buckeyebri;1719764; said:
Anyone here a contract employee? I have been approached about a contract position, which is very intriguing, but I am a little fuzzy on how I would go about determining what my hourly rate should be. Thoughts?
Is this the wave of the future? Seems like a lot of positions that I have been pursuing are being placed by agencies.....
I don't think this is the wave of the future.
In any case here are the differences between being employed and being contracted...
You get to pay SS and Medicare tax on both sides (employer and employee)- In other words if you work for company x and earn 100.00 They withhold 6.20 in SS tax and 1.45 in medicare, but they have to pay the treasury 12.40 for SS and 2.90 in medicare. As a contractor you get to pay the employer side. Add 7.65% to a fair employee wage to cover this.
Down time = no pay time No work= no pay. your vacation = no pay. sick for a day = no pay. Factor that into the equation.
Deductions- Now any reasonable cost to do the job prescribed can be deducted from your pay. In other words, if you have a home office, but they require that you come in from time to time, the mileage is a deduction. If you use your cell phone for work related tasks, the % of use that you estimate is for work becomes a deduction. Depending on what your expenses are reduce your required rate accordingly.
Other benefits- You get to pay your own medical insurance if you are insured. This can be very expensive. Fortunately this cost becomes fully tax deductible. Still it hurts.
Pay day- Typically employees get paid first. no matter what. as a contractor, there is more of a chance that you will have to carry a receivable. Talk to other contractors and see how the company pays them.
Retirement- If the company has a pension, you don't. You don't get the company's 401k. The good news is that you can create your own 401k type plan. (Called a SEP Ira) It allows you to put a whole lot more towards retirement than a 401k plan does(depending on how much you make)
Paperwork- It now becomes your responsibility to tell the IRS how much you made. You don't get a W-2. You do get to file either a schedule C or other returns depending on how you organize.
Hope this helps...
