# Tell me about setting an hourly rate for a contractor/temp-to-perm position **URL:** \ **Category:** In My Humble Opinion\ **Created:** [August 24, 2020, 6:41pm UTC](https://boards.straightdope.com/t/tell-me-about-setting-an-hourly-rate-for-a-contractor-temp-to-perm-position/918912 "2020-08-24T18:41:36Z")\ **Posts on this page:** 7\ **Page:** 1
**Author:** ![Eva\_Luna](https://avatars.discourse-cdn.com/v4/letter/e/e495f1/32.png) [@Eva\_Luna](https://boards.straightdope.com/u/Eva_Luna)\ **Post date:** [August 24, 2020, 6:41pm UTC](https://boards.straightdope.com/t/tell-me-about-setting-an-hourly-rate-for-a-contractor-temp-to-perm-position/918912/1 "2020-08-24T18:41:36Z")
So I just had a phone interview with an internal recruiter for a remote position in my field which sounds interesting, and for which I am highly qualified. The interview went well, and I expect to be scheduled for an interview with the hiring manager shortly. It’s an established global tech company with several thousand employees. I got the lead from a former boss of mine, who is their outside counsel - the position is not currently being advertised publicly. What I didn’t expect (because I just had a very brief email exchange with my former boss) is that they would tell me that until they had budget and headcount approved for a permanent position (it’s an added position because of the demanding workload), I would have to be a temp-to-hire contractor, probably for 3 months. So they asked me what my salary expectations were as a permanent employee as well as what my hourly rate would be for the contract period. Now I am willing to be somewhat flexible for the right position, but OTOH I am currently on **Tom Scud’s** employer-based health insurance, and they don’t subsidize dependents at all, so it costs almost $700/month. Plus, of course, presumably we’d be talking about no seniority, no benefits, etc. I’ve never done that before, so I want to make sure I am not selling myself short, and I have several other irons in the fire right now job, job-wise. too. So how do I figure out what would be fair, and what other questions should I be asking (and when)? ---
**Author:** ![Icarus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/icarus/32/72_2.png) [@Icarus](https://boards.straightdope.com/u/Icarus)\ **Post date:** [August 24, 2020, 6:55pm UTC](https://boards.straightdope.com/t/tell-me-about-setting-an-hourly-rate-for-a-contractor-temp-to-perm-position/918912/2 "2020-08-24T18:55:08Z")
Well, normally you would have to think in terms of total compensation. A full time job (usually) pays salary, and benefits, and employer portion of taxes (in the US, that includes SS and Medicare). While as a regular employee you might see $50,000 a year in salary, the employer is spending some higher amount ~$70,000 a year? So, what do you do with this information? The thought is that you would ask for contract pay equivalent to the ~$70,000 a year - because you are on the hook for benefits & employer taxes. The expectation would be that once you go full-time/regular you would see a drop in “pay” but total compensation would equal out. ---
**Author:** ![ThisIsTheEnd](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thisistheend/32/4713_2.png) [@ThisIsTheEnd](https://boards.straightdope.com/u/ThisIsTheEnd)\ **Post date:** [August 24, 2020, 6:56pm UTC](https://boards.straightdope.com/t/tell-me-about-setting-an-hourly-rate-for-a-contractor-temp-to-perm-position/918912/3 "2020-08-24T18:56:58Z")
Well, you’re tied up with professional relationships involved which makes it complicated to balance. If nobody you knew was in the loop and it’s a 1099 contract, I charged twice as an hourly rate what I’d make if salaried-with-benefits. But I was never angling for a permanent position. But the minimum formula would be something like: - Hourly rate you’d get if salaried, plus - 15% of the hourly rate to pay Soc Sec & Medicare taxes, plus - Fed income taxes calculated per hour plus - State income taxes per hour (if any), plus - 3/4s of what your healthcare will cost (or whatever proportion the prospective employer pays for full-timers) per hour ---
**Author:** ![ThisIsTheEnd](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thisistheend/32/4713_2.png) [@ThisIsTheEnd](https://boards.straightdope.com/u/ThisIsTheEnd)\ **Post date:** [August 24, 2020, 7:03pm UTC](https://boards.straightdope.com/t/tell-me-about-setting-an-hourly-rate-for-a-contractor-temp-to-perm-position/918912/4 "2020-08-24T19:03:23Z")
Too late to edit, but bullet #1 should really read “Hourly rate you want to take home” ---
**Author:** ![Spiderman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/spiderman/32/230_2.png) [@Spiderman](https://boards.straightdope.com/u/Spiderman)\ **Post date:** [August 24, 2020, 7:27pm UTC](https://boards.straightdope.com/t/tell-me-about-setting-an-hourly-rate-for-a-contractor-temp-to-perm-position/918912/5 "2020-08-24T19:27:37Z")
Are you going to be 1099 or W-2? There is a **big** difference; in the latter you are someone else’s employee so they pay ½ the social security & medicare taxes; also _you are eligible for unemployment as a W-2 employee where you are not as a 1099 one_ if it doesn’t workout for some reason. It’s also simpler from a tax-filing perspective to be a W-2 employee. Also remember as a contractor you typically only get paid for the hours you work; that means that holidays & any days you take off are unpaid; that’s somewhere in the neighborhood of a 10% differential - based on 250 working days / year minus 25ish (or more) days off\* \*8-10 holidays + three weeks PTO (or two weeks vacation & one week of sick time). Adjust as necessary for the specifics. ---
**Author:** ![Oredigger77](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/oredigger77/32/3181_2.png) [@Oredigger77](https://boards.straightdope.com/u/Oredigger77)\ **Post date:** [August 24, 2020, 8:48pm UTC](https://boards.straightdope.com/t/tell-me-about-setting-an-hourly-rate-for-a-contractor-temp-to-perm-position/918912/6 "2020-08-24T20:48:38Z")
I generally add 30% to W-2 position to make it an equivalent 1099. So if you were expecting to make $50K/year in a salary position I’d expect to get paid $65K as a contractor. ---
**Author:** ![squeegee](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/squeegee/32/14537_2.png) [@squeegee](https://boards.straightdope.com/u/squeegee)\ **Post date:** [August 24, 2020, 10:23pm UTC](https://boards.straightdope.com/t/tell-me-about-setting-an-hourly-rate-for-a-contractor-temp-to-perm-position/918912/7 "2020-08-24T22:23:54Z")
When I did consulting back in the day, I was charging somewhere close to double what a salaried employee would make. Mostly because I could: I had specialized knowledge and was in such demand I could bill as many hours as I wanted to work. In your case, OP, you need to balance that you’re expecting to convert and don’t want to piss anyone off. That said, do _not_ bid too low as benefits and tax stuff make an equivalent contractor hourly waaay more than a salaried position because of the risk and tax and insurance burdens you assume solely that the company does not.