NER explained

What is the net effective hourly rate?

The net effective hourly rate (NER) is the amount you actually keep per billable hour as a freelancer — after tax, mandatory reserves, and fixed business costs have been deducted from your revenue.

NER is not the same as your hourly rate. Your rate is what you invoice; your NER is what you actually walk away with. The gap between the two can be significant.

The formula

In its simplest form:

NER = (gross revenue − tax − reserves − fixed costs) / billable hours

In more detail:

NER = (
    gross revenue
  − income tax + MKB-winstvrijstelling (SME profit exemption)
  − zelfstandigenaftrek (self-employment deduction, if applicable)
  − AOV premium (disability insurance)
  − pension savings
  − other business costs
) / billable hours per year

Peil uses a monthly financial model as its central calculation. All dashboards, the Financial Lab, and scenario projections are derived from this model.

NER vs. your hourly rate — a concrete example

Say you invoice €90 per hour, work 1,200 billable hours per year (roughly 23 hours a week), and have €800 per month in fixed business costs.

Your gross revenue is €108,000. But from that you subtract:

Income tax and freelance deductions: roughly €28,000–€31,000 depending on your situation
AOV (disability insurance): €1,500–€3,000 per year
Pension savings (voluntary but sensible): €5,000–€8,000 per year
Fixed business costs: €9,600 per year

What remains is your net available income. Divided by 1,200 hours, that gives your NER — in this example somewhere between €45 and €55, depending on your specific circumstances.

You're invoicing €90, but your net effective hourly value is roughly half that. That's not bad news — it's essential information.

How Peil calculates NER

Peil runs a monthly financial model as its single source of truth. Here are the key components it accounts for:

Tax reserve

Peil estimates your income tax based on your projected annual income, accounting for the MKB-winstvrijstelling (12.70% of profit is tax-exempt) and, if applicable, the zelfstandigenaftrek (self-employment deduction). The tax reserve is built up monthly and shown as a percentage of your revenue. See Tax reserve for a full explanation.

AOV (disability insurance) premium

If you've entered your AOV premium during onboarding or in settings, Peil deducts it before calculating NER. Disability insurance is a direct business cost and directly affects your real net position.

Pension and other provisions

Via the Reserve Allocation in the Financial Lab, you can set a pension savings amount and other provisions. Peil incorporates these into the model so your runway calculation stays realistic.

Fixed business costs

Your recurring monthly business expenses — software subscriptions, phone, office costs, and so on — are deducted from revenue each month before NER is calculated.

Billable hours

NER is divided by your actually logged billable hours, not a theoretical capacity figure. This means your NER rises in productive months and falls in lean ones. That honest reflection is intentional.

Why NER is more meaningful than a salary comparison

The most common rule of thumb for freelance rates is: multiply your desired gross monthly salary by a factor of 2 to 2.5 and divide by your billable hours. That gives a target rate — but no insight into what you actually keep.

A salary comparison pits your hourly rate against an employee's gross hourly wage. But an employee gets pension contributions, unemployment insurance, disability coverage, and holiday pay that are invisible in their gross salary — and you have to fund all of that yourself.

NER makes the comparison honest: you're not looking at what you invoice, but at what you net per working hour. That number you can meaningfully compare to a net monthly salary divided by hours worked.

An employee earning €60,000 gross per year takes home roughly €38,000 net — about €19 per hour on a 40-hour week. If your NER is €42, you're doing significantly better. If it's €18, rethinking your rate or hours is worth considering.

Calculating NER in Peil

After onboarding you'll see your NER immediately on the dashboard. Use the Financial Lab to explore scenarios: what happens to your NER if your rate increases? If you work fewer hours? If you take out disability insurance?