If you are leaving a job to go freelance, you need to convert your salary to a freelance hourly rate that actually replaces it. Dividing your salary by 2,080 hours gives a number that is far too low, because a salary hides a lot of value and cost. This guide explains what a salary includes, the formula for a realistic conversion, how different assumptions change the result, and what to do before you hand in your notice.
- A salary includes paid leave, benefits and employer-paid costs that you will now fund yourself.
- Revenue needed = salary × (1 + benefits % + self-employment cost %) + business expenses.
- Divide by your billable hours, not by 2,080.
- The result is a minimum. Add a safety margin for slow months and risk.
What a salary includes that you will now pay for
- Paid time off: holidays, annual leave and sick days. As a freelancer these are unpaid unless you build them into your rate.
- Benefits: health cover, pension or provident fund contributions, bonuses and training. They are often worth roughly 15 to 30 percent of a salary, though it varies by employer and country.
- Employer-side costs: in many countries your employer pays part of social contributions or payroll taxes that you must now cover yourself.
- Equipment and software: laptops, licences, office space and internet.
- Stability: a salary arrives every month even when work is slow. Freelance income does not.
- Unpaid time: finding clients, admin and gaps between projects.
The conversion formula
- Revenue needed = salary × (1 + benefits % + self-employment cost %) + business expenses
- Billable hours = billable hours per week × (52 − weeks off)
- Freelance hourly rate = revenue needed ÷ billable hours
This keeps your pre-tax position equal to your job. It does not include income tax, because a salary is also before tax in this comparison, so you are comparing like with like.
Worked example
Salary: 50,000. Benefits worth 20%, extra self-employment cost of 8%, business expenses of 4,000, 25 billable hours a week and 4 weeks off.
- Revenue needed: 50,000 × 1.28 + 4,000 = 68,000
- Billable hours: 25 × 48 = 1,200
- Freelance hourly rate: 68,000 ÷ 1,200 = 56.67 per hour
- Salary per hour today: 50,000 ÷ (40 × 52) = 24.04
In this example the freelance rate is about 2.4 times the salary rate. Your own multiple will depend on your benefits, costs and billable hours. The figures are examples, not market rates. You can test your own numbers in the salary to freelance rate calculator.
How the assumptions change the answer
The table shows the hourly rate for the same 50,000 salary with business expenses of 4,000 and 4 weeks off, under different combined benefit and self-employment percentages and different billable hours per week.
| Benefits and self-employment costs | Revenue needed | 20 billable hrs/week | 25 billable hrs/week | 30 billable hrs/week |
|---|---|---|---|---|
| 20% | 64,000 | 66.67 | 53.33 | 44.44 |
| 28% | 68,000 | 70.83 | 56.67 | 47.22 |
| 35% | 71,500 | 74.48 | 59.58 | 49.65 |
Two things stand out. First, billable hours matter more than almost anything else: going from 20 to 30 billable hours a week cuts the required rate by about a third. Second, a higher estimate of benefits and costs raises the rate by a smaller but real amount. If you are not sure what your benefits are worth, ask your employer for a total compensation statement, or add up the items one by one.
How to estimate the value of your benefits
- Count paid leave days and public holidays: each one is a day you would otherwise have to fund.
- Add employer pension or provident contributions, if any.
- Add the value of health cover, insurance and allowances.
- Include bonuses and training budgets you actually received.
- Add the cost of equipment and software the employer supplied.
Divide the total by your salary to get a percentage you can enter in the formula.
Before you quit your job
- Treat the result as a minimum. Add a margin for slow months and the risk of having no clients.
- Build a runway. Many people aim to save several months of living costs before leaving, so a slow start does not force a bad decision.
- Test the market while employed if your contract allows it. A few paying clients prove that people will pay your rate.
- Check the market rate. Look at job boards, competitor pages and community discussions in your niche. If the market pays less than your minimum, you may need to cut costs, move to higher-value work or find better clients.
- Plan for health cover and retirement, since your employer will no longer provide them.
- Understand your tax position. Read how to estimate it in our guide on how much freelancers should save for taxes.
- Consider your contract. Check notice periods, non-compete clauses and rules about outside work.
A gradual transition
You do not have to jump all at once. Some people freelance part-time alongside their job, then move to four days a week, and finally go fully freelance when freelance income reliably covers their costs. Others negotiate remote or part-time work with their employer while they build their client base. A slower transition reduces risk, although it takes longer.
Common mistakes when converting a salary
- Dividing by 2,080 hours. This ignores unpaid time and gives a rate that is much too low.
- Forgetting benefits. Leave, pension and insurance have real value.
- Assuming full-time billing. Planning on 40 billable hours a week is almost never realistic.
- Ignoring slow months. Income can drop to zero for weeks, so plan for it.
- Not revisiting the rate. Update your numbers every few months as your costs and skills change.
What if your market rate is lower than the formula?
If the number you need is higher than what clients in your field pay, do not simply accept a lower rate and hope. Consider billing more hours, reducing expenses, specialising in a more valuable niche, targeting clients in higher-paying markets, or building packages that deliver clear results. Also test whether a lower salary expectation is acceptable to you at all, which is a personal decision.
Start from the income you want instead
If you would rather work backwards from the take-home amount you want, use the freelance hourly rate method, then price jobs with the project quote calculator.
Frequently asked questions
How do I convert my salary to a freelance rate?
Add the value of your benefits and extra self-employment costs to your salary, add business expenses, then divide by the hours you can realistically bill in a year.
Why is a freelance rate higher than the salary hourly rate?
Employees are paid for holidays, sick days and admin time and get benefits. Freelancers bill fewer hours, pay for their own benefits and costs, and have unpaid time off.
Is doubling my salary hourly rate enough?
It is a rough rule of thumb, but not reliable. Use the formula with your own benefits, costs and billable hours to get a rate that fits your situation.
How many billable hours should I assume when I start?
Plan with a lower number than you hope for, such as 15 to 25 hours a week, because finding clients takes time. Raise it as your client base becomes steady.
Should I include income tax in the salary conversion?
The formula compares your pre-tax salary with pre-tax freelance revenue, so it does not include income tax directly. Plan for tax separately, and confirm the details with a local accountant.