Re: Asking The Billing Rate?

Subject: Re: Asking The Billing Rate?
From: Jefro <jefro -at- jefro -dot- net>
To: "TECHWR-L" <techwr-l -at- lists -dot- techwr-l -dot- com>
Date: Wed, 05 Oct 2005 14:32:53 -0700

There is a difference between effective hourly rate for salaried employees vs. contractors.

In a salary situation, there are many expenses covered or handled by the company invisibly. Just to name a few:

- state disability insurance
- 1/2 of social security
- health insurance, dental, vision

These all must be handled by the contractor in a contract situation. Additionally, the tax situation is a bit different for contractors (1099) vs. employees (W2). Also, contractors do not get paid time off (sick time, vacations, "administrative leave", sabbaticals).

In other words, $x/hr for a salaried employee is not the same as $x/hr for a contractor. The conversion factor is neither constant nor simple, and any attempt at conversion is fraught with assumptions. For this reason, most conversations of this nature end up in confusion over what seems like it should be a simple question: How much should I be paid for my work? Add to the mix contract agencies and corp-to-corp arrangements that require the contractor to incorporate or outsource "back-office" stuff, and it's no wonder we are confused.

Off the cuff, as I posted earlier, I have found I can estimate conversion very roughly at about 1.4x. In other words, a $45/hr contract billing 35 hrs/week for 50 weeks per year is similar to a $65000 ($31.25/hr) salary, with both yielding around $39000 after taxes, based on a set of wild assumptions. Make of that what you will. :)

(Annual rate) divided by 2080 = hourly rate
So... $68,000 per year would equal $32.6923 per hour.


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RE: Asking The Billing Rate?: From: Claire Conant

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