Payroll – How to calculate your hourly rate

More than once, I have received an email from a freelancer, pointing out that the hourly rate on their deal memo was wrong. And 99% of the time, it’s actually right! So without further ado…

How to calculate your day rate if you are working in California:

Most freelancers get hired for on 12h day guarantee. These 12 hours consist of:
8 “regular pay” hours
4 “time and a half” hours (overtime starts after 8h in California)
If you are hired on a 14h guarantee, the hours worked between 12 and 14 are “double time”

In order to calculate your hourly rate, you must divide your day rate by the total numbers of hours worked. Let’s do a bit of math with a hypothetical $300 day rate:

First, I need to find how many “regular pay hours” I am working. It’s not 12. It’s the first 8 hours, plus 4 hours multiplied by 1.5 (my time and a half hours):

$300 / 8h + (4h x 1.5)

4 hours of “time and a half” equals 6 “regular pay” hours:

$300 / 8h + 6h

So a 12h day actually consists of 14 “regular pay” hours:

$300 / 14h

We can finally calculate our hourly rate. For that, we usually stop at the 4th decimal (if you stop earlier you won’t get round numbers when making a time card or invoice)

$300/14 = $21.4285

If you are hired on a 14h guarantee, you must take into account that the 2 hours from 12 to 14 are “double time”. Here is how you would calculate your day rate:

  $300 / (8 + (4x1.5) + (2x2) )
= $300 / (8 + 6 + 4)
= $300 / 18
= $16.6666

If you are working anywhere else:

If you are not in California, your day consists of 12h of regular pay.

So very simply, all you need to do is divide your day rate by 12:

$300/12 = $25

Note: Overtime only starts when you work more than 40h within a week. From that point, you make time and a half.

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