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How to Calculate Effective Billing Rate

Harvest helps teams and freelancers calculate effective billing rates by tracking every billable minute and providing detailed reporting, ensuring optimized revenue management.

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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

How this hourly rate calculator works

It works back from the income you need to the rate you must bill, accounting for the hours you can't bill.

  • Billable hours/year = working weeks × hours per week × billable %.
  • Break-even rate = (target income + business expenses) ÷ billable hours.
  • Recommended rate = break-even plus a 20% buffer for taxes, slow periods, and profit.

Raising your billable percentage or trimming expenses lowers the rate you need.

Calculate Your Billing Rate with Harvest

See how Harvest tracks every billable minute to help calculate your effective billing rate accurately, improving profitability.

Harvest dashboard showing effective billing rate tracking.

How to Calculate Effective Billing Rate FAQs

  • The effective billing rate is calculated by dividing the total revenue from billable hours by the total number of billable hours. This accounts for discounts and non-billable work, providing a true measure of revenue efficiency.

  • Non-billable hours can significantly lower your effective billing rate as they represent time that isn't directly generating revenue. Accurately tracking these hours helps in understanding their impact and optimizing productivity.

  • Consider industry standards, geographical tax rates, employee roles, and project types when setting your billing rate. Using tools like Harvest can help track and adjust these rates for improved profitability.

  • Using a tool like Harvest allows you to track billable hours accurately through one-click timers and manual entries. This ensures all worked hours are logged and billed correctly.

  • Harvest provides detailed reports and project budget monitoring to help calculate and adjust billing rates effectively. It allows tracking of both billable and non-billable hours for accurate pricing strategies.

  • The effective billing rate accounts for discounts and non-billable hours, whereas the average billing rate is a simple average of billed hours. The EBR provides a clearer picture of actual revenue efficiency.

  • Yes, Harvest allows you to tailor billing rates per project, enabling adjustments based on project type and ensuring that your rates reflect the true value of your services.

  • Tax rates, which vary by country and region, affect your pricing structure. For example, Germany's VAT is 19%, while Australia's GST is 10%. These rates must be factored into your billing calculations.