[Info-vax] HP contract paying a whopping $55/hr on-site in Irvine CA

[FrankS]

On Jan 1, 11:27 am, David J Dachtera <djesys... at spam.comcast.net>
wrote:
> Well, not sure how you figured $52K. Like another poster, I make it
> closer to $110K.

You need to answer a bunch of questions to come up with a reasonable
salary estimate.  Some people answer these differently than others,
and that's why there's so much variability in how people determine an
equivalent salary for a given hourly rate.

Start with the basics:  How many true working hours are there in a
calendar year?  We have to make assumptions about things, such as
excluding workaholics that put in 12 hour days in a salaried position
without any balancing compensation.

a) A salaried employee working as a software developer is likely to
get a minimum of two weeks paid vacation.  Some are fortunate to get
three, four, or more weeks.  In some European countries the minimum is
five weeks.  As a freelance developer, how much unpaid, unproductive
vacation time would you allow yourself?

b) In the USA there are 10 Federal holidays, which is paid time off
for salaried employees.  Again, some are fortunate to get more.  I
don't think it's legal to offer fewer.  As a freelance developer, how
many unpaid, unproductive holiday days would you allow yourself?

c)  Most salaried employees are allowed some amount of paid sick
time.  The minimum "standard" seems to be five days per year (although
the average is 10 days).  Again, some get more, some get less.  As a
freelance developer, how many unpaid, unproductive sick days would you
allow yourself?

d) Most salaried employees are allowed at least two paid rest/coffee/
cigarette breaks during a work day.  The duration and number of those
breaks varies.  In addition, lunch breaks may be considered paid or
unpaid.  As a freelance developer, how many unpaid, unproductive rest/
coffee/lunch breaks would you allow yourself?

Now comes the mathematics.  There are 52 weeks in a calendar year.
Deduct paid vacation time, paid holidays, and paid sick time.  That
will yield the number of actual working weeks in the year.  For
example, if you only allow yourself two vacation weeks, ten Federal
holidays (2 weeks), and five sick days (1 week) then there are only
(52 - 2 - 2 - 1) = 47 working weeks in the year.

There are five work days in a week, so multiplying working weeks by
days per week gives us (in this example) 235 working days per calendar
year.

Next comes the real tough one: working hours per day.  Is it really
eight hours?  I'd say unlikely if you're being honest with yourself.
In a 9am to 5pm work day, there are at least two 15 minute paid rest
breaks, which gives us only 7.5 hours of productive time.  How long do
you take for lunch?  1/2 hour?  One hour?

For the sake of this example, let's say there really are eight working
hours in a day.  That would give use (235 * 8) = 1880 working hours
per calendar year.  I'd say this is optimistic, and chances are the
work day is really only seven hours long, which would yield only 1645
working hours in the year.  In addition, there are probably more like
10 sick days and three week vacations as the "norm", particularly for
professionals in our industry.

However, no matter how you slice it there are fewer than 2000 working
hours in a year, which means $55/hr cannot possibly translate to an
equivalent salary (or annual income) of $110k/year.

We also haven't even touched the surface on expenses incurred by a
freelancer that a salaried employee doesn't consider.  For example,
right off the top of that hourly rate comes (in the USA) the Social
Security tax.  Salaried employees only pay half the tax due, the rest
being contributed by the employer.  Freelance consultants have to pay
the whole thing.  So the $55/hr is really closer to $51/hr (allowing
for the extra 7.65% that goes straight to the government, until the
annual maximum is reached).

There's also health benefits.  Most salaried employees in our industry
get a substantial discount on health care costs, paid by their
employers.  Freelance consultants don't get that: we have to pay the
whole thing ourselves.  The national average (from ahrq.gov, 2004
data) shows that employees only pay about 18% of their health care
premium, with the employer picking up the remaining 82%.  The average
premium for an individual policy is $3664/year (also from ahrq.gov,
2005 data).  That means a salaried employee is getting approximately
$3000/yr in additional compensation on top of their salary, whereas
the freelance consultant is paying out that additional $3000/yr from
their gross income.  (Needless to say, if you look at the numbers for
a family plan the amounts are significantly higher.  The average
family plan premium in 2005 was $5668.)

Some consultants (like Seasoned_Geek who started this topic) will
travel away from their home for contracts.  That means there are
travel and lodging expenses that have to come out of that hourly
rate.  There are also other expenses paid by a freelance consultant,
and/or benefits received by a salaried employee, that reduce the
effective income of a given hourly rate when compared with an annual
salary.

If you're a consultant and you're thinking that $55/hr is the same as
earning $110k/yr in a salaried job then you are living in a fog.