Bill Rate vs Pay Rate: What’s the Difference?

Pay rate and bill rate are easily confused. They both factor into the decision of how much you should charge for your services as an independent contractor, consultant, freelancer, etc.

When negotiating with a client at the start of a consulting project, make sure you are clear on your rates, and if you are discussing dollars in terms of bill rate or pay rate.

What is Bill Rate?

Bill Rate Definition: the amount a company or professional charges per hour of work.

Bill rate is the amount independent professionals charge clients. It includes any money needed to cover taxes, fees, and any discounts you offer. It factors into the costs you need to cover to make your target income. This rate is the foundation on which you build your business.

What is Pay Rate?

Pay Rate Definition: the amount of money a worker nets per hour.

Pay rate is the amount of money available after tax money is set aside and any fees are paid. If your bill rate is $100 per hour, for example, your pay rate (the amount of money you have to operate your business and pay yourself) could be $60 per hour after $35 is subtracted to account for taxes and a $5 fee is paid (e.g., to the online project platform where the work was secured).

Once you’ve figured out a pay rate, check out our simple-to-use bill rate calculator, which indicates a bill rate for your services after adding in all necessary costs.