How to price freelance and contract work

By Adrian Simpson. Two decades in IT and web work, freelance and otherwise, including the early years of underpricing everything. Published August 2, 2026, last updated August 14, 2026.

Most freelancers set their first rate by looking at what someone else charges and going slightly under. That's how you end up busy and broke. The number you need isn't in a survey, it's in your own arithmetic.

The mistake everyone makes first

You want to earn $80,000, so you divide by the 2,080 hours in a working year and land on about $38 an hour. That figure is wrong twice over. It ignores your costs, and it assumes every working hour is a billable one.

Working out your floor

Start from what you need to take home, add what it costs to operate, then divide by hours you can genuinely bill.

That's your floor, not your price. It's the number where you break even on the life you're trying to fund, before tax. Anything below it and you're subsidising the client.

That floor is before tax

The $78 covers your $80,000 target and your costs. It doesn't cover the tax on it, and this is where a lot of first-year freelancers get a nasty January.

As an employee, tax left before the money reached you. Self-employed, the whole invoice lands in your account and some of it isn't yours. Depending on where you are and what you earn, income tax plus self-employment or national insurance contributions can take 25% to 40% of profit, and you may owe payments on account for next year on top.

If the $80,000 in that calculation is what you want to actually keep, you need to gross it up before dividing.

Same life, same costs, same hours, and the floor moved by $31. Whether you use the pre-tax or post-tax version is up to you, as long as you know which one you're holding. Move a percentage of every payment into a separate account the day it arrives and the bill stops being an event.

Why 25 billable hours

Because the rest of the week is real work that nobody pays you for. Quoting, invoicing, chasing invoices, client calls that don't turn into jobs, your own admin, marketing, the tax return, keeping your skills current.

Twenty-five out of forty is a reasonable planning figure for an established freelancer. In your first year it'll be lower, because more of your time goes on finding work than doing it. Track it for a month if you want your own number instead of mine.

Hourly, daily, or fixed

Fixed pricing is where the money is once you know a job type well. The second time you build the same kind of thing it takes 60% of the hours, and on a fixed price that difference is yours instead of the client's.

Estimating a fixed price

Break the job into pieces small enough to guess at with a straight face, estimate each one in hours, add them up, then add a buffer. Twenty percent is a common starting point and experience will tell you whether yours should be higher.

Then check the total against your floor. Sixty hours at a $78 floor is $4,680, so a $4,000 fixed price is a job you're paying to do. That check takes ten seconds and it catches most bad quotes.

When to charge above your floor

Your floor is arithmetic. Your price is a judgement, and the gap between them is where a freelance business either works or doesn't.

The things that justify charging well above the floor are mostly about what the work is worth to the buyer rather than what it costs you to make. A checkout page for a shop doing $2m a year is worth more than the same page for a shop doing $50k, and it's the same afternoon of your time. Scarcity counts too. So does carrying risk, working to a hard deadline, or being the person who can be trusted not to break something expensive.

You don't need a formula. You need to ask two questions before quoting: what happens to this client if the work goes well, and what happens if nobody does it. If the answers are big numbers, your floor is the wrong place to be standing.

Retainers

A retainer trades some of your upside for predictable money, which is a good trade more often than freelancers admit. The two common shapes work differently and get confused constantly.

A block of hours is what most people mean: a set number of hours a month at a slight discount, use them or lose them. Simple to sell, and it's really just prepaid work.

Retained availability is the other one. The client pays to have first call on your time, whether or not they use it. That's worth more per hour, not less, because you're turning down other work to hold the slot. If you're discounting a retainer that reserves your capacity, you have it backwards.

Either way, write down what happens to unused hours, what counts as in scope, and how much notice ends it. Thirty days on both sides is normal.

Deposits, rush fees, and kill fees

Three lines in your terms that cost nothing to add and change how jobs go.

Ask for 25% to 50% before work starts. It's the standard way to cover materials or a subcontractor you're paying out of your own pocket, and a client who balks at a normal deposit is telling you something about how the rest of the job will go.

A rush fee of 25% to 50% applies when a deadline forces you to reshuffle other work. Agree it before you need it, or you'll be negotiating it at the worst possible moment.

A kill fee covers you when a project is cancelled partway through, which happens for reasons that have nothing to do with you: budgets freeze, the sponsor leaves, priorities move. State that work completed to the point of cancellation is billable, and that the deposit isn't refundable once work has started.

"So what's your rate?"

Asked on the first call, usually before anyone has described the job. Answer with a number and you've priced a project you don't understand yet, and that number becomes the ceiling for everything that follows.

The useful reply is a real range with a reason attached, then a question. Something like: "Projects like this usually land between $4,000 and $9,000 depending on how many pages and how much of the copy you're providing. Which end do you think this sits at?" You've given a straight answer, anchored high enough, and handed the scoping work back to the person who has the information.

If they push for one number before you know anything, saying you'd rather see the brief first than guess badly is a perfectly good answer. Clients who won't wait a day for a considered quote tend to be the ones who won't wait for anything else either.

Raising your rates

New clients get the new rate immediately, which is the painless half. Existing clients need notice, and a month is enough. Tell them the new rate and the date it starts, without a paragraph of justification. Rates go up. Everyone knows this.

If you're booked solid and turning work away, your rate is too low. That's not a feeling, it's the only reliable signal you get.

What to do with the number

Once you have a rate, the price quote calculator turns it into a quote with add-ons and tax. If you'd rather price from a target profit margin, use the profit margin calculator, and see margin vs markup for the difference between the two.

None of this is financial or legal advice, it's general guidance. Rates, taxes, and rules vary by where you're based, so confirm anything that affects real money with a professional.