Going from employee to contractor: setting a rate

Subject: Going from employee to contractor: setting a rate
From: "Steve Schwarzman" <steve_schwarzman -at- hotmail -dot- com>
To: "TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com>
Date: Thu, 22 May 2003 10:49:05 -0500

Hi, all.

I'm going back to school after 14 years as an employee with my present company, the last several as a pubs manager and most recently as a salesman of training and doc projects to our custom software company's customers.

We're talking about me continuing as a contractor part-time. I'd like your help in the perennial question of rate calculation.

Posts from a year or two ago would say that if one's annual salary is \$X, then one's hourly rate should be \$X/hour - that is, the same digits. If one earned \$50k in salary, for example, then one's hourly rate should be \$50/hour. This calculation method was presented as basically taking one's salary, then adding in the extra expenses and risks of being a contractor.

In today's world, does this sort of equivalency still hold?

The alternative method is the one described by Peter Kent, of setting a rate by taking one's required annual income and dividing by the number of expected annual billable hours.

For me, these two methods produce similar results, which I take to mean that the rate I'm thinking of is about right. Opinions?

Thanks,
Steve Schwarzman

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