Freelance Rate Glossary
Essential terms every freelancer should know. Bookmark this page for quick reference.
Billable Hours
Hours spent directly on client work that you can charge for. Excludes time spent on marketing, admin, invoicing, and business development. Most freelancers bill 60-75% of their total working hours.
Day Rate
A flat fee charged for a full day of work, typically 8 hours. Common in creative industries, consulting, and on-site work. Usually calculated as hourly rate × 8.
Effective Hourly Rate
Your actual earnings per hour worked, calculated by dividing total project payment by total hours spent. Helps evaluate whether project-based pricing is profitable.
Estimated Taxes
Quarterly tax payments freelancers must make to the IRS. Due April 15, June 15, September 15, and January 15. Penalty applies if you don't pay enough throughout the year.
Fixed-Price / Project-Based
Pricing model where you charge a set fee for a defined deliverable, regardless of hours worked. Rewards efficiency but carries risk if scope expands.
Gross Revenue
Total income before taxes and expenses. You need to earn significantly more in gross revenue than your desired take-home pay.
Kill Fee
Compensation paid when a client cancels a project after work has begun. Typically 25-50% of the agreed fee. Should be specified in contracts.
Net Income
Money remaining after all expenses and taxes. Your actual take-home pay.
Retainer
Ongoing arrangement where a client pays a fixed monthly fee for a set number of hours or deliverables. Provides income stability.
Rush Fee
Additional charge (typically 25-100% premium) for projects requiring faster-than-normal turnaround.
Scope Creep
When a project gradually expands beyond its original boundaries without corresponding increases in compensation. Major risk with fixed-price projects.
Self-Employment Tax
The 15.3% tax on net self-employment earnings covering Social Security (12.4%) and Medicare (2.9%).
SOW (Statement of Work)
Document defining project scope, deliverables, timeline, and payment terms. Essential for fixed-price projects.
Utilization Rate
Percentage of available working hours that are billable. Most freelancers achieve 60-80% utilization.
Value-Based Pricing
Pricing based on the value delivered to the client rather than time spent.