Freelance Rate With Holiday

How the Freelance Time-Off Surcharge works

Freelance rate with holiday: paying yourself for time off

An employee on £50,000 who takes five weeks off is still paid £50,000. A freelancer on the equivalent hourly rate who takes five weeks off earns five weeks less. The rate has to carry the difference, and most freelance rates are set as though it does not.

The uplift is bigger than the fraction of days you take. Thirty-three days off out of 260 working days is 12.7% of the year, but the surcharge needed is 14.6% — because the lost income has to be recovered across the remaining days, which is a smaller base. The general form is 260 divided by the days you actually work, and the gap between the intuitive figure and the correct one widens with every extra day off.

Sick days are not optional and not predictable. Employees in the UK average around four to five sick days a year, and freelancers have the same bodies. Budgeting zero is not discipline; it is a plan that fails the first week you have flu, and it produces the specific freelance failure mode of working through an illness badly and delivering work you then have to redo. Budget the days, price them, and take them.

Public holidays are already lost whether you price them or not. Most clients are closed, and work scheduled around them slips. Eight to twelve days a year disappear regardless of your intentions, so they belong in the calculation with the rest.

This surcharge stacks with utilisation, it does not replace it. Utilisation accounts for hours inside a working day spent on admin, sales and unbilled revisions. Time off accounts for whole days that do not exist at all. A rate built from a target income needs both, applied in sequence, plus overhead. Freelancers who apply only one of the three consistently arrive at a rate that looks reasonable and produces an annual income well below target.

Build a reserve rather than relying on the rate alone. Even a correctly loaded rate only funds time off if the extra margin is set aside when it arrives. The practical mechanism is a separate account receiving a fixed percentage of every invoice, drawn on during the weeks you are not invoicing. Without it, the surcharge is spent in the good months and the holiday is still unpaid.

Do not itemise it on the invoice. The surcharge is an input to your rate, not a line the client sees. Clients buy an hourly or daily rate and compare it to alternatives; a "holiday allowance" charge on top of a rate invites a negotiation about whether they should fund your holiday, and that is an argument with no good ending.

Holiday surcharge table by days off

$85 an hour for 30 billed hours a week, with 5 sick days and 8 public holidays on top of the holiday days in the first column.

Surcharge and rate that funds paid time off at $85 an hour

Holiday surcharge formula and worked examples

The formula: working days = 52 × days per week − days off; surcharge = days off ÷ working days; rate needed = current rate × (1 + surcharge). Forgone income = days off × hours per day × current rate.

First example. at £50 an hour, 35 billable hours over 5 days, taking 25 days' holiday and 8 public holidays: 33 days off from 260 leaves 227 working days. The surcharge is 33 ÷ 227 = 14.5%, so the rate becomes £57.27.

Second example. add 5 days of sickness and 38 days off leaves 222 working days, a surcharge of 17.1% and a rate of £58.56. The forgone income is 38 × 7 × 50 = £13,300.

How many days off should you plan for? Employees in the UK get at least 28 days including bank holidays; most freelancers budget 30–40 days once sickness and training are included.

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