Contract work salary?

[minskmonster]

I have an offer for some short-term contract work with a private firm, provided that we can agree on an acceptable hourly rate. This has the potential to lead to full-time work, so I don't want to shoot myself in the foot, but I also don't want to undercut my worth. I'm an AICP planner with a master's degree and 7 years of experience in planning and five years of experience in government relations before graduate school. Any suggestions on what would be a reasonable and fair hourly rate? Thanks in advance.

[nrschmid]

What is the scope of the contract (services needed)? How many hours are they anticipating?

[Raf]

Have you surveyed companies for similar billing rates?

[minskmonster]

The time requirement is variable, depending on the project workload. It could be anywhere from 20-40 hours a week, I foresee. As far as surveying other companies, unfortunately I don't have the time to do that. I need to reply to the employer ASAP.

[Cardinal]

I may be looking for someone later this year (about September/October). The full-time position has a moderate level of responsibility and a great deal of autonomy. It is located in a rural area. It will require a minimum 2-3 years of experience. I am looking at about $40,000, which equates to $19.23 per hour.

(When my costs of paying employment taxes, FICA, etc. are factored in, my cost is $25.96, or $54,000 per year.)

[nrschmid]

The time requirement is variable, depending on the project workload. It could be anywhere from 20-40 hours a week, I foresee. As far as surveying other companies, unfortunately I don't have the time to do that. I need to reply to the employer ASAP.

I'm just throwing out a very general estimate here:

Based on your experience, AICP, etc....

$100/hour billable rate, you take home roughly a third of that, assuming overhead is covered by the employer. As an independent contractor you will need to file a 1099.

[chocolatechip]

You would be billed out anywhere in the range of $80-140 depending on whether they wanted to call you an Associate or Senior Associate, and what part of the scope you were fulfilling with quality work. In other words, don't ****ing low ball it--they will make money hand over fist on you, especially with reduced overhead. If you made average of 25/hr as a salaried employee, their overhead would be something like 15/hr, maybe even more, for a total of 40/hr to have you in the office. So don't ask for the 25, ask for the 40.

[Cardinal]

You would be billed out anywhere in the range of $80-140 depending on whether they wanted to call you an Associate or Senior Associate, and what part of the scope you were fulfilling with quality work. In other words, don't ****ing low ball it--they will make money hand over fist on you, especially with reduced overhead. If you made average of 25/hr as a salaried employee, their overhead would be something like 15/hr, maybe even more, for a total of 40/hr to have you in the office. So don't ask for the 25, ask for the 40.

That depends somewhat on your specialization and the part of the country in which you live. The billing rates can be much lower - AND, that is if you were billing as a consultant in a firm. If I understand correctly, you will be hired on contract, not as a consultant. This is much different and more like a traditional salary. Consultant billing rates include overhead (office costs, support staff, your salary, benefits, and taxes payed by your employer, liability and workers' compensation, etc.). As a contract employee the employer pays these costs directly, and they should not be included in your hourly rate.

[chocolatechip]

That depends somewhat on your specialization and the part of the country in which you live. The billing rates can be much lower - AND, that is if you were billing as a consultant in a firm. If I understand correctly, you will be hired on contract, not as a consultant. This is much different and more like a traditional salary. Consultant billing rates include overhead (office costs, support staff, your salary, benefits, and taxes payed by your employer, liability and workers' compensation, etc.). As a contract employee the employer pays these costs directly, and they should not be included in your hourly rate.

If the firm is hiring Mr. X to do some work for them, the firm will be billing Mr. X as if he was a consultant in-house (assuming his work meets the same quality standards) towards whatever contract the firm has which requires the extra help. There is no advantage in a firm taking Mr. X's hours and billing them towards that contract at a lower rate. If they bill Mr. X out at, for example, $100/hr, but pay Mr. X $40/hr (representative of salary plus overhead), they still make the same amount as if he were a salaried employee. If they were to only pay him $25/hr, they would still likely bill him out at $100/hr, not less. Unless, of course, they for some reason didn't want to run out the contract. In any case, $40 is a reasonable wage on a contract basis for a professional. It represents probably about 55k or 65k salary, factoring an hourly wage of around 25-29/hr plus the value of benefits.

[minskmonster]

Thanks everybody for your input. It's much appreciated. I'll let you know how it goes.

[wahday]

In any case, $40 is a reasonable wage on a contract basis for a professional. It represents probably about 55k or 65k salary, factoring an hourly wage of around 25-29/hr plus the value of benefits.

I would actually put the salary equivalent lower than this for that hourly rate. My wife (not a planner) has worked quite a bit as an independent contractor charging in the $45 to $65/hr. range over the past 8 years.

The challenge with contract work, consulting, etc. is that there is a lot of work that needs to get done that is hard to bill to any one client. Getting a new toner cartridge, printer paper, report filing, tax reporting, PR/Marketing, equipment purchases and the time it takes to draw up bids or provide estimates are all hard to capture and roll into your billing. Plus, you have a lot more downtime when working for yourself and that's time you can't bill anyone but yourself for. Add to that the health benefits you mentioned and any other benefits (like paying into retirement) and the take-home pay can be reduced quite a bit.

Anyway, some issues to consider for anyone trying to strike out on their own (as I have considered). To Minskmonster, I would say, pick a rate, go with it and keep a close eye on these kinds of details. You have to jump in somewhere and if for the next job you need to adjust your rates, so be it. This is the nature of the marketplace and prices and rates shift over time in response to a lot of factors. But the only way to find the "right" rate is to jump in and try to swim. Good luck!

[minskmonster]

Again, thanks for your input. I asked for 40 and got it. And to think, before I posted here I was prepared to ask for 30. Many thanks!!!!

[chocolatechip]

Again, thanks for your input. I asked for 40 and got it. And to think, before I posted here I was prepared to ask for 30. Many thanks!!!!

Right on! Good luck with your work.