Stay in touch with Deloitte:
If you are considering, or are offered, a contract position for a certain period of time, it is important for you to know the factors to consider before accepting a contracting offer. Contracting can be very lucrative, as the pay is typically higher to compensate for a lack of benefits, perks, etc. The majority of contract opportunities (but not all) shares the following characteristics:
If you are offered a contract role that fits these characteristics, then you must decide on an acceptable hourly rate. Here are some general guidelines to consider when setting your rate:
Salary – Use your most recent annual salary, and divide that by 2080 (40 hrs/wk x 52 weeks). This is your baseline starting point.
Adjustments/Additions (if not provided by client or contracting employer, or if on a 1099 basis)
Medical/Dental – Health care costs are skyrocketing, so if you must provide your own healthcare coverage, be sure to convert the cost of the premium to an hourly rate and add them to the baseline salary amount.
Vacation & Paid Holidays – You can calculate this using your baseline hourly figure above. For example, if you receive 2 weeks of paid vacation each year plus 10 paid holidays, and your salary was $75,000.00 year, the hourly adjustment would be $3.33 per hour.
Annual Bonus – This can be a bit dicey, as bonuses can vary widely from year-to-year. If you consistently received a bonus each year for the past 3-5 years, then take the average amount paid out, convert that into an hourly figure, and add to the baseline amount.
These are the main core components to consider in determining your contracting rate. You can certainly factor in other benefits and perks, but keep in mind that the more you include, the greater chances of pricing yourself out of consideration.
Many contracting opportunities can lead to full-time, regular employment with the client company, so you want to set your expectations accordingly... as it is highly likely that the salary offered will be less than your annualized hourly contracting rate; but the benefits/perks could be a whole lot better, and at a much lower participation cost to you.