Full Time Salary vs Contract Hourly Wage

The rule of thumb I've been told in the past is full years salary + 3 months is about the minimum for contract.

It depends. Employees tend to see contract wage as a premium wage that offsets lack of vacation, benefits and job security. Employers see it as a liability measure and tend to forget that it comes at a cost to the employee.

What it's "supposed to be" often doesn't come into play.

The job I'm interviewing for tomorrow is a 1yr contract position, with possibility for permanency after. I don't expect any sort of premium here, and in fact would expect a raise if offered a permanent position. The reasoning here, is that the 'contract' is an ersatz probation period.

when you say you would expect a raise when going permanent would you think you would get less hourly? you going full time would cost the company more money.

Yes, I would expect to get less hourly, depending on the company and whether I was just doing a job, or whether I wanted to work there permanently.

Ascott wrote: ↑

Aug 14th, 2012 4:31 pm

The rule of thumb I've been told in the past is full years salary + 3 months is about the minimum for contract.

hmmm maybe im not getting enough contract money...for a salary i want to pay myself in.

1) i have a corporation
2) corporation bills the company x amount for each hour
3) the company pays my invoices and goes to my business account.
4) then i plan to pay myself a salary of 65,000

So does your formula suggests that i should be getting 81250k from my corporation if the job paid 65,000 fulltime salary?

FigNewton wrote: ↑

Aug 14th, 2012 4:16 pm

I was hoping to get some insight on Full Time Salary vs Contract Hourly Wage and what the equivalent Contract Wage should be if one were supposedly making 65,000 a year and getting lets say health benefits and 2 weeks vacation. How much the job should pay if you were a contract worker?

It used to be "same digits" rule. 65K permanent used to be considered equivalent of 60+ per hour (65 and 65, see). In today's marketplace, the connection is lost, but I'd still say it should be 50+ for 40 hour week. YMMV, of course.

hmm perhaps im over valuing the position im holding. I guess the only benefit is that i own the corporation they are contracting with rather than me billing a recruitment agency.

Our company (an EPC) has almost an equal amount of staff and contractors and (most) people are allowed to switch freely if they want.

The formula we use is
(Annual Salary)/2080hrs = staff hourly wage
(hourly wage)*26% = new contracting hourly wage


The 26% will vary from about 20% to 30%. That percentage takes into account you losing your vacation, sick days, health benefits and any other benefits you may have.

So you should expect about $39.40/hr (annual salary ~ $78,800, assuming you work 2000 hours/year as you lost your stat holidays)

I hope that makes sense.

As a contractor you may want to look into getting an accountant to help with taxes.

NorthYorker wrote: ↑

Aug 15th, 2012 11:18 am

It used to be "same digits" rule. 65K permanent used to be considered equivalent of 60+ per hour (65 and 65, see). In today's marketplace, the connection is lost, but I'd still say it should be 50+ for 40 hour week. YMMV, of course.

Execs also used to use their expense accounts to buy drugs - doesn't mean it makes sense. Unless it involves a significant investment (equipment,materials,etc) that is not reimbursed, what's your case for getting paid 50% more than a salaried employee? Sorry, but a the extra paperwork and admin costs 5k max (and that's extremely generous) and job security on a 65k job is not worth 30k.

tylaw83 wrote: ↑

Aug 16th, 2012 12:21 pm

what's your case for getting paid 50% more than a salaried employee?

There's a bunch:
1. Contractors have zero benefits, and those expenses add 30-80% to cost of salaried employee, depending on how generous said benefits are.
2. You can hire and fire contractors at will, therefore achieving extreme flexibility in your workforce management and reducing severance payments to zero.
3. Contractors are, for corporate bean counters, part of "operating costs", same article as parts (or gilded toilet paper for CEO's personal washroom) they buy from suppliers, therefore corporate balance sheets looks so much better with less money spent permanent staff. It directly affects share prices.

I'd say 40-50% premium.

PrettyMao wrote: ↑

Aug 16th, 2012 11:32 am

Our company (an EPC) has almost an equal amount of staff and contractors and (most) people are allowed to switch freely if they want.

The formula we use is
(Annual Salary)/2080hrs = staff hourly wage
(hourly wage)*26% = new contracting hourly wage


The 26% will vary from about 20% to 30%. That percentage takes into account you losing your vacation, sick days, health benefits and any other benefits you may have.

So you should expect about $39.40/hr (annual salary ~ $78,800, assuming you work 2000 hours/year as you lost your stat holidays)

I hope that makes sense.

As a contractor you may want to look into getting an accountant to help with taxes.

1+, this is what I understand too. The real benifit of being on contract is you will likely pay less on income tax. YMMV, depends on accountant and how you play with the numbers.

hdom wrote: ↑

Aug 16th, 2012 3:05 pm

1+, this is what I understand too. The real benifit of being on contract is you will likely pay less on income tax. YMMV, depends on accountant and how you play with the numbers.

Also you get to put in more hours if you choose to. I knew a guy who constantly put in 50hr/week and charging the company for it. I also wnow a extreme case where the guy was contracting at 2 jobs (8-5pm and 6pm to 10pm) at the same time.

PrettyMao wrote: ↑

Aug 16th, 2012 11:32 am

Our company (an EPC) has almost an equal amount of staff and contractors and (most) people are allowed to switch freely if they want.

The formula we use is
(Annual Salary)/2080hrs = staff hourly wage
(hourly wage)*26% = new contracting hourly wage


The 26% will vary from about 20% to 30%. That percentage takes into account you losing your vacation, sick days, health benefits and any other benefits you may have.

So you should expect about $39.40/hr (annual salary ~ $78,800, assuming you work 2000 hours/year as you lost your stat holidays)

I hope that makes sense.

As a contractor you may want to look into getting an accountant to help with taxes.

Obviously you mean 126%, otherwise that's a pretty raw deal