Fixed salary vs. Contract rates

[srothman]

I have an opportunity to move into a new position, although it is a contract-based position. I was asked what my expected rate is, and to be honest, I have no idea what to say.

Sure, I can go and simply split my current TCOE and come up with a figure, but how should I factor the additional risk into the equation? Surely, it has to be considered?

Any guidelines/suggestions will be very welcome.

 

[Joker]

Take what you would expect as a salary, add at least 30% and divide that by the number of hours you'll work in a month.

The reason I'm saying add is:
- You'll have to pay for your own medical aid/retirement annuity etc
- You won't get paid for any sick-leave, public holidays or any time-off
- As a contractor you can be let go without any warnings or notification, you need to start saving a buffer for that eventuality. A common rule for contractors is to get at least 3 months salary saved asap.

I would also ask what the maximum number of hours you can work during a month is, get it in writing, so you know what your monthly limitations are.

 

[srothman]

Take what you would expect as a salary, add at least 30% and divide that by the number of hours you'll work in a month.

The reason I'm saying add is:
- You'll have to pay for your own medical aid/retirement annuity etc
- You won't get paid for any sick-leave, public holidays or any time-off
- As a contractor you can be let go without any warnings or notification, you need to start saving a buffer for that eventuality. A common rule for contractors is to get at least 3 months salary saved asap.

I would also ask what the maximum number of hours you can work during a month is, get it in writing, so you know what your monthly limitations are.

Thanks. All good points to consider.

 

[Joker]

Some other thoughts on contracting:

When I first moved contracting the project ran out of budget after 8 months (long story), and that was it.. I luckily found another position 2 weeks later but that was 50% of my salary gone for that month until I could start billing again.

Since you appear to suddenly be earning more than you were before you can easily find yourself adjusting your lifestyle, leaving no room for the points I made above.

Also since I've been contracting the longest consecutive time-off I've had is about a week in 6 years, since sitting around at home is suddenly 'costing you' - making it hard to justify a break even if you need one..

Having said all that I do enjoy contracting, you get way more freedom, work on more varied projects, and often come across more opportunities because of this.

 

[Thor]

I am way to afraid to go contract based unless I am much older and have enough saved up in case the contract work dries up.

I hate the uncertainty.

 

[SauRoNZA]

Remember that you don't get leave so need to compensate for that.

Probably also not sick leave.

When you don't work you don't get paid.

Then there is also the question mark of whether they guarantee hours or is it a "we use you when we need you" factor.

 

[srothman]

Right, I think I might have positioned this wrong (Contract might not have been the right term).

The position is for 12 months, renewable. Apparently the previous incumbent was there for the last 5-odd years.

The hours of work are pretty standard and fixed as pretty much a 09:00-17:00, Monday to Friday type thing, but I will get more clarity on this for sure, as well as the other things mentioned (sick leave, etc.)