The real cost of being a freelancer (beyond your time)

Most freelancers set their rate by looking at what other freelancers charge, then adjusting up or down based on confidence.

The problem: that method says nothing about whether the rate actually covers what you need to earn. A rate that’s “competitive” can still leave you underpaid after you account for everything it needs to cover.

Here’s what your rate needs to pay for — and how to know if it does.

What a freelance rate actually has to cover

Your target net income. The number you want to take home after taxes. Not the number on your invoices.

Taxes and social contributions. Depending on your country and structure, this is typically 30 to 50% of gross revenue. If you’re targeting €5,000/month net in France, you need to bill roughly €8,500 to €10,000 gross. How much to provision and how to set it aside automatically is a separate calculation worth running before you set your rate. The structure itself also affects the rate — sole trader versus limited company changes the effective tax significantly above certain income levels. Once you hit the VAT threshold, VAT registration adds another layer — both administrative overhead and a pricing decision for B2C clients.

Unbillable time. Every hour spent on prospecting, admin, professional development, or transitions between clients is an hour you don’t bill. If your billability ratio is 70%, you need to earn enough in 70% of your hours to cover 100% of your costs.

Vacation and sick leave. Employees have paid leave. Freelancers don’t — which means vacation weeks are weeks of zero revenue. Add sick days and prospecting gaps and the actual billable day count drops significantly below what most rate formulas assume. If you take 5 weeks off per year, you have 47 billable weeks. Not 52.

Tools and software. Add up what you pay for: design tools, project management, accounting software, cloud storage, communication tools. For most freelancers, this is €150 to €500/month.

Equipment depreciation. Your laptop, screen, and peripherals have a lifespan. Replacing them is a business expense that needs to come from revenue.

Professional development. Courses, books, conferences. If you’re not investing in your skills, your rate will stagnate.

The calculation

Here’s a simplified version:

1. Target annual net income: €X
2. Gross income needed (accounting for tax rate): X ÷ (1 - effective tax rate)
3. Add annual business expenses (tools, equipment, development): + €Y
4. Divide by billable weeks: ÷ 47 (if you take 5 weeks off)
5. Divide by billable hours per week: ÷ (40 × billability ratio)

That gives you your required hourly rate.

Example: Target €60,000 net. 40% effective tax rate → need €100,000 gross. Add €6,000 in business costs → €106,000. Divide by 47 weeks → €2,255/week. At 70% billability × 40 hours → 28 billable hours/week. Rate needed: €80.5/hour.

If you’re charging less than that, you’re either earning less than you intend or working more hours than you planned.

The two levers

Once you have the required rate, you have two ways to close the gap if your current rate falls short.

Raise the rate. The most direct lever. If the math shows you need €80/hour and you’re charging €65, the rate needs to go up. The calculation gives you a defensible reason — this isn’t ambition, it’s arithmetic.

Improve the billability ratio. If you’re billing 60% of your hours but could reach 75%, the required rate drops significantly. Less overhead, better scoping, larger minimum client size — these all move the ratio.

Both matter. Most freelancers focus only on the invoice rate and ignore the billability ratio. But a 15-point improvement in billability is worth more than a €10/hour rate increase.

The number most freelancers don’t know

The calculation above requires knowing your billability ratio — the percentage of working hours that are actually billable.

Most freelancers don’t know this number. They track client hours but not total hours. The overhead hours — admin, prospecting, coordination — fall into a black hole.

The simplest fix: tag every working hour in your calendar, not just client hours. Total hours minus client hours equals overhead. The ratio is visible.

Once you see it, the required rate calculation becomes real. You’re not guessing at what you need to earn. You’re working from actual data.

Timescanner shows your total hours by client and period, giving you the billability ratio needed to calculate your true required rate. Works with any iCal-compatible calendar.