How to Price Your Freelance Services Without Undercharging

Most freelancers who undercharge did one of two things: they divided a salary they wanted by 2,080 hours, or they copied a rate they saw online. The first ignores that a freelancer pays both halves of Social Security and Medicare, buys their own benefits, pays for their tools and cannot bill every working hour. The second borrows someone else's costs, market and experience. This guide shows the calculation that gives you a defensible minimum, with every input labelled, and then how to turn that number into hourly, project, retainer and value-based prices that appear clearly on your invoices.

How do you calculate a freelance rate floor?

Add up what the business must earn in a year, then divide by the hours you can bill. The floor is the rate below which every hour costs you money. Work through it with your own figures.

Worked example: replacing a $75,000 salary. Every input is an assumption, labelled so you can replace it with your own.

Where the numbers come from:

• Self-employment tax is 15.3%, "12.4% for Social Security and 2.9% for Medicare", and it applies to 92.35% of your net earnings from self-employment; the Social Security part stops at an annual earnings limit, and you can deduct half of the tax when working out your adjusted gross income (IRS Tax Topic 554: Self-employment tax, page updated 24 September 2026, accessed October 2026). The example's profit is below the Social Security limit, so the full 15.3% applies. It leaves income tax out of the floor because you would pay that on a $75,000 salary too, and it ignores the half-tax deduction, which makes the floor slightly conservative.
• Benefits are the part of an employee's pay people forget. US private-industry employers spent an average of $46.89 per hour worked on compensation in June 2026, of which benefits were $14.07, or 30.0% (BLS Employer Costs for Employee Compensation, released 9 September 2026, accessed October 2026). An employer pays those for an employee; a freelancer pays them out of their rate.
• Billable hours are the input most people get wrong. Sales calls, proposals, invoicing, bookkeeping, learning and gaps between projects all take working hours that no client pays for. The 60% here is an assumption; track your own for a month.

The result: $75,000 over 2,080 hours is $36.06 an hour, but the freelance floor that replaces it is about $97, or 2.7 times as much. If your rate is near $36, you are working for much less than the salary you think you are matching.

How much does the billable-hours assumption change your rate?

More than any other input. Keeping revenue at $106,966 and changing only the billable share of 1,840 working hours:

A freelancer who is new, still building a client base, or spends a lot of time on proposals should use the lower share. The difference between 50% and 70% billable is $33 an hour on the same income target.

How do you turn the floor into a project price?

Estimate the hours honestly, add a contingency for the unknowns, and multiply by a rate at or above your floor. For example, a website copy project you estimate at 24 hours gets a 25% contingency for revisions and slow feedback: 24 × 1.25 = 30 hours, and 30 × $97 = $2,910, quoted as $2,950. If you finish in 22 hours, you earn more per hour; if it takes 34, you earn less, which is why the contingency exists and why your quote should state the number of revision rounds included.

Then check the result against what the work is worth to the client. A fee that is right by your costs can still be low if the deliverable supports a product launch, a funding round or a large contract. Value-based pricing means charging nearer to that value, with the scope and the outcome written down. It only works when you can point to the outcome; otherwise the client compares your fee with hours, and you are back to hourly pricing.

Packages make this easier to sell. Three tiers (for example "essentials", "standard" and "complete") with named deliverables, timelines, revision rounds and exclusions let the client choose a scope instead of negotiating your rate. Each tier should still clear your floor at its estimated hours.

How should you price a retainer?

On the time or output you reserve, at a rate that reflects the commitment on both sides. A retainer for 15 hours a month at $97 is $1,455. Some freelancers discount a retainer a little for guaranteed monthly income (5% off would be $1,382.25), while others charge a premium for guaranteed availability. Either way, write down:

• what is included each month (hours or deliverables);
• whether unused hours roll over, and for how long;
• the overage rate for work beyond the included amount;
• the notice period to change or end the retainer.

See invoicing retainer agreements for how to bill it month by month.

How should you raise your rates?

On a schedule, with notice, and first with new clients. A practical sequence:

1. Recalculate your floor once a year, or when your costs change (new health insurance premium, new equipment, fewer billable hours).
2. Quote new prospects at the new rate first. If you win most of what you quote, the rate is probably low.
3. Give existing clients written notice, typically 30 to 60 days, with the date the new rate starts and whether work in progress finishes at the old rate.
4. Put the new rate on the next estimate and then the next invoice, so there is no surprise at billing time.

For scripts and timing, see how to raise freelance rates.

What else affects what you can charge?

• Payment terms. Money paid 60 days late is worth less than money paid now, and long terms tie up your cash. Shorter terms, deposits on large projects and clear late-payment terms protect the rate you priced. See Net 30 and alternatives and deposit invoicing.
• Rush work. A short deadline displaces other work; price it as a stated rush rate in the quote, not a surprise line on the invoice. See invoicing for rush work.
• Scope creep. Every unpriced extra lowers your effective rate. List exclusions in the quote and bill changes as change orders; see scope creep prevention.
• Currency and international clients. If you bill abroad, decide which currency you quote in and who bears transfer fees before you set the price. See multi-currency pricing.

How should your pricing show on the invoice?

Make the price basis visible, so the invoice matches the quote line for line:

• Hourly: hours × rate per task or per week, with dates.
• Project: one line per deliverable or milestone, citing the estimate or proposal number.
• Retainer: the monthly fee, what it includes, hours used and any overage line.
• Changes: a separate, numbered change-order line with the approval date.

Clients approve invoices faster when they recognise each line, and a clear invoice is your record if a rate is ever questioned. See what to include on an invoice and hourly vs fixed-price invoicing.

This is general information, not tax or financial advice. Tax rules, earnings limits and your own costs change; check your figures with an accountant. Last reviewed: October 2026.

How InvoiceQuickly fits once you have set your prices

InvoiceQuickly does not set or suggest rates. Once you have them, you can type or say what to bill ("Invoice Halden Studio 30 hours of copywriting at $97, due in 14 days") and it drafts the client, lines, rates and terms into an editable invoice you review before saving. On Pro ($9/month), estimates let a client accept your quoted package in a private portal and convert it to an invoice in one step, and you can send invoices by email, add a payment link from your own Stripe or PayPal account and send scheduled reminders before and after the due date. A monthly recurring schedule can bill a fixed retainer fee (one line item with saved tax, discount and payment terms). Free covers 5 invoices, 5 clients and 3 AI drafts in total. Pro also tracks time, with a start/stop timer or manual entries, and bills selected unbilled hours into a draft invoice you review. See pricing and the features overview.

When this approach is not the right fit

• Platform-set rates. On marketplaces and gig apps where the platform sets or caps the price, the floor tells you which jobs to decline, not what to charge.
• Regulated or fixed fee schedules. Some work, such as publicly funded legal aid or insurance-reimbursed services, is paid at a set schedule. Your floor shows whether that work is viable, not the price.
• You are really an employee. If one client sets your hours and controls your work, the issue is classification, not price. See independent contractor.
• Side income with no costs to cover. If freelancing is occasional and your benefits come from a job, you can price below a full floor, but know that you are doing it.

Frequently asked questions

How do I calculate my freelance hourly rate?

Add the pay you want, the benefits you now have to buy, your business costs and self-employment tax, then divide by the hours you can bill in a year. In this article's worked example that is $106,966 ÷ 1,104 hours, about $97 an hour. Use your own figures; the billable hours estimate changes the result most.

Should I charge hourly or per project?

Charge hourly when the scope is unclear or open-ended, and per project when the deliverables are defined and you have done similar work before, so you can estimate the hours. A project fee rewards you for working efficiently; an hourly rate protects you when scope is uncertain. Many freelancers quote projects but bill changes hourly.

How much should a beginner freelancer charge?

At least their floor, calculated with a lower billable share, because new freelancers spend more time finding work. Experience changes how far above the floor you can go, not where the floor is. Charging below it means paying to work.

Is it OK to charge different clients different rates?

Yes, if the work differs: rush deadlines, larger scope, more meetings or a bigger commercial outcome can all justify a different price. Keep it consistent for the same work, put the basis on the quote, and avoid one-off discounts that quietly become a client's expected rate.

How much notice should I give before raising my rates?

Typically 30 to 60 days in writing, with the date the new rate starts and whether work already agreed finishes at the old rate. Apply it on the next estimate first, so the client sees it before the invoice.

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For trade-specific pricing, see guides such as how to price consulting, how to price graphic design and how to price web design, or the freelance income statistics. More guides are on the InvoiceQuickly blog. To invoice at your new rate, start free.