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Contractor Rates and Self-Employment Tax
Benefits & Compensation
Contractor Rates and Self-Employment Tax
Exchange ideas about health plans, retirement, work/life benefits, and employee assistance.
The self-employment tax rate is 15.3%, consisting of 12.4% for social security and 2.9% for Medicare. There are a number of ways to estimate contractor rates from salaries. Would it be accurate to inc
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Forums » Topic Forums » Benefits & Compensation » Contractor Rates and Self-Employment Tax
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Contractor Rates and Self-Employment Tax
posted at 10/23/2008 9:16 AM EDT
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Posts: 42
First: 3/13/2007 Last: 6/8/2010 |
The self-employment tax rate is 15.3%, consisting of 12.4% for social security and 2.9% for Medicare. There are a number of ways to estimate contractor rates from salaries. Would it be accurate to include the self-employment tax as an additional markup in estimating contractor rates?
Also, does anyone have a table/formula for converting salaries into contractor rates that lists all components used in the markup? Thank you! |
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Contractor Rates and Self-Employment Tax
posted at 10/23/2008 10:24 AM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
I would definitely include at least the employer paid part (1/2) of FICA in any markup. But the employee paid part (1/2) is the same either way -- whether an employee or a contractor.
I would also include the cost of any insurance required of the contractor (workers compensation, liability, property, EPLI, E&O, etc). There also tends to be a pay differential just to the "unstableness" of contracting...the fact that most view it as more unstable and more risky than employment (when truly it may not be). Also many times contracting involves traveling outside the hometown/state which could bring in another pay differential. It is hard to quantify as an exact formula as there are many things that play into any one rate. |
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Contractor Rates and Self-Employment Tax
posted at 10/23/2008 10:44 AM EDT
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Posts: 2442
First: 2/12/2000 Last: 9/14/2011 |
Beyond the obvious costs contracting markups also are a factor of the skills being contracted for. Here are a few examples of markups or multipliers on base pay. (only showing examples for explanation purposes)
Clerical staff-50% Technicians-75% Engineers-100% IT expertise- 150% |
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