Being a gig worker — whether that means freelancing or consulting — used to be a rarity. In today’s economy, however, many people are choosing the freedom and convenience of freelancing because they prefer the perks of it to working in a traditional job.
One of the biggest and most important questions to ask before choosing freelance work is how much to charge for the work you do. If you charge $45 per hour, you may be wondering what that means on an annual basis. In other words, getting paid 45 an hour is how much a year?
If you assume a traditional 40-hour work week, then $45 per hour would work out to a decent salary. But it may surprise you to learn that the answer is more complicated than a simple multiplication problem.
How Many Hours a Week Will You Work?
The first consideration when deciding how much to charge as an hourly rate is figuring out how many hours a week you want to work. For a lot of first-time freelancers, the temptation is to cut their rate because it will help them get work; but it’s necessary to think first about how many hours you want to work.
You might get a lot of work if you charge only $20 an hour, but that might also mean you’d need to work a 60-hour workweek to earn enough money to pay expenses. At that rate, assuming you took 15 days of vacation and 10 holidays, your annual salary would work out to $56,568 per year–and you’d likely burn out from working such long hours.
You can use a hourly to salary calculator to determine how many hours you would need to work at your chosen rate to earn the amount of money required to pay your living expenses.
Beyond Hours: Other Considerations
The amount in the previous section illustrates the gross amount you would earn if you charged $20 an hour and worked 60 hours per week. However, there are other considerations to keep in mind:
- You will need to estimate and pay your self-employment and income taxes, which will reduce your estimated salary accordingly. In the United States, you’ll need to pay your estimated taxes on a quarterly basis, which can pose a financial challenge.
- You may not get enough work to fill 60 hours per week. Especially when you’re starting out, it can require a lot of effort to find work. You may need to bid on jobs and wait to hear back.
- If you get sick or need personal time off, you won’t get paid. One of the most challenging things about gig work is that you don’t earn anything when you’re not working.
- Your income is likely to be inconsistent and unpredictable. Every freelancer has had the experience of having a great month with high income and the opposite experience of wondering if their work has dried up permanently. You should have an emergency savings fund with at least six months’ worth of expenses to draw on if you have a slow month.
It’s important to be realistic about how much you can reasonably expect to work and what the real expenses associated with freelancing are before you set an hourly rate.
How Much Do Freelancers Charge?
According to the Motley Fool, the average freelancer in the United States earns about $93 per hour. That might sound like a lot, but it depends on how many hours you’re working.
On average, freelancers are more likely to work 10 or more hours a day than traditional employees but they’re also more likely to work less than six hours per day. Charging a higher hourly rate may mean that you have more time for your personal life.
Keep in mind that as you gain experience, you should increase your fees accordingly. If you can complete work quickly, you shouldn’t be paid less to do it. Your expertise translates to better work and quicker turnaround times for your clients and you should be reimbursed accordingly.
How Much is $45 an Hour as an Annual Salary?
If you decide to charge $45 per hour, here’s what that means on an annual basis.
- If you work 40 hours each week, your gross weekly pay would be $1,800. Assuming you took 15 vacation days and 10 holidays, you would earn $84,852 per year before taxes.
- If you worked 50 hours per week, your gross annual income would increase to $106,065.
- If you worked only 30 hours per week, your gross annual income would be $63,639.
Keep in mind that it’s unlikely you’ll work the same number of hours every week because freelance work tends to ebb and flow.
Tips to Set Your Hourly Rate
Here are some pointers to help you set a reasonable hourly rate for the work you do.
- Research what gig workers charge for the type of work you do. As a beginner, you may need to charge a rate at the low end of the spectrum; if you have experience that you can use to attract clients, you can charge a higher rate.
- Consider how many hours you want to work per day and per week.
- Factor in time off, whether that means setting an intention to be done with work by a certain time each day or to take regular vacations.
- Take a conservative approach. You may think you’ll work 40 hours per week but it’s best to assume fewer hours and set your rate accordingly.
It may be useful to track your time with a calculator when you’re getting started. This trick will help you understand how long it takes to complete work and get a handle on how much work you can reasonably do in a day or week.
Earn What You’re Worth as a Freelancer
It’s common for beginning freelancers not to charge enough for the work they do. You’ll need to set an hourly rate that matches your value as a worker and allows you to earn enough money to pay your regular expenses–and enjoy your time off!