Most freelancers set a rate by looking at what a friend charges and subtracting 20% for safety. Then they wonder why the month ends with forty hours of unpaid admin work.
A rate is a business decision with three inputs: the income you need, the hours you can actually bill, and the price the market will accept. Get those three on paper and the negotiation becomes arithmetic instead of anxiety.
Step one: the income you actually need
Start with take-home, not revenue. Work backwards:
- Personal draw — what you need to live on for the year.
- Tax — estimate the effective rate on your total income; keep it aside monthly.
- Business costs — software, hardware depreciation, internet, accounting, insurance, coworking.
- Buffer — three months of personal draw, saved for the months that go quiet.
That total is your required revenue. It is usually 30–50% higher than the number people start with, which is exactly why the friend’s rate felt impossible to survive on.
Step two: billable hours, not working hours
A full-time freelancer does not bill 2,080 hours. Subtract:
- Annual leave and public holidays: ~120 hours
- Sick days and buffer: ~60 hours
- Sales, proposals, invoicing, learning, admin: 20–30% of the week
A realistic planning number is 1,200–1,400 billable hours per year, or roughly 25–28 billable hours in a 40-hour week. If you are building a product or writing content alongside client work, plan for less.
Divide required revenue by billable hours and you have a floor rate — the number below which you are subsidising the client.
Step three: the market ceiling
The floor tells you what you need. The ceiling comes from what clients pay for comparable work:
| Engagement | What the market usually pays for |
|---|---|
| Domestic startup, early stage | Lower cash rate, sometimes equity, fast decisions |
| Funded Indian company | Mid-market rate, procurement process, 30–45 day payment |
| Foreign small business | Higher rate, simple contract, pays on time |
| Foreign agency subcontract | Rate set by the agency’s margin — expect 40–60% of end client rate |
Compare like with like. A US agency paying you $45/hour is charging its client $120/hour; that is not evidence that a Delhi startup should pay $45.
Step four: three numbers, not one
Publish a rate card internally with three figures:
- Hourly / daily — for ambiguous work and change requests.
- Fixed project — scoped deliverable, 30–50% upfront, milestone payments.
- Monthly retainer — a defined number of hours or a defined outcome, billed in advance.
Fixed pricing is where the real margin lives, but only with a written scope and a change-request clause. Without those, fixed price becomes an unlimited liability.
The currency question
If you bill abroad, price in the client’s currency and protect yourself against a rate move on long projects by invoicing in milestones rather than one payment at the end. Do not quote in rupees to a foreign client unless they ask — it shifts the FX risk to you and makes the number look arbitrary.
Use the calculator
The rate calculator on this site does the arithmetic for you: enter your required annual income, costs, billable hours and tax rate, and it returns the hourly rate, day rate and the project price for a given estimate. Change one input at a time and watch how sensitive the number is — that sensitivity is the real lesson.
Raising rates without losing clients
- Give notice, not an apology. “From 1 April my day rate is ₹X. Current retainers move on the same date.”
- Raise new clients first. The market tells you within two weeks whether the new number is viable.
- Grandfather one long-term client if the relationship is worth more than the delta — but set an end date.
- Never discount the rate; reduce the scope. A discount teaches the client that the first number was fiction.
A note on underpricing abroad
The most expensive mistake is quoting in dollars at an Indian cost of living. It wins the project and loses you the year: you attract clients who buy on price, they refer other price buyers, and you end up with no capacity for the work that pays properly.
Charge for the outcome, in the market you are selling into. Your location is a cost advantage, not a pricing instruction.
General information, not financial advice. Your tax position depends on your individual circumstances; confirm with a chartered accountant.
Common questions
Should I charge hourly or per project?
Hourly or daily for exploratory work where scope is unknown, fixed price for well-defined deliverables with a written scope, and a monthly retainer for ongoing relationships. Most practices end up using all three.
How much should I charge compared with a salaried job?
Start from your required annual income, divide by realistically billable hours — usually 1,200 to 1,400 per year, not 2,000 — and add your costs. The result is often 1.6 to 2 times the equivalent salary rate, because you are funding your own leave, equipment and downtime.
Is it okay to charge foreign clients more than Indian clients?
Charge what the market in that client's context will bear, and be transparent about what is included. The same work can justify different prices in different markets; the mistake is charging a low rate because you are unsure, not because the market is lower.
How often should I raise rates?
Review annually, and for new clients immediately after a strong result or a skill upgrade. Give existing clients 60 days' notice and a clear date.