Salary vs contract rate?

  • Matt Miller (4)

    SSC Guru

    Points: 124202

    SeattleDBA (1/10/2016)


    Alan.B (1/4/2016)


    If the FTE salary for my area is $130,000 to $140,000 for a senior level DBA, that would be about $65 (W2) per hour based on 2,000 hours per year. But there is no bonus or paid vacation or other benefits with that $65 per hour.

    The rule of thumb based on my experience is that companies will pay 10% more than the salary in hourly wages. That would be ~$70-75/hour. I have friends right now that are getting 15%-20% higher for the contract rate because the market is good at the moment. I'd be asking for $75/hour at a minimum.

    Thank you for the response. That matches about what I have figured out since the original posting. Something I didn't mention in the original post was that I am referring to contracts while on W2. Some of the response I think were answering for Corp to Corp rates, with the added taxes I guess.

    The fact that you also have another job isn't going to be much of a factor. Just be careful because that isn't going to absolve you from the other requirements (taxes), so unless you plan on eating the taxes out of your nominal rate (not something you should do), make sure you know what that overhead is going to be and charge them for it. You ARE going company to company (in this case you ARE the company), so whether the taxes flow through an LLC or just on a 1099, you will be paying them either way.

    TALK to an accountant first. Will be worth every dollar you spend.

    ----------------------------------------------------------------------------------
    Your lack of planning does not constitute an emergency on my part...unless you're my manager...or a director and above...or a really loud-spoken end-user..All right - what was my emergency again?

  • Alan Burstein

    SSC Guru

    Points: 61074

    [font="Arial Narrow"]

    SeattleDBA (1/10/2016)


    Alan.B (1/4/2016)


    If the FTE salary for my area is $130,000 to $140,000 for a senior level DBA, that would be about $65 (W2) per hour based on 2,000 hours per year. But there is no bonus or paid vacation or other benefits with that $65 per hour.

    The rule of thumb based on my experience is that companies will pay 10% more than the salary in hourly wages. That would be ~$70-75/hour. I have friends right now that are getting 15%-20% higher for the contract rate because the market is good at the moment. I'd be asking for $75/hour at a minimum.

    Thank you for the response. That matches about what I have figured out since the original posting. Something I didn't mention in the original post was that I am referring to contracts while on W2. Some of the response I think were answering for Corp to Corp rates, with the added taxes I guess.

    First, as Matt said, talk to an accountant. I have done that - they'll often talk to you for free because of the potential to get your business. That said, here's a few things to consider based on my experience.

    To be clear - my 10% rule of thumb was for W2. W2 is much less work (and has less liability potential) than 1099 and Corp-to-Corp (e.g. S-Corp). If you go the independent route then add another 10-15% (minimum). As an independent you pay your own Social Security (~7%). Keep in mind that, on W2, the company that contracts you out gets about double what you get as a W2 contractor. E.g. If you're getting $60/hour, the company is paying roughly $120/hour for your services. I have signed many contractor invoices, I know.

    Next, and this is huge, many people refer to corp-to-corp as 1099 but it's not the same thing. (FYI - when I was on my own I did so as an S-Corp). Most Corp-to-Corp people set themselves up as S-Corps (roughly $500 to setup in accounting fees/paperwork). In my experience many more companies prefer S-Corp to 1099. This for a number of reasons the most notably reason being, IMHO, the IRS sometimes declares 1099 workers are employees then things get more complicated than both parties want.

    Here's a great article I used before going out on my own that you might find useful: Consultants: W-2, 1099 or Corp-to-Corp?

    The one thing I disagree with in this article is: If you have health insurance through your company and like it, DONT get COBRA for your health insurance. Go another route. I made this mistake only to discover that COBRA is now part of ObamaCare which means you'll pay like $400+ and get a much crappier and more expensive version of your employer provided health care policy.

    I went the S-Corp route after a tech recruiter/friend advised me to. It's more work but not too much more. Some companies pay you every 30 days which takes some getting used to but it's a big one. The best benefit is the tax benefits. A good accountant will help you exploit that.

    "I cant stress enough the importance of switching from a sequential files mindset to set-based thinking. After you make the switch, you can spend your time tuning and optimizing your queries instead of maintaining lengthy, poor-performing code."

    -- Itzik Ben-Gan 2001

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