Independent Contractor Rate Question

[vbbit]

If you use to make 60k a year, and now an independent contractor for the same company. How much hour rate it should be? Are there any formula that could help me out?

[techgnome]

a couple ways ... if you take your target annual, divide by 12, get to a monthly rate, then divide that by 160, which is on average what a month is (40hrs/wk * 4 week)
or ... take the annual target, divide by 52 weeks, then divide that by 40...

either method should put you in the ball park.
Keep in mind, with that target, if you truly are independant (and not working for a contract company) you have taxes and insurance and all taht wonderful stuff that goes with it.

-tg

fyi: you're looking at about $30/hr for an equivalent rate.

[vbbit]

a couple ways ... if you take your target annual, divide by 12, get to a monthly rate, then divide that by 160, which is on average what a month is (40hrs/wk * 4 week)
or ... take the annual target, divide by 52 weeks, then divide that by 40...

either method should put you in the ball park.
Keep in mind, with that target, if you truly are independant (and not working for a contract company) you have taxes and insurance and all taht wonderful stuff that goes with it.

-tg

fyi: you're looking at about $30/hr for an equivalent rate.

My skill set is unique, with $30/hr and all the good stuff with insurance and tax, I won't make much as I don't get a lot of hours a day either. Can I ask for $100/hour?

[techgnome]

you can but it had better be worth it.
if youre not going to work full time, you can still use the above formulas, you just need to adjust the weekly or monthly houyrs to better reflect how many hours you actually plan for.

-tg

[SJWhiteley]

1 hour work = 1 hour pay. No work no pay. (i.e. there is, depending on what part of the world you are in, none, 1, 2 or more weeks of additional 'vacation' pay that needs to be accounted for).

In the US, depending on how you consider yourself, unemployment taxes, additional 6.2% social security, time to track and pay everything (you will be working extra non-billable hours to do the books), health insurance, vacation as noted, additional amount because you are in a less secure position (you can be terminated effective immediately), cost of tools not supplied by the customer (e.g. if you are a developer, you may be required to supply all computer and development tools, like Visual Studio), insurance both loss/liability and possibly Errors and Omissions, the time to decrypt all the requirements...

As a contractor, you are expected to hit the ground running - any training required to get up to speed on a technology will be done in your own, non-billable, time. So, while working for yourself seems really cool - and don't get me wrong, it is - there's an added cost to that.

If you were paid $30 an hour, while you may be worth $100/hr, that's a big leap, regardless of what the ultimate savings are for a company. So now, you have to understand sales and marketing, if it's only yourself. While you may think your skills are unique, the reality is that you aren't as unique as you think; you may fulfill a unique position in the company, but they may be able to fulfill the ultimate requirements at a lower cost by hiring two lesser skilled people at a much lower price.

Not trying to burst your bubble: being independent does have some freedoms, but don't get too greedy. Have an honest look at what you need (taxes, health, insurance, etc.), consider a fair and reasonable price for what you are worth. If you were being paid $30, I'd estimate around $45 would put you back at a comfortable spot, but that's not knowing what the market is, your field, skills, the employer/customer, any other requirements (e.g. safety equipment, OSHA training, certifications).

Companies that charge $100, $150 or $200 or more for service employees have a much larger overhead and, unfortunately, you will most likely not be able to charge that as an independent contractor: a larger company offers reliability and peace-of-mind with the money they charge.

[FunkyDexter]

+1 to everything SJW said.

If you want to work out an equivalent income just do as TG described. Take your annual salary and divide it by the number of hours you expect to work in a year - that's the hourly rate you need for an equivalent earning. I tend to use 2000 as the divisor: 50 weeks (allowing for holidays) * 5 days * 8 hours but you can adjust those figures according to your expectations.

But an equivalent is probably too low because you're losing sick pay, pensions, medical etc. so you then want to put on a premium. My experience has been that you can probably ask for somewhere between 1.5 and 2 times your permanent equivalent but that's in the UK and the US may be different. Overall, though, what you can ask for is whatever someone is willing to pay you.

Finally, don't forget to do some investigation into tax. For me it was worth setting up a limited company because that means I pay les tax overall.

[dclamp]

I feel like the others pretty much touched on it.

Where you work now, you are taking home $60k a year. But that doesn't account for what your employer is actually paying for you to work there. You are probably costing the company $120k to work there. That is including salary, benefits, retirement, time off, etc.

When you are independent, you have to pay for all those employer contributed funds yourself, which is taken away from your $60k evaluation. In the end you may walk away with $30k at the end of the year.

[szlamany]

My skill set is unique, with $30/hr and all the good stuff with insurance and tax, I won't make much as I don't get a lot of hours a day either. Can I ask for $100/hour?

If your skill set is unique then yes you can charge a lot more.

It has absolutely nothing to do with your salary divided by anything.

You should call a staffing firm - give them your skill set - and get an idea of what you can charge in your region. They might not value your "unique skillset" the same way, as they serve a larger population (then what you might farm yourself out to in your specialty).

It will at least give you an idea of what your minimum value might be.

An old boss of mine 30 years ago told me to do this exact same thing. It was an eye opener.

I currently charge my clients $200/hour. Without my unique skillset I could still charge $120/hour - and have been farmed out by staffing firms at this rate.

I also use staffing firms for programmers myself from time to time - a junior, junior just out of college programmer is $40 or more per hour.

If you want to do contract work with a firm that had you at $60,000 a year and now doesn't pay your taxes and all then at least the $45/hr that FunkyDexter mentioned.

If you going to do contract work from now on then you need to start thinking about what you need ANNUALLY for GROSS income to BOTH run your business and pay yourself.

It quickly becomes all about cash flow - making sure that you have enough payables outstanding to keep you in the black.

I've been an ISV since 1986.

[szlamany]

Here's a resume I got from a staffing agency today

Bill Rate: $87.50/hr

Web Developer with both Front and Back end experience. His strongest skills include HTML5, CSS3, JQuery, Jscript, Cross-browser experience, etc. In addition, has working knowledge of WordPress, C# and ASP.NET, SQL Server, Photoshop. ....

This person is at almost $90/hr.

And .Net was mentioned - don't tell Dil...