[clug] [OT] Contracting hourly rate calculation

[Jacinta Richardson]

Chris Henderson wrote:
> I understand that the calculation of hourly rate should include
> superannuation, annual leave, sick leave, payroll tax exempt fees
> (excld. GST) and anything else that I'm missing but I'm not sure how
> to come up with an hourly rate based on my current full-time permanent
> salary.

It depends on what you're doing.  Are you contracting to an agency/business such
that you just turn up and work, or are you likely to have to handle your own
paperwork, invoices etc?  Some people say contracting when they mean consulting
(and visa-versa).

It's important to be aware that full time jobs generally break down like this:

	Wage			Hourly rate
	40,000			$20
	50,000			$25
	60,000			$30
	70,000			$35

once leave has been taken.

If you're contracting such that you just turn up and work then all you really
need to do is take into account sick leave, holidays, superannuation, any
management fees and personal development.  Dale's calculations cover this quite
well, pick your current or preferred full-time permanent salary and choose an
hourly value with factored loadings that will approximately match it.  For example

	Wage			Hourly rate
	41,485			$30
	48,984			$35
	56,481			$40
	63,979			$45

(Note I haven't taken into the tax and Medicare levy, because I hadn't done so
with the previous wages either.).


If you're considering consulting then things are quite different.  Typically you
need to charge 3-4 times the hourly rate that you'd accept as a full time
employee.  This is to help you cover your higher costs.  You need to do (or pay
someone else to do) all of your own business management (books, invoice creation
and chasing, meetings with clients who don't generate work...), pay for your
business' expenses (accountant, utilities, rent...) plus earn enough to cover
sick leave, holidays, superannuation and business quiet times.  So, for example,
to personally earn $50k a year after putting in a normal year's work into your
contracting business you'll probably need to charge something like
$75-$100/hour.  This is why consultants are so expensive.

You may be able to use the above and your recent experiences to get an idea of
what a comfortable yearly wage might be.

WARNING:

If you're intending to multiple clients at the same time, make sure that your
clients are aware of this.  For example, tell clients that if they schedule
meetings for one of your "off" days then you can try your best to make it, but
it's not a guarantee.  If you're not working full days for a client then accept
that you will be losing available working time in your weeks anyway.  For
example you might give a client 20 hours a week, that doesn't mean you
necessarily have 20 hours a week for your other contracts, it'll be more like
10-15 hours a week after commuting, running late etc.  If this is likely to be
an issue, ensure that your hourly-wage rate compensates for those lost hours.

All the best,

	Jacinta

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