures sustainability. Taxes are another consideration, with self-employment taxes alone ranging from 15-25%. Understanding these components helps in setting a competitive and profitable rate.

A Step-by-Step Guide to Calculating Your Hourly Rate

Setting an hourly billing rate involves several calculated steps. First, determine your desired annual income, factoring in personal financial goals. Next, calculate total annual business expenses, including overhead costs like rent and utilities. Estimating realistic billable hours is essential, accounting for non-billable activities. For instance, with 2,080 annual work hours, subtracting 200 hours for time off leaves 1,880 hours, of which only 50-70% may be billable.

Incorporate taxes by estimating annual liabilities, then calculate a break-even rate by dividing the sum of desired income, expenses, and taxes by billable hours. Finally, add a profit margin of 15-25% to ensure business growth. Harvest can assist in this process by tracking billable and non-billable hours, ensuring accurate rate calculations.

Strategic Considerations for Your Billing Rate

Beyond basic calculations, strategic considerations are vital when setting hourly rates. Market research helps ensure competitive pricing, while value-based pricing can target clients willing to pay for expertise. Adjusting rates according to project complexity or regional cost differences can also optimize earnings. For instance, legal professionals in Washington, D.C. average $462/hour, reflecting regional economic conditions.

Using Harvest's tools, you can differentiate between employee rates and billable rates, adapting them based on project types and client needs. This flexibility allows for targeted pricing strategies, enhancing competitiveness and profitability.

Optimizing Profitability with Harvest

Achieving optimal profitability involves more than just accurate rate setting. Strategies for increasing billable hours and reducing non-billable time are vital. Regularly reviewing and adjusting rates ensures they remain aligned with market trends and business goals. Communicating billing policies effectively to clients also aids in maintaining transparency and trust.

Harvest supports these efforts through detailed time tracking and invoicing capabilities. By monitoring billable hours and Average Billable Rates (ABR), Harvest helps businesses assess revenue efficiency across projects. This data-driven approach empowers businesses to make informed decisions, optimizing both rates and profitability.

Calculate Hourly Billing Rate with Harvest

Discover how Harvest helps calculate your hourly billing rate by tracking billable hours and overhead costs for profitability.

Harvest dashboard showing hourly billing rate calculation.

Calculate Hourly Billing Rate FAQs

  • Consider desired salary, business expenses, non-billable time, and profit margin when calculating your hourly billing rate. For instance, non-billable tasks can account for 20-30% of total hours, impacting how many hours you can actually bill.

  • To account for overhead, include all indirect business costs like rent and utilities, ideally keeping them under 35% of total expenses. Add a profit margin of 15-25% to your break-even rate to ensure sustainability and growth.

  • Adjust your billing rate by evaluating project complexity, client needs, and market conditions. Harvest's project settings allow you to set different rates for various projects, enhancing flexibility and competitiveness.

  • Use Harvest to track time accurately with one-click start/stop timers and manual entry options. This ensures you capture all billable hours and maintain accurate billing records.

  • The pay rate is what an employee earns per hour, while the bill rate is what a client pays for that hour of work. Harvest helps differentiate these rates through detailed reporting and project settings.

  • Most professionals aim for 1,200-1,600 billable hours per year, accounting for non-billable tasks and time off. This equates to about 29 billable hours per week if targeting 1,500 annually.

  • A common profit margin goal is 15-25% of total costs. This margin ensures business sustainability and allows for growth, with professional services often targeting a 30% profitability.

  • Harvest enables accurate tracking of billable and non-billable hours using detailed time reports, helping you optimize profitability and ensure accurate billing.