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Permalink Reply by Michael Saulnier on April 10, 2008 at 2:18pm

Ronald,

This can be a bit more complex than a simple calculator... depending on how "precise" a conversion you would want to make.

But a fair "rule of thumb" is: divide the salary by 2000 hours, and add 10-15% to cover the benefits, vacation, and other perks of a direct hire... That gives you an hourly "fair" estimate...

For example, 100k salary divided by 2000 hours is $50/hr., plus 15% is 57.50.

Of course this example is for a W-2 employee contractor.

Most candidates will find this a reasonable way to balance direct vs contractor wages.

Some clients will oppose this, prefering to pay only an matching "salary" in hourly wages. Simply divide the salary by 2080, and you'll have the hourly number.

Hope this helps.

Michael
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Permalink Reply by jay tarimala on April 10, 2008 at 4:17pm

2000 hours is stretching it as a contractor as one will not find contiguous engagements to cover every day of the year. Definitely assume 10-15% down time within the year.

Add professional liability insurance costs to the equation as well.

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Permalink Reply by Michael Saulnier on April 10, 2008 at 4:54pm

The prospective length of the contract can have a strong influence on the contractor's perceived value of the compensation. Many people considering a short term - say 3 month contract, would expect to receive a higher rate than - say a 1 year contract. Keep in mind that contractors may qualify for OT pay, where a salaried employee may not. So depending on the needs and budget of the client, they may make up for income or benefits in this way.

If the contractor is a W-2 employee, I would expect all the business insurance: General Liability, Error and Omissions, and Worker's Compensation would be provided by the Recruiting Firm, not paid by the contractor... although in some industries the contractor, especially if he's got an established consulting business, may carry his own professional liability insurance. If so, it's a good idea for the recruiter to be an "additional insured" on the professional liability coverage.

Of course, business insurance, and employee burden would need to be accounted for in the final "bill rate markup" to the client from the recruiter.

Michael

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