What is Billable Hours?
Billable hours explained in plain English. Learn how to calculate your hourly rate, track billable hours accurately, and maximize the percentage of your time that's actually paid.
What Are Billable Hours?
Billable hours are the hours you spend doing work that can be directly charged to a client — the time spent designing, coding, writing, consulting, or otherwise delivering the services you're contracted to provide. These are the hours that go on a client invoice and generate revenue. Everything else you do as a freelancer — invoicing, accounting, marketing, responding to emails, learning new skills, pitching prospects — is non-billable. You do it, but you can't charge the client for it. Non-billable time is the overhead of running your freelance practice. Understanding your billable hours ratio is fundamental to pricing correctly. If you work 8 hours a day but only 5 are billable, your effective hourly rate is actually 37.5% lower than your stated rate. A $100/hour freelancer with 50% billability is really earning $50/hour effective.
How to Calculate Your Effective Hourly Rate
Step 1: Determine Total Annual Working Hours Assume 48 weeks × 40 hours = 1,920 hours (accounting for some vacation/holidays) Step 2: Estimate Your Billable Hours Ratio Track your time for 2–4 weeks. Count hours spent directly on client work vs. total hours worked. Step 3: Calculate Billable Hours Per Year 1,920 hours × 60% billability = 1,152 billable hours per year Step 4: Determine Total Annual Revenue Needed Target annual income: $100,000 Plus overhead: $20,000 (software, insurance, taxes, equipment) Total needed: $120,000 Step 5: Calculate Effective Hourly Rate $120,000 ÷ 1,152 billable hours = $104.17 per billable hour Your stated rate to clients should be higher than your effective rate to account for non-billable time.
How to Track Billable Hours
Option 1: Manual Time Tracking - Start/stop timer during work sessions - Write down project and task for each session - Review and log weekly to ensure nothing is forgotten Option 2: Time Tracking Software Tools like Toggl, Harvest, Clockify, or Eonebill's built-in time tracking: - One-click timers that run while you work - Automatic categorization by project and client - Reports showing billable vs. non-billable ratios - Export timesheets directly to invoices Option 3: Estimate Based on Deliverables Some freelancers price by deliverables rather than hours (see flat-rate pricing). But even when you bill flat-rate, tracking hours helps you understand if your rate is sustainable.
Common Billable Hour Mistakes
Under-billing: - Forgetting to track time spent on email, calls, and revisions - Not billing for administrative tasks related to the project - Only billing "heads-down" work time, ignoring planning and communication Over-billing: - Billing non-billable activities to client projects - Padding hours beyond what was actually worked - Billing at rates higher than agreed without notification The 10-Minute Rule: Round time in 6-minute increments (0.1 hour). Don't bill 2 minutes as a full hour, but don't lose 8 minutes of legitimate work either.
Example of Billable Hours in Action
A freelance app developer works on a client's iOS project: | Activity | Time | Billable? | |---|---|---| | Initial client meeting | 1.5 hrs | Yes | | Writing project proposal | 0.5 hrs | Yes | | Development work (coding) | 40 hrs | Yes | | Client emails and reviews | 3 hrs | Yes | | Internal team meeting (not client-related) | 1 hr | No | | Marketing own services | 2 hrs | No | | Invoicing and accounting | 1 hr | No | | Total | 49 hrs | 44.5 hrs billable (91%) | Her effective hourly rate on this project: if she's charging $125/hour, her effective rate for the total 49 hours she worked is: ($125 × 44.5) ÷ 49 = $113.77 effective hourly rate.
Billable Hours vs. Flat-Rate Pricing
Some freelancers prefer flat-rate pricing — charging a fixed fee per project — over hourly billing. Hourly billing is transparent and fair for open-ended or uncertain projects; flat-rate pricing rewards efficiency. Many experienced freelancers use both: hourly for ongoing retainer work, flat-rate for defined deliverables. Related reading: - Hourly Rate: Setting Your Price → - Flat Rate Pricing: Fixed-Fee Projects → - Milestone Invoice: Stage-Based Payments → Key Takeaways: 1. Billable hours are hours you can charge to clients; non-billable hours are overhead 2. Most freelancers achieve 60–75% billability — the rest is admin, marketing, and business development 3. Calculate your effective hourly rate by dividing target income by actual billable hours 4. Use time tracking software to capture every hour accurately 5. Round time in 6-minute increments — don't undercharge by forgetting small tasks Track every billable hour accurately — Try Eonebill Free