Hourly Rate
The amount of money charged, paid, or earned for every hour worked.
Definition
An Hourly Rate is the amount of money charged by a freelancer, or paid to an employee, for exactly one hour of work.
Why It Matters
If you are an employee, your hourly rate dictates your paycheck. But if you are a freelancer or agency owner, your hourly rate must do much more than pay your personal bills.
A freelancer's hourly rate must be high enough to cover business overhead (software, hardware, marketing), self-employment taxes, health insurance, and unpaid time off. This is why a freelancer generally needs to charge double or triple the hourly rate of a W-2 employee doing the exact same job.
Practical Example
Billing in Increments
When invoicing clients, you rarely work exactly 1 hour or 2 hours. You must convert your time duration into a decimal.
If your rate is $100/hr, and you work for 1 hour and 15 minutes:
- 15 minutes ÷ 60 = 0.25 hours
- Total billable time = 1.25 hours
- 1.25 × $100 = $125 total charge.
If you are transitioning to freelance work and need to figure out what you should charge to survive, use our Freelance Hourly Rate Calculator.
Frequently Asked Questions
How do you bill for a partial hour?
You convert minutes into a decimal. For example, 15 minutes is 0.25 hours, so you multiply your rate by 0.25.