Contract-to-hire pricing?

[Geoff Hart <ghart -at- videotron -dot- ca>]

Felice Albala wondered: <<Is there a formula of some kind to determine 
a dollar amount when going from consultant to full-time employee?>>

Two main factors. First, most freelancers set their hourly rate high so 
as to provide the desired total income despite periods with no work. 
For example, if you base your total earned income on 48 weeks of work 
per year (i.e., 4 weeks of vacation), but expect to earn nothing during 
8 weeks of the year, your total salary wouuld be based on 40 weeks of 
work per year. As an employee, you'll probably be working 48+ weeks, so 
your pay per week is lower for the same total salary.

Second, fringe benefits (pension plan, health care, etc.) are 
expensive. The "overhead" for employing someone ranges between 30% and 
50% in my experience (Canada), depending on how lucrative these 
benefits are. The personnel director at any large company can tell you 
the range of rates in your area. As a freelancer, you build this 
overhead into your hourly rate to ensure that you can afford to 
purchase these benefits yourself. As a wage slave, the employer covers 
them, so your hourly take-home pay appears lower, even though your net 
income is the same at the end of the year.

<<Also, can a higher salary be negotiated if health benefits are not 
needed (or is that just my wishful thinking)?>>

Wishful thinking. Very few companies are flexible enough to offer 
different benefits packages to each employee. In most cases, they need 
to ensure that everyone is (for example) part of a health or pension 
plan to ensure that they have the minimum number of employees required 
to qualify for or fund that plan. In other cases, they simply lack the 
administrative staff to be able to treat everyone differently, and 
refuse to make the effort to do so.

It never hurts to ask, but don't expect to succeeed. What you can try 
during salary negotiations is to state proudly that you are currently 
earning $X per hour on an annualized basis, and expect to earn no less 
once you're employed full-time. If the gods of Personnel are smiling on 
you, they'll offer you a salary based on that hourly wage, even though 
that wage includes all the aforementioned padding (vacation, downtime, 
benefits). If not, they'll still offer you $X minus the cost of your 
benefits if they want to hire you.

--Geoff Hart   ghart -at- videotron -dot- ca
(try geoffhart -at- mac -dot- com if you don't get a reply)


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