A $100,000 salary. A $140,000 freelance income. For exactly the same money in your pocket.
That is not a rhetorical flourish, it is the arithmetic Scott Davis, founder of digital marketing firm Outreacher.io, ran after leaving full-time employment. His first estimate had been $75 to $90 an hour, the range platforms and peers quote for someone with his experience. He was off by almost half.

And he is far from alone in getting it wrong. Upwork’s research found that 64 million Americans freelanced in 2023-, contributing $1.27 trillion to the US economy, and its more recent Future Workforce Index puts the share of American workers doing some form of freelance work at around 39%. Millions of people, in other words, setting a rate. Rather fewer doing the sums behind it.

The line items that vanish overnight

Start with the mistake almost everyone makes: comparing a net paycheck with a gross invoice. Between those two numbers sits everything an employer used to pay on your behalf without it ever appearing on your payslip.

Beth Logan, an Enrolled Agent and owner of Kozlog Tax Advisers in Massachusetts, has run this calculation for dozens of clients and for herself. The floor is the 7.65% in payroll taxes an employer used to cover, which a self-employed person now pays on top of their own half, reaching the full 15.3% self-employment tax set out by the IRS-. For 2026 that rate applies up to a Social Security wage base of $184,500, with Medicare continuing above it without a cap.

«At a minimum, going freelance results in a 7.65% increase to costs, because the freelancer has to pay both the employee and the employer contributions. At a maximum, adding vacation, holidays, sick days, health insurance, retirement matching and the time needed to market your work, it could be 42.65% plus $5,800 or more», says Beth Logan.

Her breakdown assumes ten vacation days and ten public holidays, five sick days, health insurance at $10,000 a year, a 5% retirement match and a life insurance policy. But the item worth pausing on is the last one, because it is universal: roughly one day a week disappears into marketing your work and keeping your own books. That is 20% of the year, and no client pays for it.

Logan’s point cuts deeper than tax. What an employee sells is time. What a freelancer sells is a fraction of their time, and the rest of it still has to be paid for.

The hours nobody bills

This is where Davis’s numbers become genuinely useful, because he puts two figures side by side that most people never connect.

Strip out vacation and 46 working weeks remain. Of those hours, in his experience, only half are actually billable: the rest goes to proposals, admin, business development and the gaps between contracts. That leaves about 920 billable hours a year. Divide the $140,000 he needed by those 920 hours and the floor is above $150 an hour, against the $75 to $90 he had assumed. Today his consulting rates run from $210 to $336 depending on complexity, and he describes that as the level at which the arrangement is finally comfortable rather than merely survivable.

John Raisor, Growth Director at Occam’s Raisor, arrives at the same place from a different direction, and adds the detail that quietly wrecks most calculations: the forty-hour week is a fiction. «Nobody on a $100K salary only works 40 hours, and if you bill 40 hours per week, you’re working at least 55 to 60», he says.

His own experience is almost a rerun of Davis’s. Coming off a $100,000 salary, he worked out that $60 an hour would do: forty hours a week for fifty-two weeks comes to nearly $125,000, which looks comfortably ahead. Once solo health insurance, added taxes and expenses were accounted for, he was taking home less than he had as an employee, and pushed his rate to $75 an hour. His rule of thumb now is blunt: freelancers need to charge at least 30% more than their old pay, and 50% is the safer bet.

Raisor also names the structural reason the gap exists at all, and it is not one that better negotiating can fix. Large organisations buy health insurance and payroll services at a discount that no individual can match. The world is built to run at scale, and the freelancer pays retail for everything the employer used to buy wholesale.

It is worth adding that the 50% billable figure is a personal estimate and moves a great deal from trade to trade. The principle holds everywhere, though: a rate is not calculated on the hours you work, it is calculated on the hours somebody pays for.

The same problem, in British money

The mechanics travel. Only the labels change.

In the UK a self-employed person pays Class 4 National Insurance at 6% on profits between £12,570 and £50,270, and 2% above that, with Class 2 contributions abolished from April 2024. On the face of it that looks gentler than the American 15.3%. The catch sits on the other side of the ledger: an employer currently pays National Insurance at 15% on an employee’s earnings above the secondary threshold, a cost the employee never sees and which simply evaporates when they start invoicing.

Then there is time off. UK employees are entitled to 5.6 weeks of paid annual leave, 28 days for someone on a five-day week. That is more than a month a year that a salaried worker is paid for and a freelancer is not. Build the equivalent into a day rate and the number moves before a single tax is calculated.

And the same problem, in euros

Italy is the country where this calculation matters most, and where it is done least. Self-employed workers made up 23.2% of total employment in 2025 according to Eurostat, third in the European Union behind Greece and Bulgaria, against an EU average of 14.2%. Istat counted 5.275 million independent workers in the first quarter of 2026, 21.9% of everyone in work, up from 20.9% a year earlier.

The rates are different, the outcome is not. A professional without a dedicated pension fund pays 26.07% into the INPS Gestione Separata, a rate confirmed for 2026, on top of income tax. Run the most common set-up in Italy, the flat-rate regime with a 78% profitability coefficient and a 15% substitute tax, and €40,000 invoiced leaves €28,406 in hand. That is the same 40% gap Davis found on the other side of the Atlantic, under a tax system that has nothing in common with the American one. Which is rather the point: the gap is not a feature of any one tax code, it is the cost of no longer having an employer.

Frequently asked questions

How much more do I need to charge than my old salary?

  • Between 30% and 50% more, according to the professionals quoted here, with 40% a reasonable working assumption for a knowledge worker with normal overheads.

How many freelance hours are actually billable?

  • Estimates cluster around half of hours worked, with roughly one day a week absorbed by admin and finding the next client.

What is the minimum tax hit when leaving employment in the US?

  • The employer’s 7.65% share of payroll taxes, taking the self-employed total to 15.3% up to the 2026 Social Security wage base of $184,500.

What does the same calculation look like in Italy?

  • Invoicing €40,000 under the flat-rate regime leaves roughly €28,400 once the 26.07% INPS contribution and the 15% substitute tax are paid, a gap of about 40%.

The lesson underneath all of it is the same one. An hourly rate is not a price, it is a budget. It has to cover the holiday you will not take, the sick days nobody reimburses and the month a year you will spend chasing work. Set it on the number you used to earn, and you will find out the hard way.

And if you are doing this in Italy? Invoice €40,000 and €28,406 stay with you. We took that calculation apart line by line, contribution by contribution, in the Italian version of this story-.