Calculating your hourly rate as a self-employed professional: the complete formula

Setting your hourly rate too low is one of the most common mistakes made by new self-employed professionals (zzp'ers). People often base it only on the amount a client seems to find "reasonable", without looking at what they actually need to make ends meet, set aside for tax, and absorb setbacks. A fixed formula prevents you from structurally charging too little.

Step 1: determine your desired annual income

Start with the net amount you want to keep per year, after tax and after deducting business costs. Also consider things an employer would normally arrange for you: pension accrual, a buffer for incapacity for work, and holiday pay.

Step 2: calculate your billable hours

A full-time working week amounts to roughly 1,872 hours per year (52 weeks × 36 hours), but not all of those hours are billable. Subtract:

• Holidays and public holidays (25-30 days on average)
• Sick leave (reserve at least 5-10 days)
• Non-billable time: acquisition, administration, invoicing, training, networking

For most self-employed professionals, after deducting all this, a realistic 1,100 to 1,300 billable hours per year remain — less than half of a calendar year.

Step 3: add up your business costs

Think of a workspace, insurance (liability, incapacity for work), software and subscriptions, accounting software, marketing, a possible car or travel costs, and accountant fees. Make an annual list and add it to your desired income.

Step 4: account for tax and reserves

As a self-employed professional, you pay income tax on your profit, after deducting the self-employed tax deduction (zelfstandigenaftrek) and any SME profit exemption (MKB-winstvrijstelling). Set aside a fixed percentage of your revenue in a separate savings account for this, so the tax assessment is never a surprise.

Rule of thumb: set aside at least 25-35% of your revenue for income tax, depending on your total income and deductions.

The formula

You then calculate the hourly rate as follows:

Hourly rate = (Desired net annual income + business costs + tax reserve) ÷ billable hours

Worked example

Suppose you want to keep €45,000 net, your business costs are €8,000 per year, and you set aside 30% for tax. At 1,200 billable hours, that works out to an hourly rate of roughly €63 per hour, excluding VAT.

Checking against the market

Once you know your own minimum rate, compare it with rates in your industry. Ask around your network, check job and freelance platforms, or ask fellow self-employed professionals. A rate that's (far) below your calculated minimum isn't sustainable in the long run, even if it brings you more work right now.

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