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Contractor pay vs. Full time

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Post Thu Jun 09, 2011 10:55 am

Contractor pay vs. Full time

I'm thinking about getting a different job and would like to hear from others who may have been in this position. If have done a job search recently, you probably noticed that many jobs that used to be full time have moved to being "long term contract" (even though they are still full time). Presumably this is because companies want to save on the costs of healthcare and benefits.

If I was to consider taking one of these jobs, how much more do you think I would need to ask for to make up for the loss of healthcare, the lack of paid vacations, 401k, etc.? What about Social Security and other taxes? How much more would I be paying as an individual than as a full time employee? I need some rough estimates to figure out whether it's worth the risk moving from a steady but lower-paying job with good benefits......especially if the contract job runs out in a year or so.
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sil

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Post Thu Jun 09, 2011 12:08 pm

Re: Contractor pay vs. Full time

There is a formula I used to use when accepting contractual work like that so I will simplify it so that you can get an idea of how to proceed. Let's assume a full time job is willing to pay you $60,000.00 on a quarterly basis, you're earning $15,000.00 Let's assume the average amount of time you will be without a job, you will be losing that $15,000.00

For starters we have $75,000.00 to work with in which you should go not go under. Now, you would be literally making a parallel move from full time with benefits to contractual work. If you bought your own insurance with yourself +1 (spouse/kid) you're looking at about 6k per year. Which means, $75,000.00 - 6,600.00 you'd come away with. You're contract work at the $75,000 per year mark comes to about $68,400.00 if you did this parallel move. This translates to about 32.88 per hour per 40 hour work week per 260 workdays.

So you have one rate: 32.88 (new contract rate) versus your normal salary of $60k which is 28.84 per hour. A mere 14% raise in which on the worse case, will cost you more if you go three months dark after your contract is up.

Me... I wouldn't go under $45.00 per hour (93,600) per year which gives me 6 months of downtime when the contract is up. Of which, $45.00 is sort of insulting, I've had people offer me $75p/h for 6 months worth of work. Might sound like a lot, but its 78,000 at 6 months. You need to remember, contracts are not guaranteed, so you need to set a threshold and do the math according to your expenses and tack on between 3-6 months of downtime when work is non-existent.

You will also need to set aside your own taxes, SS, etc., however at that point, you'd be surprised what you can write off. Do like General Electric does... Everything is a loss.
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sil

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Post Thu Jun 09, 2011 1:29 pm

Re: Contractor pay vs. Full time

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Post Thu Jun 09, 2011 10:12 pm

Re: Contractor pay vs. Full time

Thanks Sil. Very informative and I hope it helps others in the future as well. As an aside, I spent a few hours today reading about what other industries expect as well. The consensus seems to be between 30% more than what a regular full time employee would get (as a bare minimum) to around 50-60% more as a general rule of thumb.
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