Formula
The rate divides what you need to cover by the hours you can bill:
Hourly rate = (income target + business expenses) / billable hours
Unpaid time is left out by entering only billable hours.
Assumptions
- Every billable hour is paid at this rate.
- Expenses are the business costs you need the rate to cover, not personal tax.
Worked example
An income target of $80,000.00, $10,000.00 of expenses, and 1,200 billable hours set a rate of $75.00.
Input definitions
- Billable hours
- Hours you expect to invoice, from 1 to 4,000.
- Business expenses
- Costs the rate should cover in addition to the income target. Zero is allowed.
Limitations
This is not a wage conversion. The salary calculator turns a known wage into hourly, weekly, monthly, and yearly pay.
Questions
Why not divide salary by 2,080?
That assumes every work hour is paid. This page uses only the hours you can bill, and it adds expenses.
Does this withhold tax?
No. Put tax into the income target or the expenses if you want the rate to cover it.