The Money Mustache Community

Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: TheAnonOne on December 18, 2018, 10:00:54 AM

Title: 170k full time vs. 90 to 99 an hour?
Post by: TheAnonOne on December 18, 2018, 10:00:54 AM
Hello,

I've been doing contracting as a software guy for the better part of the last 10 years now.

Usually making 80 to 85 an hour as a w2 hourly and I've had clients approach me with full time offers everywhere from 100k to 130k

They never make sense to take because 85*1960 is around 166k.


Fast forward to my current client....

I've been making 90/h W2 and recently switched to 99/h Corp to Corp, so anywhere from 175 to 194k (though realistically it ends up less due to holidays being unpaid)

They gave me a FTE offer of 165k with 5 weeks of PTO and 5k 401k match and 3 to 5 percent raises yearly (hourly rarely gets bumps)


When I put it all together it looks like the FTE offer is actually around 2k more than I was making at 90/h w2 but 10 to 15k less than I might make as a c2c next year.

168k <old 90/h w2
170k <fte offer
185k <99h c2c(taxes figured already)

The obvious choice is the 99/c2c arrangement but after 1 5% bump the gap falls by half and after 2 years its equal. Not having to jump jobs, worry about downtime, and the very real possibility that the next contract is 10-15 bucks lower than this one are also pluses for FTE.


Just looking for thoughts on this. Take 10% more money for all the risk (maybe even make less after jumping contracts) or take the 165k principal software dev job and hope the raises / surprise bonuses close the gap?

(Side note: I do like the work and the office is 4.2 miles from my house, I biked to work a good amount last summer)
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: fell-like-rain on December 18, 2018, 11:04:47 AM
Isnít the rule of thumb that contractors need to make 50% more hourly than FTEs to break even? Double FICA taxes, no health insurance, no PTO, no bonus, no 401k match, possible downtime between jobsÖ If the difference is pretty small, Iíd go with full-time. (With the caveat that Iíve never worked on contract, so this is from hearsay, not experience)
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: TheAnonOne on December 18, 2018, 12:14:10 PM
Isnít the rule of thumb that contractors need to make 50% more hourly than FTEs to break even? Double FICA taxes, no health insurance, no PTO, no bonus, no 401k match, possible downtime between jobsÖ If the difference is pretty small, Iíd go with full-time. (With the caveat that Iíve never worked on contract, so this is from hearsay, not experience)

//A little off topic but...
In my experience, this figure is highly variable to the individual. I have never had a period of unemployment in nearly a decade but others, even in the same field have. For whatever reason, I present myself well, am aggressive enough on contract searches, and am good enough at what I do that downtime doesn't scare me much.

That being said, I USE-TO work 2500+ billable hours a year and consulting was >200k slightly (though my rates were less back then) I can't do that anymore mentally.

$99/hour * 2080 is $205,000 but after 4-6 weeks off it falls to $180-$185k. So if I was going to tell myself "No time off" I would be better off contracting still. Though the Wife and I are traveling more and it isn't realistic like it was for the first 6 years of my career to take 0 weeks off.

All that to say, most people probably need 50% more. I don't think I do, due to my skill-set, and ability to stay employed. I probably only need 20%->30% more, but the stress level is certainly higher.

//Back on topic

I think that my days of wanting to take on extra hours is waning as well after 10 years. It certainly was a different picture with student loans, no house, no nicer car, ect ect.
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: FreelanceToFreedom on December 18, 2018, 12:26:19 PM
I'd do the math on the tax implications. As a contractor, the new 199A pass-through deduction could be quite significant in your case, although that may be offset by increased FICA, health insurance, etc. If you haven't already, run the numbers to compare post-tax/post-insurance take-home pay.
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: TheAnonOne on December 18, 2018, 01:32:55 PM
Yeah, I have everything apples to apples in the OP
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: Assetup on December 18, 2018, 01:46:30 PM
Option C: negotiate a slightly higher starting rate so there is no downside at all(in a perfect world)
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: Assetup on December 18, 2018, 01:47:42 PM
I realize that probably isn't an option but always worth a shot.  Either way you are in a great position.  Congrats!
Option C: negotiate a slightly higher starting rate so there is no downside at all(in a perfect world)
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: TheAnonOne on December 18, 2018, 09:25:17 PM
I realize that probably isn't an option but always worth a shot.  Either way you are in a great position.  Congrats!
Option C: negotiate a slightly higher starting rate so there is no downside at all(in a perfect world)

I tried that for sure. Sounds like there is possibilities of bonuses and more raises in 2020. For 2019 there wouldn't be much movement.

I am leaning on going the FTE route, seems like after a year or two the COL increases alone would close that gap. . .
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: AccidentialMustache on December 18, 2018, 10:28:19 PM
Do you trust them to actually do that increase year over year, or will there be a "hard year" with minimal or no raises?
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: historienne on December 19, 2018, 07:42:57 AM
What about other benefits?  Health insurance, etc? 

I'd take the FTE in a heartbeat.  Several reasons:
1 - from a strictly financial perspective, the numbers seem to close to call over a 3+ year timespan - FTE is lower now, but likely to catch up/exceed in the future, however there is enough uncertainty that you can't make a clear call 
2 - FTE pegs your salary there for future employment (contracting is harder to compare, although certainly not impossible)
3 - more job security, if only because you would receive unemployment if laid off
4 - nicer psychologically to have the PTO guaranteed, and not to feel pressure to work instead of taking vacation
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: trollwithamustache on December 19, 2018, 08:10:08 AM
It looks like your contracting rate is too low!
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: TheAnonOne on December 19, 2018, 08:46:36 AM
Do you trust them to actually do that increase year over year, or will there be a "hard year" with minimal or no raises?

Eh, I give it a 80% chance. According to my boss they have never not had an increase in 23 years. Also, I've been very vocal about my intentions on closing the gap within a year or two.

I suppose I could always jump and return to c2c.
Title: Re: 170k full time vs. 90 to 99 an hour?
Post by: TheAnonOne on December 19, 2018, 08:49:56 AM
It looks like your contracting rate is too low!

Most contacts are in the mid 70s and I have been able to maintain mid 80s, if I had to drop to 75 to 80 I would be way under this FTE offer. I guess the fear of dropping in rate, even if its highly unlikely, is pushing me.