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Thu 27 Dec, 2007 09:13 am
It has been hinted at that the company I'm freelancing at right now is going to offer me a permanent position soon. Therefore, I want to figure out how much money companies pay for freelance workers compared to how much they pay for permanent employees, so that I might be in a better position to negotiate. I have come up with some figures here, but I want to see whether you good people can see any problems with how I'm figuring it.
I'm not going to tell you all exactly what I make, but for the sake of round numbers and easy math, let's say they are paying $50/hour for my services right now as a freelancer.
That works out to about $100k yearly, averaging a 40-hour work week with two weeks of vacation.
What would be the yearly salary equivalent of that, taking into account benefits, vacation/sick pay, holidays, and 401k matching?
My father owns his own small business, and for a single employee, as far as I know, he was recently paying in the neighborhood of $750/month. So that works out to about $9,000/yr. As far as vacation/holiday/sick time, I figure that would be the equivalent of about 4 weeks each year. At fifty bucks an hour, that comes out to about $8,000/yr.
So, without counting 401K money, that's $17,000 ($9,000 for healthcare + $7,000 for vacation time) per year, which means that my equivalent salary would be 83,000 minus any 401K matching.
I think they match your 401K savings up to 5%. To figure it roughly, a permanent salary of $79,000/yr would give me $3,950 as an amount for what they would give me for my 401K, which adds up to 82,950. Close enough.
So, in conclusion, that would mean that a permanent salary of about $79K would be roughly equivalent to $50/hour on a freelance basis.
Does that make sense? Should I even count the 401K, since it only goes into effect after five years? Do these other numbers sound right? Am I forgetting anything?
I forgot to add in worker's comp. My father tells me that he pays 11% of the employee's salary for that. How the hell do I figure that in here? Ugh. My head hurts.
And now my dad tells me the company has to match the employee's social security payment. Oy.
I thought you despised where you're working. Or was that an earlier job?
No, that was an earlier job. Actually that was many earlier jobs. This one is tolerable. For the time being. The fact that they don't pay any OT once you get hired really bugs me though. It could be a deal-breaker, depending on what I can squeeze out of them, money-wise.
9+7 is 16 -- it's only a grand difference but don't short yourself. In your shoes I would start negotiating around 85 and not count the 401K matching. Then if they offer you less you can take the matching into account to determine whether it's worth it.
Oh yeah, thanks for the correction, FD. These numbers are hypothetical, so they don't represent the true numbers. I'm just trying to come up with a basic formula to figure this out.
It's more complicated than I was hoping it would be.
Maybe there is some other way to approach this.
kickycan wrote:No, that was an earlier job. Actually that was many earlier jobs. This one is tolerable. For the time being. The fact that they don't pay any OT once you get hired really bugs me though. It could be a deal-breaker, depending on what I can squeeze out of them, money-wise.
Some things to consider:
Are there upcoming projects that will probably require a lot of OT? If so, are you willing to take the chance that they may be looking to cancel the freelance contract to save the OT money by hiring you?
If they offer and you decline, will they still pay your freelance fees or will they make the offer to someone else and eliminate your freelance chores?
Is the OT pay worth the loss of the freelance contract when they hire someone else?
The economy is in decline. Will the security of your freelance contract survive that or is it better to forfeit the OT for a relatively secure paycheck?
I think your approach is valid. The only other thing to consider is whether you enjoy the work and the environment and if so, how much that is worth to you.
What about health insurance premiums?
You need to add in the portion the employer pays.
Just take the 100k figure and deduct the yearly health insurance premiums,
the vacation/sick pay, and other benefits you'd receive (profit sharing etc.)
So let's say your
health care is $ 800/month = $ 9600.00/year
sick pay 1 week $ 1923.00
vacation 2 weeks $ 3846.00
deduct this from your 100k and you've got $ 84,631 gross salary.
Any other benefits you'd receive need to be deducted as well.
401k might have restrictions that you have to be a fulltime employee
for at least one year. You have to check this out.
Here is a chart that might be helpful.
Kicky would have to find out what the amount the employer is paying though.....Don't know how easy it would be to get them to divulge that.
Also, since he didn't even bring up the insurance aspect, I don't know if he had just forgotten about that, or is already buying his own health insurance (as a freelance) and intending to keep it that way.
That's true, Chai, and health insurance is a big factor in determining
salaries.
Ah, yes. Lots of good info here. I don't have the time or the desire to figure it all in right now, but thanks.
Oh, and that figure I posted in my first post of $750 was for health insurance. I can see that I didn't make that very clear. But I'm a single person, so it would be a lot cheaper than that, I would think. Right now, on my own I'm paying a bit over $400/month for health insurance and dental coverage. I assume that since this is a multi-national company with thousands of employees that they probably get a better rate than that.
I'll come back to check this out. THANKS EVERYONE!
I've seen that 33% overhead figure before. Depending on what benefits they offer you could use 25 - 33% overhead for what it costs them to have an employee.
Using your $100,000 base, they would be coming out even if they offer you anywhere between $67,000 and $75,000.
Is 2 weeks vacation standard in USA?
In general new employees get two weeks vacation. Not always, but yeah, two weeks is pretty standard. Unless you work of a non-profit. Then it's usually more. I don't know how much more, but I know that two weeks vacation is just **** in my book.
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