
What You Should Be Charging as a Freelancer
As a freelancer, chances are youâll go through phases feeling like youâve fallen into a pot of gold. Youâll want to shell out your 50-Euro bills like Kim and Kanye . âŹ3.50 for that Americano? Make it 5! Ok, Iâm kiddingâŠmost of us have a bit more sense than that. Nevertheless, the temptation is there â until the pot runs dry, or youâre faced with a hefty tax advance. Then itâs back to biting your nails and freaking out about where to get the next gig just to pay your bills.
Letâs face it: dry spells and fluctuation are normal. Even after many years as a freelancer, there will be times where youâre making good money and times where you might start doubting whether youâll ever find work again. This means that figuring out what you should be charging in the first place is a super important step to making or breaking your freelance dream.
As always, youâre not alone in this: weâve made it our mission to help you cope with the tricky stuff and eliminate a little of the financial angst. In this article youâll find a method that can help you calculate your rates. Itâs a lot of number crunching so bear with us!
Challenges Youâll Face When Working out Your Rate
There are many reasons why you might join the freelance tribe â maybe itâs a desire to turn your passion into a career. Perhaps you canât wait to be your own boss, accountable only to yourself. Whatever your motivation, when you start out you will probably be filled with unbridled euphoria, a sense of freedom and a willingness to do what it takes to get your business up and running.
A word of caution: with this sense of excitement also comes a responsibility to yourself. Itâs oh-so-easy to suddenly work all day every day and compromise on what youâre earning when your job is also your hobby. But are you getting paid for all the extra hours youâre putting in? To make sure you donât end up burned out and in debt, itâs important to be aware of some of the mistakes you might make when working out your rates.

Lack of Experience
Once upon a time you probably had a regular income delivered directly to your account each month. As an added bonus, your (German) employer took care of all those pesky tax and health insurance deductions. All you had to do was figure out your living costs and whether you could afford that Grecian summer holiday.
With lack of experience and little opportunity for comparison, you might be tempted to simply base your freelancer fee on what you earned as an employee. Your thought pattern might go along the lines of, âI earned âŹ3,000 a month at FullTimeJob, so surely thatâs the amount I can expect from freelancing? Oh, and look, this article on Freelancers âRâ Us says to take that amount and simply add 20%. Well, thatâs easy! Whatâs all the fuss about?â Please, donât be fooled by this too-simple-to-be-true approach.
The Economic Calculation
It doesnât matter whether youâre a developer, a designer, a writer, a photographer or in PR â as a freelancer, youâll need to train yourself to be economically minded. And this is no easy feat. There will probably be countless occasions in your career where youâre faced with project opportunities that sound really exciting, but, on closer inspection, just donât make sense financially. Take a step back and really consider whether you can afford to take on a job that doesnât pay enough to cover your basic needs.
Know Your Worth
It takes balls to charge an hourly rate of âŹ60, âŹ80 or âŹ120. You canât do this if you donât believe your work is worth it â it might sound a bit strange, but people can smell that kind of insecurity from a mile off and it will make potential clients wary. Make sure you really own what youâre doing and donât fall into the trap of selling yourself under value. If you have several years of experience in your field, you shouldnât be charging the same rate of someone with no experience at all.
The Biggest Mistake Freelancers Make When Calculating Their Hourly Rate
Many online forums and blogs suggest that you simply work out your personal expenses as a basis for calculating your hourly rate, but we disagree.
Consider the following scenario: youâve just completed your studies and want to start out as a freelance IT-consultant and use your private expenses as the basis for your hourly or daily rate. Youâve managed to get by on âŹ1,000 a month so far and so thatâs the amount you use for your calculations.
5 years go by and suddenly youâre married, you have a kid, a car and want to build a house. Youâve decided that your partner will be a stay-at-home parent for a bit and to make this work youâll need âŹ3,000 a month. But letâs be honest, you canât suddenly tell your clients that your rates have tripled â when the service you provide stays the same. Yes, of course you may increase your rates based on more experience, but that should be reflected in a gradual increase and not a sudden jump. Increasing your rate based on your personal situation is a big risk â you will most likely lose faithful, long-term clients and it will be very hard to justify. So, what is the alternative?
How to Properly Calculate Your Rate
Letâs work with an example to show you a better way of calculating your rate. When doing this for yourself, simply substitute the relevant figures with your own.
As a starting point, letâs consider the minimum wage in Germany, which is âŹ8.50 an hour (for a 40-hour week that makes âŹ1,473.33 a month) and also the current average wage. According to government statistics (Destatis), full-time employees in the service industry earn âŹ3,970 a month (2nd quarter of 2016). ( Source ). If you were to work 8 hours for 30 days that makes âŹ16.54 an hour. This is, however, not an adequate hourly rate for a freelancer. Why?
Canât Work, Wonât Work
Even if you start out fuelled by adrenaline and an endless supply of coffee, you wonât be working 24/7 for the majority of the year (or at least we hope thatâs not the case!). This means that you need to consider the effect of lost time and non-billable hours when doing your rate calculation.
So, letâs do the maths: a year has 365 days, approx. 52 weeks. That means there are 52 Saturdays and 52 Sundays on which you probably donât want to work. In addition, there are about 9-16 bank holidays in Germany (depending on where you live). This reduces the number of working days to around 248 (assuming you have 13 bank holidays).
As an employee, you have an additional 25-30 days of paid holiday. As a freelancer, you need to make allowances for this, too, as any break you take will come out of your own pocket.
Next up: sickness. Remember that pesky flu you had last winter that reduced you to a snivelling mess on the sofa for a week? If youâre employed, your employer covers this. As a freelancer, you have to factor this into your calculations. Government statistics estimate that on average approximately 10 days a year are sacrificed to illness. ( Source )
And we havenât finished just yet: you will probably want to take some time off for further education â for example an online course or even just a day where you take some time out to plan where your freelance business can go next. So, letâs deduct another 5 days for this.
This leaves us with 205 days a year or 17.08 days a month that you can work. If we use the average employeeâs wage of âŹ3,970 and divide it by 17.08 we get âŹ29.05 an hour (âŹ3970: 136.64 hours). To help you visualise all these numbers, hereâs a little table overview:
Category | Days/Hours |
---|---|
Calender days | 365 days |
Weekends | 104 day |
Bank holidays (9-16) | 13 days |
Holidays (25-30) | 28 days |
Illness | 10 days |
Further education | 5 days |
Working days/year | 205 days |
Working days/month | 17.08 days |
Working hours/month | 136,64 hours |
So far, so good. This now leaves us with a minimum wage of âŹ10.78 an hour or an hourly average wage of âŹ29.05.
The Difference Between Profit and Turnover
Something all freelancers need to get their head around is the difference between turnover and profit. Your turnover will become profit once youâve subtracted your expenses.
As an employee, youâre provided with a place to work, probably a nice computer, software and, if relevant, insurances. All this is covered by your employer. As a freelancer, you need to take care of all these aspects â and foot the bill. Depending on what you do, these costs can amount to anywhere between 500 and several thousand Euros. And you also need to factor this into your calculations.
Letâs assume you have monthly expenses âŹ1,000 for things like renting an office space, office materials, travel costs, insurance and marketing. Take a look at how this affects your hourly rate in the table below:
Category | Minimum Earnings | Average Earnings |
---|---|---|
Monthly gross income | âŹ1,473.33 | âŹ3,970.00 |
Monthly expenses | âŹ1,000.00 | âŹ1,000.00 |
Total | âŹ2,473.33 | âŹ4,970.00 |
Hourly rate (136.64 hrs/month) | âŹ18.10 | âŹ36.37 |

Social Insurance
By now youâre probably scratching your head and wondering: am I done yet? Well, no, not quite. Hang in there, tiger.
When youâre employed, a contribution towards your health, old-age care, pension and unemployment insurance is automatically deducted from your gross wage. Your employer also pays a percentage of the costs, listed in the table below:
Insurance Type | Percentage |
---|---|
Healthcare insurance | 7.3% |
Old-age care insurance | 1.175% |
Pension insurance | 9.35% |
Total | 17.825% |
When youâre employed, you most likely wonât even know how much your employer is paying towards your insurance, but as a freelancer, you have to take care of all this yourself. Note: For this calculation, weâve assumed that the freelancer has state healthcare insurance and weâve removed the unemployment insurance, as freelancers tend not to have this.
Category | Minimum Earnings | Minimum Earnings |
---|---|---|
Monthly gross income | âŹ1,473.33 | âŹ3,970.00 |
Monthly expenses | âŹ1,000.00 | âŹ1,000.00 |
National insurance contributions (% paid by employer) | âŹ262.62 | âŹ707.65 |
Subtotal | âŹ2,735.95 | âŹ5,677.65 |
Hourly rate (136.64 hrs/month) | âŹ20.02 | âŹ41.55 |
Time Stealers
In an ideal world, you would spend 100% of your time on client projects. But reality is different: you suddenly have a lot more things on your plate that need handling, like admin, marketing and client acquisition. How many hours you need to dedicate to this depends on the type of job you do but shouldnât be neglected in your sums. For the purpose of our calculation, weâll assume you spend 30% of your time doing things only indirectly linked with the projects:
Category | Minimum Earnings | Average Earnings |
---|---|---|
Monthly gross earnings | âŹ1,473.33 | âŹ3,970.00 |
Monthly expenses | âŹ1,000.00 | âŹ1,000.00 |
National insurance contributions (% paid by employer) | âŹ262.62 | âŹ707.65 |
Subtotal | âŹ2,735.95 | âŹ5,677.65 |
Hourly rate (136.64 hrs/month) | âŹ20.02 | âŹ41.55 |
Hourly rate for 95.65 chargable hours | âŹ28.60 | âŹ59.36 |
To summarise: If you, as a freelancer, want to earn in the minimum (really?), then you should be charging âŹ28.60 (net) an hour. If you want to earn the average you should be charging around âŹ60 an hour. This makes it very evident, that projects which offer âŹ20/25 an hour are really not worth taking into consideration. If other freelance competitors offer such negligible rates, they are most likely doing themselves and the industry harm, or donât have any expenses to speak of.
What About Taxes?
Last but not least, letâs quickly mention how your taxes factor into all this. Value Added Tax or Umsatzsteuer is always calculated separately. Why? Because VAT is added on top of your rates and goes straight to the Finanzamt (for example via your Kontist account) â this means it is âself-balancingâ.
Youâll also have to remember to deduct income tax from your earnings. Your income tax is only marginally considered in our calculations but how high it is depends on many factors, including your total annual income, your marital status and whether you have kids, so itâs difficult to provide an accurate example. However, if you want to make sure that youâre putting aside enough money, the Kontist app and your tax advisor can help you.