Many professionals charge hourly and have come up with a magic number based on the market-related rate.

However, how is that initial market-related rate conceptualized?

Tricky minefield

It does get a bit tricky to understand an hourly rate. One has to compare the rate to a fulltime salary, and then add on expenses, admin, travel, and equipment.

Once that has been completed, that number needs to be divided by the amount of expected billable time which is near 60% after holidays and divide by the previous number to get an hourly rate.

Which means the hourly rate will always work out a little more expensive against a full-time employee, but much cheaper if only used for a number of hours a month and hopefully have a much higher output in comparison to full-time employment.

A better understanding

I believe that when sufficiently broken down, both customers and professionals alike can use this formula to better understand how an hourly rate is calculated:

  • What is the annual salary of the profession? If employed full time, how much would that position cost?
  • What billable hours would one believe to complete over a year? Work this number into a percentage by calculating billable days a month, after admin and travel, and working hours per day. Ensure to remove some days for sick and leave; and
  • Add overheads to the initial salary amount per annum such as equipment, office supplies, internet access, training and other miscellaneous bills.

Now divide the total by the billable number of hours over the year, then month, then day, and finally, hour to have a full break down of how to calculate your hourly rate.

A very cool tool can assist when calculating the rate online here at