New job was going to hire me at $20/hr, but now want to hire me as private contractor

zylander

Platinum Member
Aug 25, 2002
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My friend set me up with a job at his work. When I went in for the interview, the boss told me that I would be hired as an employee at a rate of $20/hr, that was about three weeks ago. Now I find out that the company doesnt want to take on any more employees and wants to hire me as a private contractor. This is fine with me, but how much more should I ask for to make up for the taxes that I will have to pay?

**Update**
The company is a start up chocolate company, not yet open to the public, they plan to open up this summer. I will basically be doing what ever is needed in the warehouse/factory; welding, pickups, deliveries, making molds, what ever.

I started today and the first thing I did when I got there was talk to the boss about my pay/position. He wants to hire me as a private contractor but still keep the same $20/hr. All this week the company is doing a huge analysis of the factory and its workers; how much they can afford to spend, how many more people they can take on, when the factory will be ready to open, ect. I decided that since I have absolutely nothing else lined up (my last job, CompUSA ended last Tuesday) that I might as well work for them at the current rate for a week and just make some money. Next Monday after they have done their analysis, I am going to sit down with the boss and the woman in charge of payroll and figure out what I will do. Either I will be hired as an employee or a private contractor at a higher rate or Ill take my weeks worth of pay and go somewhere else. So we'll jsut have to wait and see what happens.
 

Dissipate

Diamond Member
Jan 17, 2004
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You will have to pay 7.5% more for social security, since you will have to pay the entire 15% for that.
 

OdiN

Banned
Mar 1, 2000
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Insurance will cost an arm and a leg unless it's just for yourself. So factor that in there.
 

KillerCharlie

Diamond Member
Aug 21, 2005
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Originally posted by: OdiN
Insurance will cost an arm and a leg unless it's just for yourself. So factor that in there.

That's why contracting jobs pay so much more. My manager told me that we cost the company over twice what they pay us when you factor in benefits.
 

WingZero94

Golden Member
Mar 20, 2002
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figure in at LEAST 33% for insurance. I wouldn't do it for less than 35 dollars an hour (all the extra hassle you have to go through)
 

zylander

Platinum Member
Aug 25, 2002
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Forgot to add that I already have private health insurance through Kaiser. Im not concerned about the benefits that I wont have, Im just worried about the whole tax thing.
 

WingZero94

Golden Member
Mar 20, 2002
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Originally posted by: zylander
Forgot to add that I already have private health insurance through Kaiser. Im not concerned about the benefits that I wont have, Im just worried about the whole tax thing.

Do they know about your private health insurance? Demand more as a contractor for sure. Again, i'd go $35 / hr. If you really wanted the job you could go down to $30, but NO lower.
 

Fritzo

Lifer
Jan 3, 2001
41,894
2,135
126
Ugh, I did this. You need around 35% of your pay for taxes, not to mention no benefits and they can let you go at any time.

I'd say another $10/hr or forget it.
 

Nitemare

Lifer
Feb 8, 2001
35,466
4
76
Originally posted by: WingZero94
Originally posted by: zylander
Forgot to add that I already have private health insurance through Kaiser. Im not concerned about the benefits that I wont have, Im just worried about the whole tax thing.

Do they know about your private health insurance? Demand more as a contractor for sure. Again, i'd go $35 / hr. If you really wanted the job you could go down to $30, but NO lower.

Yeah, if you add on the cost of insurance, taxes, 401k and aggravation 30-35 sounds reasonable
 

AgaBoogaBoo

Lifer
Feb 16, 2003
26,107
4
81
Originally posted by: KillerCharlie
Originally posted by: OdiN
Insurance will cost an arm and a leg unless it's just for yourself. So factor that in there.

That's why contracting jobs pay so much more. My manager told me that we cost the company over twice what they pay us when you factor in benefits.
That's a good way of thinking about the cost to hire someone, just double your salary and you get what it takes them to have you on board.

Personally, I'd say that you should charge twice, plus some padding to account for the added risks involved. You should also figure out the terms of the contract - maybe what it will cost them for an early termination or something, which obviously requires you to give something in the event that you leave early.

Easiest way to figure this out is to find what a firm that specializes in this would charge for those hours of work, and bill the same rate. Pick a firm that is looked up to in the industry, and charge what they do, or at least have an idea of how your competitors price themselves.
 

redly

Golden Member
Nov 15, 2004
1,159
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first off...what kind of work will you be doing...what is your skillset and experience?
Don't underestimate what a company will pay for a contractor. Hell, I was 2 yrs out of electronics tech school in a time when the market was not quite flooded with talent...in Eastern Iowa no less... and I was pulling $40/hr back in 2000
 

AlienCraft

Lifer
Nov 23, 2002
10,539
0
0
Originally posted by: AgaBoogaBoo
Originally posted by: KillerCharlie
Originally posted by: OdiN
Insurance will cost an arm and a leg unless it's just for yourself. So factor that in there.

That's why contracting jobs pay so much more. My manager told me that we cost the company over twice what they pay us when you factor in benefits.
That's a good way of thinking about the cost to hire someone, just double your salary and you get what it takes them to have you on board.

Personally, I'd say that you should charge twice, plus some padding to account for the added risks involved. You should also figure out the terms of the contract - maybe what it will cost them for an early termination or something, which obviously requires you to give something in the event that you leave early.

Easiest way to figure this out is to find what a firm that specializes in this would charge for those hours of work, and bill the same rate. Pick a firm that is looked up to in the industry, and charge what they do, or at least have an idea of how your competitors price themselves.

Sound advice that.
Most people don't have a clue as to how to figure what something should cost vs how much to charge.

 

AgaBoogaBoo

Lifer
Feb 16, 2003
26,107
4
81
Originally posted by: AlienCraft
Originally posted by: AgaBoogaBoo
Originally posted by: KillerCharlie
Originally posted by: OdiN
Insurance will cost an arm and a leg unless it's just for yourself. So factor that in there.

That's why contracting jobs pay so much more. My manager told me that we cost the company over twice what they pay us when you factor in benefits.
That's a good way of thinking about the cost to hire someone, just double your salary and you get what it takes them to have you on board.

Personally, I'd say that you should charge twice, plus some padding to account for the added risks involved. You should also figure out the terms of the contract - maybe what it will cost them for an early termination or something, which obviously requires you to give something in the event that you leave early.

Easiest way to figure this out is to find what a firm that specializes in this would charge for those hours of work, and bill the same rate. Pick a firm that is looked up to in the industry, and charge what they do, or at least have an idea of how your competitors price themselves.

Sound advice that.
Most people don't have a clue as to how to figure what something should cost vs how much to charge.
You made a good point too, cost vs charge should be different numbers, no reason to sell at cost when people expect to pay more :)

It won't be easy going up to the boss and asking for X times what the hourly rate was, but find what the competitors charge, and explain to him his options, and why you are the best balance between price and skill, or why you are better than others, etc.
 

zylander

Platinum Member
Aug 25, 2002
2,501
0
76
The company is a start up chocolate company, not yet open to the public, they plan to open up this summer. I will basically be doing what ever is needed in the warehouse/factory; welding, pickups, deliveries, making molds, what ever.

I started today and the first thing I did when I got there was talk to the boss about my pay/position. He wants to hire me as a private contractor but still keep the same $20/hr. All this week the company is doing a huge analysis of the factory and its workers; how much they can afford to spend, how many more people they can take on, when the factory will be ready to open, ect. I decided that since I have absolutely nothing else lined up (my last job, CompUSA ended last Tuesday) that I might as well work for them at the current rate for a week and just make some money. Next Monday after they have done their analysis, I am going to sit down with the boss and the woman in charge of payroll and figure out what I will do. Either I will be hired as an employee or a private contractor at a higher rate or Ill take my weeks worth of pay and go somewhere else. So we'll jsut have to wait and see what happens.
 

Kelemvor

Lifer
May 23, 2002
16,930
7
81
Definitely the Insurance is the big thing. It can cost you hundreds of dollars a week just for that.
 

ebaycj

Diamond Member
Mar 9, 2002
5,418
0
0
Originally posted by: zylander
My friend set me up with a job at his work. When I went in for the interview, the boss told me that I would be hired as an employee at a rate of $20/hr, that was about three weeks ago. Now I find out that the company doesnt want to take on any more employees and wants to hire me as a private contractor. This is fine with me, but how much more should I ask for to make up for the taxes that I will have to pay?

I would ask for at the bare minimum $75/hr, because in a contract position you are not guaranteed anything. You could work 20 hr/wk one week and 60 hrs/wk the next. Plus as others have said you have to cover your insurance, retirement, social security.

take their $20. add 50% for ins/ret/ss (now total of $30). Double that for your job insecurity (now total of $60). add 25% for the hassle, and lack of bonus. (final total of $75)


Also what kind of work is it? One of my buddies is a level 2 tech support contractor (LOW KEY TECH JOB). He gets paid something ridiculous like 30k. His employer (contracting company) bills him at $80/hr to their client..
 

IceBergSLiM

Lifer
Jul 11, 2000
29,933
3
81
as a contractor you will be able to write off just about everything.

That said 20% of employer costs related to employees are the benefits for which you are getting none. So therefor you should demand $20 x 1.20 as your fair compensation.
 

Rage187

Lifer
Dec 30, 2000
14,276
4
81
Originally posted by: zylander


I started today and the first thing I did when I got there was talk to the boss about my pay/position. He wants to hire me as a private contractor but still keep the same $20/hr.



yeah, no.

You are getting scammed.
 

Saga

Banned
Feb 18, 2005
2,718
1
0
Originally posted by: Rage187
Originally posted by: zylander


I started today and the first thing I did when I got there was talk to the boss about my pay/position. He wants to hire me as a private contractor but still keep the same $20/hr.



yeah, no.

You are getting scammed.

The above is pretty accurate.

By taking on a contracted position you typically lose quite a bit of things; severance packages, stock options, but most importantly - benefits.

For $20/hr if I was asked to take a contracted position in lieu (is it hourly, or just salaried broken down to $20/hr?) I would most likely demand $30/hr and see where I ended up (probably around $28/hr).

You are being scammed. If the intent was for a stable 9-5 and they turned your offer into Salary you are basically being offered a temporary position at reduced benefits where you atypically have to provide your own equipment (see: PC/Laptop) and your job can basically end at any moment if they desire because you're a LOT easier to get rid of.

I'd probably pass, the change itself is enough to break my trust in any potential employer without a very valid explanation.
 

PlatinumGold

Lifer
Aug 11, 2000
23,168
0
71
Originally posted by: zylander
My friend set me up with a job at his work. When I went in for the interview, the boss told me that I would be hired as an employee at a rate of $20/hr, that was about three weeks ago. Now I find out that the company doesnt want to take on any more employees and wants to hire me as a private contractor. This is fine with me, but how much more should I ask for to make up for the taxes that I will have to pay?

$45 at least. also make sure that they have you come in like an employee, 4 to 8 hour blocks of time.
 

Nitemare

Lifer
Feb 8, 2001
35,466
4
76
Originally posted by: zylander


I started today and the first thing I did when I got there was talk to the boss about my pay/position. He wants to hire me as a private contractor but still keep the same $20/hr.



Did you laugh?
 

Capt Caveman

Lifer
Jan 30, 2005
34,547
651
126
Originally posted by: PlatinumGold
Originally posted by: zylander
My friend set me up with a job at his work. When I went in for the interview, the boss told me that I would be hired as an employee at a rate of $20/hr, that was about three weeks ago. Now I find out that the company doesnt want to take on any more employees and wants to hire me as a private contractor. This is fine with me, but how much more should I ask for to make up for the taxes that I will have to pay?

$45 at least. also make sure that they have you come in like an employee, 4 to 8 hour blocks of time.

125% pay increase? Not likely. 33% is reasonable.