Calculating your hourly rate as a freelancer in Germany: how to price correctly

The formula: from desired income to hourly rate

Many freelancers divide their old gross salary by 1,700 working hours and wonder about their empty accounts after the first year. The mistake: as a self-employed person you pay insurance alone, have costs for work equipment and cannot bill anywhere near every working hour. You calculate correctly in four steps:

• Step 1 – target profit: what must remain after all business expenses so that you can pay living costs, health and long-term care insurance, pension provision, income tax and a buffer?
• Step 2 – business expenses: what does your business cost per year, from hardware and software to insurance and tax advice?
• Step 3 – billable hours: how many hours can you realistically invoice to a client?
• Step 4 – hourly rate = (target profit + business expenses) ÷ billable hours. Then round and compare with the market.

Step 1: target profit – what you really need

As an employee, your employer shares social security contributions with you, continues paying during holidays and illness, and provides the workplace. A gross salary of €60,000 already costs the employer around €72,700 including the employer’s share of social security – without office, laptop and training. As a self-employed person you have to pay for all of this out of your profit.

With statutory insurance you pay the full contribution yourself as a self-employed person: in 2026 that is 14.6% general contribution rate (with sickness benefit entitlement), on average 2.9% additional contribution and 3.6% long-term care insurance (4.2% without children) – together around 21–22% of profit, at most up to the contribution ceiling of €69,750 a year. Details are in the guide on health insurance for the self-employed. As a freelancer you usually don’t have to pay into the statutory pension insurance, but you still have to provide for old age; ways to do so are explained in the guide on pension planning for the self-employed.

Example for a single freelancer without children living in a large city:

Step 2: estimating business expenses realistically

Business expenses reduce your profit and therefore your tax – but they still have to be paid out of your turnover. Plan them in full; what they include is explained in the guide on business expenses. For an IT or creative freelancer, €8,000 to €15,000 a year is typical:

• Hardware (laptop, monitor, phone; computers are depreciated over one year): approx. €1,000.
• Software, cloud services, licences: approx. €1,800.
• Coworking desk or share of a home study: approx. €3,600.
• Professional liability and other business insurance: approx. €600.
• Phone and internet: approx. €600.
• Training, specialist literature, conferences: approx. €1,500.
• Bookkeeping and tax advice: approx. €1,500.
• Marketing, website, travel to clients: approx. €1,400.
• Total in the example: €12,000 a year or €1,000 a month.

Step 3: how many hours can you really bill?

This is where most calculations fail. A year has around 261 working days, but holidays, public holidays and illness are deducted from this. And even on working days not every hour is billable: nobody pays you for writing quotes, acquisition, emails, bookkeeping, training and idle time between projects.

Step 4: hourly rate and day rate in the worked example

Now you put everything together: turnover (net, excluding VAT) must cover target profit and business expenses, i.e. €75,000 + €12,000 = €87,000. Divided by 1,070 billable hours this gives €81.31. With a bit of a safety margin you calculate €85 per hour; the day rate at 8 hours is €680.

How sensitive the result is to utilisation is shown by the comparison – with the same turnover target of €87,000:

Taxes in your hourly rate: VAT, income tax, trade tax

Your hourly rate is a net price. If you are liable for VAT, you invoice €85 plus 19% VAT, i.e. €101.15 – you pass the €16.15 on to the tax office via the advance VAT return (Umsatzsteuer-Voranmeldung). Business clients deduct it as input VAT; for them only the net price counts. As a small business (Kleinunternehmer) you don’t charge VAT; this is a price advantage above all with private customers.

Income tax is included in the target profit. It is not deducted monthly but becomes due via prepayments and the annual return – so set aside a fixed share every month, as described in the guide tax reserves.

If you are a freelancer (Freiberufler), no trade tax is due. As a trader you pay it on profit above the €24,500 allowance: in the example (€75,000 − €24,500) × 3.5% = €1,767.50 tax base amount, so at a Hebesatz of 400% €7,070 trade tax. It is credited against income tax up to 4.0 times the tax base amount (§ 35 EStG) – up to a Hebesatz of about 400% this usually largely balances out; above that you should factor in the difference.

Hourly rate, day rate or fixed price?

The hourly rate is your internal calculation figure – you can still bill differently. Which form suits depends on how well the effort can be predicted:

Raising prices: when and how

An hourly rate is not a decision for life. If your costs, your experience or demand rise, you should adjust it – ideally regularly once a year rather than rarely and abruptly.

• New clients get the new price immediately – in a quote what you calculate today applies.
• For ongoing contracts you need an agreement: either a price adjustment clause in the contract or the client’s consent. Without it, the agreed price applies until the end of the contract.
• Announce the increase in writing 6 to 8 weeks in advance, with the date and new rate, and briefly justify it (costs, additional qualifications, expanded offer).
• Rather raise prices regularly by 5 to 10% than by 30% every few years.
• If you are fully booked or almost all clients say yes, your price is very likely too low.
• A fee well above the salary of a comparable employee is also an indicator against false self-employment (Scheinselbstständigkeit).

Keeping an eye on hourly rate and profit with KontoVexa

In KontoVexa you create your services once as a product with price and unit, such as “Consulting – hour – €85” or “Day rate – day – €680”, and select them in every invoice. The cash-basis income statement (EÜR) continuously shows you how much profit really remains in the year, and the dashboard how much you should set aside for taxes – so you see early on whether your hourly rate works.

You write invoices with consecutive numbers and all mandatory details, as an e-invoice if required. More about KontoVexa’s invoicing software and starting out as a freelancer.

Frequently asked questions