W2 vs 1099 and what's really important (was: Pay rate for contrac tor with no experience)

["Humbird, LenX" <lenx -dot- humbird -at- intel -dot- com>]

When talking about the total *value* of compensation to the employee... the
salary makes up about HALF of the total package. 

What is included in that other half? 
Here are some things I thought of in the last ten minutes: 
* Paid time off for - vacation, holidays, health, govt. & armed forces,
training, committees, volunteering
* Perks - stock options, bonuses, 401k contributions, internal training and
continuing (academic) education, retirement plan, memberships & clubs, 
* Insurance - health, vision, dental, mental, accident, long-term, etc.
* Office - furniture, supplies, capital equipment, copiers, faxers, data
services, etc.
* Infrastructure - secretarial, administration, HR, payroll, legal,
marketing, sales, etc.
* Real estate - building, parking, heating, lighting, water, phone,
security, garbage.
* Other business expenses - SSI employee tax, FICA, real estate taxes, B&O
tax, city/state/county tax, public transportation taxes, environment-related
taxes.

This is really important to show if you're W2-ing it. Because if you find a
job that you really like, but the pay is not all that great, it is totally
allowable to negotiate for some non-salary benefits - like more time off, or
an executive-level health plan. They can and will do this if they want you
bad enough. 

But if you're 1099-ing your way to ecstasy, contracting will be a bitch
until:
1. you become an expert at what you do (to make money), 
2. learn how to market yourself, and most importantly, 
3. learn to be skilled at bidding or negotiating a decent hourly rate. 

I'm not quite there yet with negotiating, so contracting (read: agency work)
is still a biting me. But not as bad as it used to. 


-----Original Message-----
From: McFerren, Sean [mailto:sean -dot- mcferren -at- et -dot- pge -dot- com]
Sent: Wednesday, February 16, 2000 8:27 AM
To: TECHWR-L
Subject: RE: Pay rate for contractor with no experience


Correct me if I'm wrong, but I read somewhere that
20%-30% of a permanent employee's compensation is
derived from non-salary benefits (401k matching,
health, dental, etc.). Contractors, both independent
(1099) and W-2, almost never receive these benefits.

You also have to consider that contractors have
down-time. Your calculation of an hourly rate into
an annual salary assumes the contractor will be
employed for 50 weeks out of the year. It's very
unlikely that will be the case.

An employer obtains staffing flexibility when hiring
a contractor. This flexibility is a benefit for which
the employer must pay, since it's a liability for the
contractor.