FTE salary to contract numbers

[doneby35]

If anyone has experience with w2 contacts, I'm wanting to make sure my numbers are correct. I'm currently a full time salaried employee but I have another fully remote opportunity that might work out, however according to the recruiter, it's going to be a minimum of a 1 year contract with a possibility of renewal or full time hire. In trying to figure out if the offer at least matches/or is better than what I currently make as an FTE, here are the numbers I put together:

Current full time salary + bonus: $145,000
4 weeks of PTO: 20 days + holidays: 9 days = 29 days = 232 hours (28 days x 8 hrs)
Assuming 40 hours per week of work and 52 weeks per year = 2080 hrs (40 hrs x 52 weeks) of work without PTO and holidays
Hours of work with PTO and holidays: 2080 hrs - 232 hrs = 1848 hrs

Considering all of the above, contract hourly rate should be: Salary / Hours of work with PTO and holidays ($145,000 / 1848 hrs) = $78.5

In addition, benefits in my current job are:
Health insurance: $15,000 per year for a family of 2
401k match: $5,000
Total benefits: $20,000 or $11 per hour ($20,000 / 1848 hrs)

Adding these up, the contract hourly rate should be: $78.5 + $11 = $88.5 (this rate would be to match my current salary)

Am I doing this correctly?

[miked]

You are missing the part of your taxes that your current employer pays that you would be paying as a self-employed person: 6.2% (SS) + 1.45% (Medicare). I'd bake that into any calculation about equivalent rates.

[BiggerFishToFI]

I think you are low. The general rule of thumb is 2-3x your hourly as a salaried employee. At $145k that's $140-$209/ hour.

Not sure what you do, but what about taxes, equipment / software / travel expenses / insurance / licensing costs, etc?

[bacchi]

If you're going through an agency, there's no way you'll be making $140/hour. The agency takes its cut and it's large.

[doneby35]

You are missing the part of your taxes that your current employer pays that you would be paying as a self-employed person: 6.2% (SS) + 1.45% (Medicare). I'd bake that into any calculation about equivalent rates.

It's through a staffing agency, so I wouldn't be paying the additional 7.65% tax for social security and medicare.

[doneby35]

I think you are low. The general rule of thumb is 2-3x your hourly as a salaried employee. At $145k that's $140-$209/ hour.

Not sure what you do, but what about taxes, equipment / software / travel expenses / insurance / licensing costs, etc?

I'm not sure those numbers would be possible? maybe that would be reasonable for an independent contractor?

[Just_Me]

So you are not actually going to take this as an independent contractor but as an employee of the staffing agency. You may be limited to their benefits, or whatever the contract that they are middle manning limits as far as pto goes.

The whole contract thing means somebody has a project and there's a limited duration they need to keep somebody on. So if you take this just make sure that either a) the rate is high enough for you to take a risk on a 1 year contract, or b) really hammer out what the contract-to-hire deal is after the first year.

[AccidentialMustache]

Does PTO include sick time or is that a separate bucket? Any other misc times given (bereavement, new baby, etc) which you might use at your salaried gig? Is there expected overtime/what is the overtime rate/what is the expected hours per week?

I was a contractor position similarly when switching from IT to Software Eng, but it was a huge pay bump anyway because I also went from public to private at the same time. Same "1+years or hire" and I was a hire (as was the guy who got the contractor spot before, and after, me).

[doneby35]

All good. Thank for the responses. I ended up figuring out that it's not really better than my FTE salary. I'm rejecting it. They are also doing something strange when it comes to the pay, instead of an hourly rate, they have a fixed daily rate. I'm in IT where it's not unusual to work more than the typical 40 hours/week, so that probably only works in the staffing agency's favor and not mine.

[ender]

All good. Thank for the responses. I ended up figuring out that it's not really better than my FTE salary. I'm rejecting it. They are also doing something strange when it comes to the pay, instead of an hourly rate, they have a fixed daily rate. I'm in IT where it's not unusual to work more than the typical 40 hours/week, so that probably only works in the staffing agency's favor and not mine.

This is often the case fwiw, because people don't do the math. Which isn't really surprising given that the companies have way more awareness of the costs of labor and what they are being paid than the individuals do.

I suspect a large percentage of people who go salaried --> hourly (either 1099 or through an agency) end up losing money on the whole.

[doneby35]

All good. Thank for the responses. I ended up figuring out that it's not really better than my FTE salary. I'm rejecting it. They are also doing something strange when it comes to the pay, instead of an hourly rate, they have a fixed daily rate. I'm in IT where it's not unusual to work more than the typical 40 hours/week, so that probably only works in the staffing agency's favor and not mine.

This is often the case fwiw, because people don't do the math. Which isn't really surprising given that the companies have way more awareness of the costs of labor and what they are being paid than the individuals do.

I suspect a large percentage of people who go salaried --> hourly (either 1099 or through an agency) end up losing money on the whole.

Funny thing is they thought it was a great rate and were telling me that all their other contractors (including some that are 1099) are happy with those types of rates, so you might be completely right with that assumption.