Re: Contractor Rates

Subject: Re: Contractor Rates
From: Richard Lewis <tech44writer -at- yahoo -dot- com>
To: Barry Campbell <barry -dot- campbell -at- gmail -dot- com>, Richard Lewis <r44lewis -at- yahoo -dot- com>
Date: Thu, 21 Sep 2006 10:21:15 -0700 (PDT)

Richard Lewis posted:

\$25 per hour contracting is the same as making \$12,500 a year as
a permanent employee (\$25,000 / 2 * 1000 = \$12,500)

Barry Campbell replied:

...asserting that \$25 an hour is equivalent to \$12,500 a year is mathematical and business illiteracy (innumeracy?), even if you're claiming the \$12.5K figure as take-home pay. [Full reply at end of this e-mail.]

Richard Lewis responds:

Barry, others on this listserv recommended the following formula to calculate a contractor hourly rate for a given employee annual salary. (I have also seen this formula on the on-line Contractor's Handbook web site.)

* Employee annual salary * 2 / 1000 to get equivalent hourly contractor rate.

If the above formula is true, then the following must also be true:

* Hourly Contractor Rate / 2 * 1000 = Equivalent employee annual salary

So, for a contractor making \$25/hr, the equivalent hourly contractor rate is:

* \$25 / 2 * 1000 = \$12,500 per year. And that is gross!

Barry, you are making the common mistake of not considering the ample benefits that, typically, the employee gets that the contractor does not that are built into the formula.

Barry Campbell <barry -dot- campbell -at- gmail -dot- com> wrote:
Richard, a couple of points:

(1) Getting the annual equivalent salary from an hourly rate works like this:

Assuming a 40 hour week and no downtime, there are 2080 working hours
in a calendar year. A \$25/hr job would yield you gross income of
\$52,000 per year; \$35/hr, \$72,800, and so on.

Of course, as a 1099 or corp-to-corp employee, you're not only doing
your own withholding and paying self-employment taxes, but must
arrange for your own benefits; however, asserting that \$25 an hour is
equivalent to \$12,500 a year is mathematical and business illiteracy
(innumeracy?), even if you're claiming the \$12.5K figure as take-home
pay.

(2) Note that most of the "contractor" jobs posted on places like DICE
do not reflect the rate that a client is willing to pay for a
technical writer's services; they reflect the rate that an agency
middleman is willing to pay a technical writer for pimping out the
writer to the client. The rate that the middleman charges the
temporary employer is higher, sometimes considerably higher. If
you're not good at marketing yourself and finding your own work, this
reduced hourly rate might actually be a good deal; if you're good at
marketing yourself, avoid it if at all possible.

- bc

--
Barry Campbell
http://campbell-online.com
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Re: Contractor Rates: From: Barry Campbell

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