What Is an Hourly Rate?
An hourly rate is the amount of money you charge for every hour of delivering services to a client. Hourly rates should take into consideration the interests of both parties: budget constraints of the client and the profitability of the service provider. To calculate an hourly rate for a project that your business is working on, you’ll need to consider the rates of each of your employees. To see what an hourly rate works out to per day, week, month and year, use our free hourly rate calculator.
See what your rate is really worth
The free WebWork hourly rate calculator shows what any rate works out to per day, week, month and year — before you quote it to a client.
What is the difference between an hourly rate and a billable rate?
A billable rate is what you charge for delivering a service per unit of time. An hourly rate is simply a type of billable rate that uses an hour as its unit of time. Quite frequently, both terms are used interchangeably. This is due in large part to the widespread use of hourly billing in the world of business.
Which hours does an hourly rate apply to?
Hourly rates are only applied to billable hours. Otherwise known as billable time, this only includes time spent working on the project itself. Time spent working on tasks that are only indirectly related are typically not billable.
How do you set an hourly rate?
Work backwards from what the work must earn. Add up your target annual income and business costs, divide by the hours you can realistically bill in a year — not 2,080, but the 1,000–1,500 that survive admin, sales and holidays — and you have your floor. Price below it and even a fully booked month loses money.
Then sanity-check the result against your market: what do people with your skill, niche and region charge? Start where you can win work, and treat the rate as a living number — once your calendar stays full for a quarter, that is the signal for a pay raise. The same logic serves employees negotiating a rate: a full workload and expanded responsibilities are the argument.
If you are on the receiving end of a rate, the picture is simpler: an hourly paycheck calculator shows what a given rate turns into per week, per pay period and per year before taxes.
How does overtime affect an hourly rate?
For hourly employees the base rate is also the anchor for overtime: in many countries, hours past the weekly threshold are paid at time and a half — 1.5 times the hourly rate. At a $20 rate an overtime hour is $30, and a payroll that misses the split underpays exactly the people working the most. Freelancers can borrow the idea: a rush-job surcharge is easier to defend when it is framed the same way.
