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Subject:RE: Pay rate for contractor with no experience From:Win Day <winday -at- home -dot- com> To:"McFerren, Sean" <sean -dot- mcferren -at- et -dot- pge -dot- com> Date:Wed, 16 Feb 2000 18:43:31 -0500
At 10:26 AM 2/16/00 -0600, McFerren, Sean wrote:
>Correct me if I'm wrong, but I read somewhere that
>20%-30% of a permanent employee's compensation is
>derived from non-salary benefits (401k matching,
> >health, dental, etc.). Contractors, both independent
>(1099) and W-2, almost never receive these benefits.
Can't comment on the 1099 versus W-2 stuff. But when I was writing
proposals for an engineering company, we considered "burdened labour" in
the US market to be a minimum of 1.3 times base salary. In some states
(like California, but I never knew why) the factor might have been as high
>You also have to consider that contractors have
>down-time. Your calculation of an hourly rate into
>an annual salary assumes the contractor will be
>employed for 50 weeks out of the year. It's very
>unlikely that will be the case.
A complete labour year in Canada is 2080 hours (52 weeks x 40 hours/week).
As a rule of thumb, I've had a good year if I bill more than 1650 hours.
>An employer obtains staffing flexibility when hiring
>a contractor. This flexibility is a benefit for which
>the employer must pay, since it's a liability for the
>You're comparing apples to oranges when you simply
>annualize a contractors hourly rate, then compare it to
>a permanent staff position salary. The contractor isn't
>earning an *annual* salary, and doesn't receive another
>20%-30% in benefits.
When I compare full-time salaries to contract rates, I figure that a
full-time salary of $50,000 per year would be about equal to a contract
rate of $37.50 per hour. It works out to approximately 1.5 times the
hourly salary figure.