[jm962011]

Anyone have any contract employment tips? I know the individual has to pay both portions of the withholding and SS tax.. it is like being self-employed. So if a full-time, perm rate was $28 an hour, would you be able to ask for more per hour as a contractor?

[Missy]

Lets just say if a temp agency is paying a temp $28/hr, they're charging the client north of $50/hour. Short answer is yes you can ask for more as a contractor.

Long answer, contracted employees to be TRULY contracted (ie the employer pays none of the employment taxes) cannot have their work directed by the employer (they can't tell you where you have to work, what hours, etc), If they direct your work it is illegal (for them,not for you) to pass along the tax burden to you. Many companies will try to get away with this to save money and save on their unemployment insurance premiums, or worse to avoid having to offer benefits, so make sure you're not agreeing to something for their benefit entirely out of desperation. I may be off, but it sounds like you've been job searching a while and someone is offering to bring you on as a contractor, sends off all kinds of warning bells for me.

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[jm962011]

Mla, thanks for the reply, I always appreciate your feedback. I am familiar that they can't direct the hours or where I am doing the work from. I also believe I would be expected to provide my own materials (laptop, copier, etc.) in a true contractor position.

I actually applied for the position and it isn't with Rober Half, they just need some extra help with a project which is what I have 3 years of experience in (not individual income tax season). This would allow me to have some money coming in while waiting on a few other things to pan out (waiting 3 weeks for another interview) and my old VP of tax said she would reach out to her public accounting contacts as she recommended I go to public accounting for the challenging environment I am looking for.

When I was talking to the internal HR recruiter, she kept mentioning this is a W-2 contract position (compared to a 1099) and I just did some research this morning, with a W-2, the company pays their portion of the taxes like a full-time, permanent position would.

I guess my question was if I am doing a 1099 contract position and making estimated tax payments, do you get to ask for more per hour since I have to pick up the entire withholding and SS contributions?

[KCCPA13]

You can ask for more hours but they usually have a cap of how much hours you can work in a week unless there is some type of approval from management. I did contracting work before and they told me I need further approval if I work more than 40 hours/week. Usually, you would ask for a higher rate. If your ideal rate is $28/hour, then you should figure out what the pre-tax amount needs to be for you to get your $28/hour rate after tax.

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[Missy]

(Remember when you file taxes as self employed half of the self employment tax, 7.65% will be deductible as an expense so you're only paying taxes on 92.35% of your income.)

If you have a particular skill set that isn't likely to be filled by someone who will work for less, you can fully burden your hourly rate, heck you can tell them as a 1099 vendor you'll work for $75-$100 per hour. The question is are they willing to pay that, you don't want to go outside their ballpark.

A full time employee who makes $28/hour costs the company about $40/hr fully burdened ($28 salary, plus taxes of $2.06/hr, plus insurance figure about $4-5 per hour, etc.and other items like FUTA, SUTA,Workers comp that are negligable at an hourly rate) if not slightly higher. However not all employers consider the full burden when hiring contractors. They arbitrarily decide an amount they want to pay and stick their heels in the ground.

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[Anonymous]

Contract W-2 employee is very different from 1099 contractor. Sounds like most people in this thread are assuming contractor, which is 1099. If they're paying you as W-2 employee, but hiring you as a contract employee (so, only hiring you for 3 weeks, rather than at-will with the expectation of an ongoing relationship), then that is not considered self-employed, and you will not have to pay the withholding tax or pay both parts of the SS and Medicare tax.

Contract W-2 employee is just like an employee, except you're committed to stay at the employer for a certain length of time, and they're committed to keep you for that length of time…and you both have no expectations beyond that length of time. The risky part of it is that you're out of a job when it's up, so if it was, say, a year-long contract, then you can't leave in 3 months without breaking your contract, but in a year you've no longer got a paycheck. However, it sounds like you're talking about something short-term that you expect to fill a gap while you wait for a permanent job, so that's probably not a concern.

As for asking for a higher rate of pay, I think the only way you could logically expect that would be if it was a longer term contract that you were taking on a risk of future non-payment (if you couldn't find a job after the contract concluded) and they would need to expect to pay some extra to get people to take on that risk. However, again, in this situation, I don't think that applies.

[jm962011]

Thanks everyone! Definitely a few more things to think about! 🙂

I actually read a few articles that suggest “contract” or “consulting” employment is the way the world might be going since nothing is guaranteed or secure anymore.

[Missy]

I think it was acknowledged pretty well that W-2 is different and the question was IF a 1099 contractor instead………

My husband is and has been for the last year a contractor (delivery guy). The company that contracts him has been and I believe currently IS being sued by contractors who are and believe they should be W-2 employees. I think the company has made enough changes that they are not directing my husband's or the other drivers' work anymore and believe they will win this lawsuit. The one nice thing is he makes damn good money and very little of it is taxable because of the .575 cent mileage rate and the fact he drives nearly 200 miles a day. (Yes I have a swanky spreadsheet that details his beginning and ending business miles for each day)

Contract and consulting employment is just too risky for me personally. Between the fact that I'd be out of pocket for 100% of my medical and dental insurance,the fact that there is no unemployment for a contractor if they're let go, no workers comp or disability (unless you buy your own disability policy) god forbid you're in an accident or become ill and unable to work, etc. Some people can be WILDLY successful self employed but that is their reward for taking huge risk.

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