Cost Per Hour Calculator
Divide any total cost by hours to get the true cost per hour. Freelancers and businesses get a second mode: enter annual costs, expected billable hours, and a profit margin, and the tool computes the hourly rate you must charge, with real-world utilization benchmarks.
Annual costs should include salary, taxes, insurance, software, equipment, and overhead, not just take-home pay.
Worked example, checked against this exact tool
Simple mode: total cost $5,000 over 100 hours gives a cost per hour of $50.00. Freelancer mode: annual costs $60,000 and 1,000 billable hours give a break-even rate of $60.00/hour; add a 30% profit margin and the required rate becomes $78.00/hour.
The formulas
Simple mode: cost per hour = total cost ÷ total hours. Freelancer mode: break-even rate = annual costs ÷ billable hours; required rate = break-even × (1 + margin % ÷ 100). Every hour you bill below the required rate is an hour you lose money after costs.
Why billable hours are not 2,080
A full-time employee works about 2,080 hours a year, but freelancers bill far fewer: the average freelancer bills about 1,140 hours (23.4 per week), and 45.2% bill between 1,000 and 1,500 hours. Admin, marketing, sick days, and vacations are not billable. The utilization presets use these real benchmarks so the required rate reflects the hours you actually sell, not the hours you work.
Count the real annual costs
Beginners underprice because they divide their desired salary by 2,080. The honest numerator includes salary, self-employment and income taxes, health insurance, retirement contributions, software, equipment, coworking or home-office costs, and a buffer for unpaid time. Miss any of these and the “profit” is really an unpaid expense.
What competing calculators miss
The direct tools divide cost by hours and stop. The hourly-rate tools assume 2,080 hours and ignore margin. None of them reverse-solve the freelancer’s real question, “what must I charge,” with honest utilization and a profit margin. This page does both modes: the simple division and the full required-rate solve.
Frequently asked questions
How do you calculate cost per hour?
Divide the total cost by the total hours: cost per hour = total cost ÷ hours. $5,000 over 100 hours is $50.00 per hour.
What hourly rate should a freelancer charge?
At least annual costs ÷ billable hours, plus your profit margin. $60,000 of costs over 1,000 billable hours is $60/hour break-even; with 30% margin, $78/hour.
How many billable hours does a freelancer have?
About 1,140 a year on average (23.4 per week). Most bill 1,000 to 1,500; almost nobody bills the full 2,080.
Should taxes be included in annual costs?
Yes. Self-employment and income taxes are real costs of the hour you sell; leaving them out underprices you by 20 to 30%.
What is a good profit margin for freelancers?
20 to 40% above break-even is common: it funds slow months, growth, and the risk you carry as your own employer.
Can I use this for equipment or project costing?
Yes. Simple mode works for anything: machine cost over operating hours, project budget over estimated hours, event cost over attendee-hours.
Why is my required rate higher than my old salary’s hourly equivalent?
Because an employee’s hourly equivalent hides employer-paid taxes, insurance, paid leave, and non-billable time. The freelancer carries all of it.
How often should I recalculate?
Yearly, or whenever costs or utilization change materially. A rate set on last year’s hours quietly goes stale.