Total addback for benefits and taxes for Alice equal $24,475, ($24,475/1920 hours = ~$13 dollars per hour.).If Alice’s contracting position is with a staffing company on a W2 then this does not need to be added. This is what her employer used to pay the Government (Employer Taxes). Add $11,475K (7.65%) for the extra tax Alice will pay for self employment.Add $7K – Alice is single and health insurance will cost her 7K per year.As a 1099 contractor or if you are working under your own corporation you will need to account for these employer taxes which will be approximately 15%. The difference being that as a W2 employee the employer will withhold taxes and pay employer taxes. Taking her $150,000 and dividing it by the 1920 hours gives her an hourly rate of $78/hour.īefore determining her rate Alice must know if she will be a 1099 contractor or work on the w2 of a staffing agency. Since Alice wants to take off 2 weeks for vacation and an additional 10 days for holidays she should reduce the yearly hours by 20 days * 8 hours/day = 160 hours. There are 40 hours per week and 52 weeks per year so a full year with no time off would have 40×52 =2080 hours. ![]() She wants to figure out what her equivalent hourly rate would be as a contractor.įirst she should take her 150K salary and divide that by the number of hours she plans to work in the year. You can successfully build benefits and paid time off into your contracting rate and feel comfortable that your contracting gig will be at least equivalent to a fulltime salary plus benefits.Īlice is a full stack developer who has just left a fulltime position where she was making 150K with 2 weeks vacation, medical benefits, 401K. The benefits and paid time off are not FREE and your fulltime employer will pay a lower salary to cover those things. However, you can receive a much higher hourly rate on a contracting job then you would on a fulltime job. Many people may shy away from contracting jobs because they often do not offer paid time off or benefits. A recent study suggests that by 2020, 40 percent of America’s workforce will be contract, temporary or self-employed workers. However my accountant's view is that they don't think that I'd have a very strong case if HMRC looked into it.As more and more companies look to hire contractors instead of full time employees to get work done you may find yourself considering a contracting gig for the first time in your career. So 60% of 16 months comes out at 9.6 months which is (just) less than the 10 months gap. I asked our accountant whether this was a long enough break to enable me to claim expenses again - now their response was that I needed to have had a break for at least 60% of the time spent there. ![]() If I had continued with that client past that date I would of course have stopped claiming travel expenses.ġ0 months later I started another contract with the same client, at the same site as before. I was claiming travel expenses throughout my time with this client. The last contract ended virtually 24 months to the day that I started my first contract with them. I had several contracts (on site) with a client over a 2 year period, 16 months in total with gaps in between. I haven't seen this scenario discussed before so here goes.
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