It turns the income you want to take home into the hourly rate and day rate you need to charge, after business expenses, tax, a safety buffer, holidays, sick days and the time you cannot bill. Switch to the reverse mode to see what a given rate brings home in a year. Below the result, price a fixed-price project with a contingency and check what a monthly retainer pays per hour actually worked. All arithmetic is exact and happens on this page; pick a currency symbol if you like.
The model, step by step
- Working days = weeks a year × working days a week − public holidays − vacation − sick days. With 52 weeks of 5 days, 10 holidays, 20 vacation days and 5 sick days: 260 − 35 = 225 days.
- Billable hours = working days × hours a day × billable share. Freelancers spend a large part of their time on things nobody pays for: finding clients, proposals, email, invoicing, bookkeeping, learning. At 8 hours a day and 60% billable: 225 × 8 × 0.6 = 1,080 hours a year, not the 2,080 of a "40 hours × 52 weeks" job.
- Revenue needed = (take-home ÷ (1 − tax rate) + expenses) ÷ (1 − buffer). For 60,000 take-home, 8,000 of expenses and 20% tax on profit: 60,000 ÷ 0.8 + 8,000 = 83,000 a year.
- Hourly rate = revenue ÷ billable hours = 83,000 ÷ 1,080 = 76.85. Day rate = 76.85 × 8 = 614.81 for a full billed day.
Compare that with the naive answer: dividing the 60,000 a salaried employee would earn by 2,080 hours gives 28.85 an hour. Charging that, after expenses, tax and unbilled time, would leave a fraction of the income. Even the common "just double the salary rate" shortcut would undershoot here.
Reverse mode: what does a rate earn?
Enter an hourly rate instead. At 50 an hour and the same assumptions, 1,080 billable hours bring in 54,000; after 8,000 of expenses the profit is 46,000, and after 20% tax the take-home is 36,800. The breakdown shows where every unit of revenue goes: expenses, buffer, tax and take-home.
Assumptions, plainly
Tax is modelled as one effective rate on profit; real systems have brackets, allowances and social contributions, so use the share of profit you actually paid last year, or ask an accountant. The rate is the same all year, every hour is billed at it, and every invoice is paid; the buffer is where slow months and late payers go. This is arithmetic on your numbers, not tax or financial advice. Why the billable share matters so much is explained in setting a freelance rate that survives non-billable time. For a salaried job in Vietnam, the salary calculator converts gross and net.
