How to calculate your hourly freelance rate? | Nikki Parsons | Skillshare

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How to calculate your hourly freelance rate?

teacher avatar Nikki Parsons, Digital Marketing Manager

Watch this class and thousands more

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

6 Lessons (21m)
    • 1. Introduction

    • 2. Step 1: Costs

    • 3. Step 2: Availability

    • 4. Step 3: Final calculation

    • 5. Project

    • 6. Next steps

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About This Class

In this short Skillshare class, I'll walk you through the steps in order to calculate your freelance rate.

We'll take a look at:

  • how to calculate your adjusted annual salary
  • how to calculate your real number of working hours
  • how to put this together and calculate an hourly freelance rate

By the end of this class, you'll understand what you need to be charging clients in order to achieve your financial goals.

Meet Your Teacher

Teacher Profile Image

Nikki Parsons

Digital Marketing Manager


A digital marketer living in Basel, learning about the latest trends in marketing and project management.

I learned on-the-go when launching my own mobile app startup in Barcelona, following that with a role in the healthcare industry working for GC Aesthetics as their Digital marketing manager and now I work at Bachem as the Director of Digital & Event Marketing.

I've come to love both the strategic and executional side of digital marketing, there are always opportunities to keep learning which gets me excited about the future possibilities!


What can you expect from this channel?

As I come from a startup/freelance background, I developed a habit of working to constantly upskill myself and my team, which is why in my ski... See full profile

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1. Introduction: Welcome to the course. This is how to calculate your hourly freelance rate mining this Nicky Parsons and I'm a freelance. They're working on a range of projects, from writing to digital marketing to project management. I know firsthand how daunting it seems for new freelancers to try to figure out what their hourly rates should be. But don't just copier competition or search a figure from Google and start using that everyone is different. Everyone has different expenses, different targets, salaries on different levels of expertise. The only way to find out your ideally rate is to do the math. But don't worry, it's surprisingly straightforward. And in just a few lectures you'll know exactly what you need to do. So join me for this quick course on calculate your hourly rate so you can get out freelancing. 2. Step 1: Costs: Ah, the dreaded question. What is your hourly rate? Well, this might be a stab in the dark if you've never freelanced before, but you need to think about all the new costs that might be involved in becoming a freelancer. So I'd suggest doing the calculation. It's time for some math. Open up, excel and follow along during this lecture. So first you want to ask yourself, What do you want to make in a year? So let's say we want to make 40,000 euro. So let's think about the new costs thes They're gonna be on a monthly on an annual basis. And basically what we're gonna do is we're gonna add up all the new costs, and then we're gonna, um, consider that in our adjusted annual salary. So what might you have as a freelancer while you might have to pay for an office or a co working space? So let's say that's gonna cost you 200 euros a month, right? So 200 euros times told months, let's say you have some I t. Tools that you're gonna need to get, So maybe now you have to pay for Microsoft, right? Uh, that would be around 10 euros a month for a basic Microsoft subscription. Say you want to pay for a custom email domain from Google. Will that will be around five years a month. What else could we have for I T tools? Well, maybe you want to dio the can va premium so that you can be designing with different custom colors and set up your brand well. That would be around 12 euros a month. And if you're not familiar with Can VA? Basically, it's a design software, so it's actually free a lot of it. But I pay for the premium version because it helps me as a freelancer when I'm preparing either my CV in different four months for different jobs, or if I want to do a really nicely laid out a proposal for a client and also, occasionally, freelancers also have needs for design topics, even those of us who aren't designers. For example, if you want to make a custom head of your linked in profile or other social media profiles eccentricity, you don't have to use can va, but probably some kind of design tool you'll need if you're not using a free software. Okay, so let's just add up I t tools and drag that over for the formula. Okay, let's just put this into a different colors. It's a little bit easier to compare. Not that. There we go. Okay, so I t tools 27 years a month in total. 324 euros extra a year. Okay, So what else could we have is a freelancer. Well, maybe you're now making a lot of calls because you're trying to close business. Maybe you're using more data on the street because your out going client to clients and maybe you haven't increased phone bill. What could you have? You could spend maybe an additional 20 euros a month. You know, it's just pop this into black. Save this document on going along these lines, other kind of technical equipment that you might need that maybe in the past, the company would have paid for you would be a computer or a phone itself. So basically, what we want to do here is we want to think about what's the cost off your computer and how long of a life is that Expected toe have? Well, probably over three years, maybe three years from now, you'll have to upgrade your phone. Or maybe you have to upgrade your computer depending on what state it's in. So you want to calculate the cost of the computer and kind of divide that by three years so we can get an idea of what that really costs us per month and what that really costs us per year. So if we have a new computer, um, is having a look what the 13 inch MacBook Air goes for in Europe on. I know this is a more expensive phone deal with it, so that goes for 1349 euro. Okay, but we would divide that by 36 because we have 36 months in three years, right? 12 months in a year, times 3 36 So that's a monthly cost that we need to associate of 37 47 I just find the yearly rally of that as well. So that's the new computer. And what about a new phone? So a iPhone eight was just having a look at what that costs and again, I know it's an expensive phone as 689 euros will do. The same process will say that that phone only lasts us three years or 36 months. So every month, it's really costing us around. 20 euro, right? Illegal times 12. Okay, so per year Around. 229 euro. All right, let me just fix some of these colors here. Okay? Perfect. What else could we need is a freelancer, cause we're not done yet, right? Well, we could have promotional materials, could have marketing costs. And you might think yourself, what am I gonna have in terms of marketing costs? Well, maybe you at least want to make some business cards, right? So I was having a look at what Vista print, which is just one of those standard online companies that makes business cards. And they had a rate of 30 euro for 500 business cards. So let's say that those business cards. So let's say that those business cards, they last you all year. So you really only have an annual cost of that. So they're real costs to you per month is like to 50. But of course you're gonna fork up that up front What other costs could we have here? Well, we could have promotional costs. So if you're someone who's planning to do social media ads for your freelance work, if you're going to do some like instagram ads or Facebook ads, if you're running a Google AdWords campaign, all of this stuff you could put here a swell that you might have accountant fees. For someone like me who doesn't really understand all these additional tax obligations of being a freelancer, you'll probably get an accountant, the handle your quarterly finances. And in my case, I have a very cheap person who just got 60 years a trimester, 1/4 so that's around 20 euros a month. But again, all of these amounts, basically, you wanna put what's the cost to you? Don't just follow what I'm doing and kind of use. This is a number for yourself because it matters. In each region, it's very different. So for me, an accountant might be a lot cheaper or a lot more expensive than from where you're from and along the lines of accounts that we could have additional tax obligations, and this is something you really need to just talk with your accounts and because I can't call you what your additional tax obligations are gonna be in something very unique to you . Let's just put around and figure in here and say it's 200 euros extra a month, times 12 and we have 2400 extra tax a year. Another kind of big cost could beat health care costs. And this really depends on where you're from, because if you're in the States and a company used to pay for you your health care costs, maybe you didn't realize that. Now you have to really plan your freelancer, and you're gonna have to pay your own health care costs for some private insurance. Maybe you're from a European country where it's included as part of your tax obligations. But either way, there's some kind of health care costs built in to your to your system there. So let's say that the health care call we pay 100 years a month to have a private health insurance. I know what it is in your region, but just do the calculation and put in the figure. And then the last thing I would say here is a buffer for bad clients. So, yeah, we're freelancer, and it kind of sucks because there's these annoying clients in the world that, well, just not pay you. They'll have problems. They're just not really good people. Um, you know, it's gonna happen to you at some point or even the company goes bankrupt, even if they're a good client. So what you want to do is you want to plan 2% off the figure that you want to make in a year as a as an amount that, you know, you need to have as a buffer in case someone doesn't pay you well, you you've planned ahead for that, right? So we would do 40 grand in our case, times two percents a 20.2 Just make this a bit better. Perfect. Here we go. Okay. So what is the extra annual cost we need to be thinking about here? Let's sum up all of these amounts. So we've got our co working space. Her I T tools or increased phone bill, a new computer, a new phone, promotional activities, accountant, tax obligations, health care and a buffer for bad clients. What's this gonna set us back here? 8313 euros in additional costs that you need to plan for. So the next step here is to take your target salary. So that's your 40 grand. Add up your new costs and this is going to give you your adjusted annual salary. OK, so in our case, we've got 40 grand plus this amount. Okay, so some 40 plus this. So for us are adjusted. Annual salary is gonna be 48,313 Europe. 3. Step 2: Availability: Okay. The next step in this process is not to consider just your salary, but we want to consider how many hours can we work as a freelancer. Right. So let's planned over here. Working hours. Okay, so we're gonna go through the basics. How many weeks are there in a year? Well, it's 52 weeks in a year off that the days you work are normally five of those days a week. Which would mean if we do 52 weeks times by five days would mean you have 260 working days . How many hours you having a day when you work? Normally around eight hours a day. So again, 260 working days, times eight hours a day. Should be 2000 and 80 working hours. Right? Buts. There's some other things we need to take into account here because we don't work every single business day we can write, we take holidays or we get sick or any number of other things. Maybe you became a freelancer toe. Have a bit more holiday than normal, right? So you gotta take this into account. Let's go here and we'll put deductions. Okay, so deducting four holidays. Right? So how many holidays do we want in our gear? Well, if you're in Europe, usually have five weeks of holiday. So again days that we work our five days of the week on we would take five weeks of holiday . So five times five is 25 working holidays, right? Similarly, eight hours in a day. So 25 working holidays times eight hours is 200 holiday working hours. Now, let's plan for sick days because, of course, we're freelancers s so we don't get sick. Right? So let's say maybe you are really healthy and you just get sick. Three days in the whole year and the end. Of course, when you're a freelancer like you are really sick to be taking time off. But say you're sick three days again. Eight hours in a day. So three days times eight hours is 25 24 Sick working days were sick working hours. Sorry for that. So it's come back over her toe working hours. So we said, How maney working hours do we have 2000 and 80 but minus our holiday hours of 200 on our six hours of 24. So if we take our working hours minus our holiday hours, minus are sick hours. This is 1000 and 1856 working hours. But wait, we are not done yet because as a freelancer, you don't spend every single moment of your time doing things that bring you money, right? Because we spend time doing invoices. We spend time finding clients doing marketing work. It's a you need to plan that 25% of your time is actually things you can't build any client . Four. So they're really like worth e? No, they're not worthless, but they're not bringing you money in that moment. There. Bring you money through other ways, right? So, off this 1856 working hours, we have non available hours, right? So it's 1856 times 25% of your time, so put just 25%. Here is 464 non billable working hours. So this means you're really working. Hours are not 2080 every single week and day. What working day of the year? It's your working hours minus holiday hours minus sick hours and taking into account that 25% of these hours you're not doing things that you're gonna be able to invoice someone for . So you're really working Hours are 1856 minus 464. So you're really working hours or 1392 Great. 4. Step 3: Final calculation: So I guess you can tell We're probably gonna go from here. This is the last step, which is to take your adjusted annual salary, this figure we can we created before and you're gonna divide it by your riel working hours . So 4330 48,313 year old, divided by 1392. So let's do the math. There you go. That is your freelance hourly rate. 34 euros. 71 cents if you want to make 40 grand in a year. What I've noticed from doing this exercise with myself and with other freelancers in the past is that it often sounds like a very high figure. So it's good to have a bit of a reality check. There are a lot of costs involved in being a freelancer, and that's why it's so important to stay strong in the negotiation. So you know your hourly rate. You know what you want to make and you're not going to make what you want. If you accept a lower hourly rate, so you need to stay strong in the negotiation 5. Project: your project in this course is a simple reflection. Exercise before you can reflect. You need to do the math yourself to calculate your hourly freelance three. If you remember in step one, we focused mainly on the additional costs involved in being a freelancer. First we identified our target salary, and then we brainstormed all the possible costs involved in being a freelancer. Then, we calculated, are adjusted annual salary by taking our target salary minus our new costs. In Step two, we looked at how many hours were available toe work. So we calculated the total number of possible hours and then took into account potential holiday time budgeted for sick days and also considered that 25% of our time, we won't be able to build anyone for in the last step. We use this information to calculate our hourly freelance rate by dividing are adjusted annual salary by our riel working hours, as you probably don't want to simply upload your excel and share your personal expenses with the world. I decided to have our project in this class you more of a reflection and sharing exercise. So answer these few questions. What work do you do? What country are you from? What is your hourly rate? And did that rate surprise you? If so, why? I think these questions are useful to share with the class because, like we mentioned in the lectures, different countries, regions, even cities can mean wildly different expenses and therefore different freelance rates. So we need to have a little context just to be able to understand your Freeland three. And also there's no shame in saying while you earn two fellow freelancers, it's important that we know are worth so that we can be strong in the negotiation. Maybe you would see other freelancers taking a low rate, and you start to question if you should be taking a lower paying jobs. Well, no, you've done the math, so let's help each other out by being honest about what we need to earn to achieve our goals. 6. Next steps: thank you for taking this class. It's been a real pleasure to have you if you're interested in learning more freelance skills than make sure to follow my skill share channel. I have a lot of courses on sports writing, as it's my main itch. But I do also add courses on topics that any freelancer would be interested in, like digital marketing, project management and simple finance topics like this class. I hope to see you again in another class very soon. Take care.