The salary×2 → ÷ billable hours formula, explained honestly
You have probably heard the advice: "Take the salary you want, double it, and divide by your billable hours." It sounds like folklore. It is actually compressed arithmetic — a shortcut for a model that is worth understanding piece by piece, because the shortcut is only as good as its two inputs. Get either one wrong and you spend a year underpricing yourself.
Key takeaways
- ×2 is shorthand for grossing up: employment costs, business expenses, tax and profit all have to come out of the same fee.
- ÷ billable — not ÷ 2,000 — because holidays, sick days, admin, sales and gaps consume roughly a quarter of a working year (billable reality).
- With conservative defaults, 2,080 calendar hours shrink to about 1,600 sellable ones.
- The formula's output is a floor, not a market verdict — raise it, never undercut it.
- Run your own numbers in the rate calculator; this page explains what it is doing.
Why multiply by two?
An employee's salary is only part of what employment costs. On top of the paycheck sit employer contributions (social security, pension, insurance, paid leave), plus the workspace, equipment and software the employer provides. When you freelance, you become both the employee and the employer — every one of those costs now comes out of your invoice. Doubling the salary is a coarse but rational first approximation of that gross-up.
The honest version refuses a single magic multiplier and splits the ×2 into named parts, so you can argue with each one:
- Business expenses — software, hardware, insurance, accounting, workspace: a real annual number you can write down.
- Tax allowance — income tax and self-employment or social contributions, which for freelancers are typically paid out of received fees. The clean way to model it: revenue = (net target + expenses) ÷ (1 − tax rate). A 25% allowance means grossing 68,000 up to about 90,667, not adding 25%.
- Profit margin — the part beginners forget. A rate that merely covers costs leaves nothing for slow months, new equipment, or the year you get sick. Ten percent on top of gross is a modest survival margin, not greed.
Whether the pieces sum to exactly ×2 depends on your jurisdiction and cost base — which is precisely why the disaggregated model beats the rule of thumb. Tax rules vary by country and change often; treat our general framing as a prompt to check your own jurisdiction, not advice.
Why divide by billable hours, not 2,000?
The second half of the folklore is where most damage is done. A "full-time year" of about 2,000 hours counts hours you were paid for. Nobody pays a freelancer for those hours:
- Holidays — four weeks is 160 hours you must pre-fund through your rate.
- Sick days — real and unpredictable; plan several.
- Admin — invoicing, bookkeeping, taxes, email: the unbilled standing appointment.
- Sales — proposals and calls that convert interest into signed work.
- Gaps — the dead time between one project ending and the next starting.
Freelancer-education resources keep repeating this because it keeps being forgotten — the Freelancers Union resource hub is a good example of guidance built around real costs and unbilled time rather than headline salaries. The full hour-by-hour walk-through lives in billable reality; the short version: 2,080 calendar hours, minus leave and sickness, minus weekly admin and sales, lands most people near 1,600 sellable hours — about 77% of capacity.
Building the honest model, end to end
Take a target of 60,000 net plus 8,000 expenses. Gross up at a 25% tax allowance: 68,000 ÷ 0.75 = 90,667. Add a 10% profit margin: 99,733. On the time side: 52 weeks − 4 holiday weeks − 1 week of sick days = 47 working weeks × 40 hours = 1,880 capacity hours; minus 6 admin/sales hours a week (282 hours) leaves 1,598 billable hours. Final rate: 99,733 ÷ 1,598 ≈ 62.4 per hour, or a day rate near 499.
Notice what the salary shortcut would have cost: 60,000 × 2 ÷ 2,000 = 60/hour looks close to 62.4, but it quietly assumes zero profit margin, identical tax treatment, and exactly 1,650 billable hours. Small denominator errors are expensive: the same income over 1,400 billable hours needs 71.2/hour. This is why guessing the divisor is the most expensive guess in freelancing.
What the formula is not
It is not a market price. It is your break-even-plus floor — the rate below which working is a slow loss. What clients will pay can be higher, and for specialized, high-leverage work it often is; the gap between your floor and the value you create is the subject of value-based pricing. And it is not a one-time calculation: rerun it whenever your expenses, tax situation, or working pattern change — the calculator keeps all the knobs explicit. When the floor outruns what clients accept, the answer is better qualification and positioning (saying no), not quiet discounting into the spiral described in the underpricing spiral.
Not tax advice
The tax allowance here is a generic planning concept. Rates, contributions and deductibility rules differ by jurisdiction and personal circumstances. Check your local rules or consult a qualified professional.