SERVING THE QUANTITATIVE FINANCE COMMUNITY

ithousekeeper
Topic Author
Posts: 33
Joined: March 28th, 2009, 11:09 pm

I've done some searching over the web on this, but really couldn't find anything that fully answers my questions.Since the question pertains to a finance job, I am hoping this question could be answered here.I am currently working in front office IT for a bank at 150K a year. In past years including bonuses, my total cash payments can go up to 200K+.If I convert to contracting, I know that I will lose the vacations, bank holidays, 401k matching, health benefits, etc. (To be honest - I would really only miss the 4 week vacations and 2 week bank holidays every year).The contract position involves the development of a new Java trading system. This contract position has the option to convert to full-time and could fetch up to $1000 or more per day.The question - is this a fair rate from what I have now as full time? Does this rate also cover the salary + bonus that comes with full-time employment? Could I get a higher rate?Thank you for your help. ElysianEagle Posts: 93 Joined: February 7th, 2012, 7:25 pm ### Full Time Salary to Contracting Rate go contract and bill the shit outta them. i had a number of colleagues where i used to work doin contract, and they agreed that even factoring in the fact that they had to pay for their own health insurance etc, they were still comin out ahead. the place i used to work at offerred an incredible 401k (matching upto a certain extent + profit share) and still they were makin more than most fulltimers at the same level.caveats: you might not be able to move up the ladder because the place you're working at might reserve leadership roles for full-time staff. also, there is somewhat less job security. if you're a single guy with few responsibilities or if your partner has a stable full-time gig that offers you both health insurance, then this would be a no-brainer. Last edited by ElysianEagle on May 22nd, 2013, 10:00 pm, edited 1 time in total. QuantCentral Posts: 45 Joined: January 24th, 2013, 9:16 pm ### Full Time Salary to Contracting Rate QuoteOriginally posted by: ElysianEaglego contract and bill the shit outta them. i had a number of colleagues where i used to work doin contract, and they agreed that even factoring in the fact that they had to pay for their own health insurance etc, they were still comin out ahead. the place i used to work at offerred an incredible 401k (matching upto a certain extent + profit share) and still they were makin more than most fulltimers at the same level.caveats: you might not be able to move up the ladder because the place you're working at might reserve leadership roles for full-time staff. also, there is somewhat less job security. if you're a single guy with few responsibilities or if your partner has a stable full-time gig that offers you both health insurance, then this would be a no-brainer.Forget about the leadership roles. There are not that many of those given the flat organizational structure. Job security could be an issue. But since the OP works in IT where contract jobs are the norm, he should not have difficulty taking up consecutive contracts. traderjoe1976 Posts: 1544 Joined: May 19th, 2006, 9:50 am ### Full Time Salary to Contracting Rate It really depends on the overtime policies of the company. If you are only going to bill for 40 hours a week, then full-time position with benefits is better. But if you can bill for 70 hours a week at$100 per hour, that is $350 K per year or$7 K per week before taxes. Then you can take all the tax deductions for retirement ($60 K per year), hotel ($20 K per year), travel ($20 K per year), car ($12 K per year), home office and equipment ($20 K per year), health insurance and healthcare for family ($20 K per year), pay salary to wife as secretary ($60 K per year). In this case,$350 K per year looks quite sweet. Otherwise, US government will take half your salary.
Last edited by traderjoe1976 on May 22nd, 2013, 10:00 pm, edited 1 time in total.

blycm
Posts: 28
Joined: July 3rd, 2012, 5:06 pm

### Full Time Salary to Contracting Rate

In the US you'll need to know if it is W2 or 1099. You'll be paying extra taxes directly if it is 1099. With a day rate you probably aren't going to be billing overtime, from there it should be pretty easy to estimate. If you take the same amount of vacation, then to break even, you'll probably need a contract rate 30-40% higher than your full time compensation.
Last edited by blycm on May 30th, 2013, 10:00 pm, edited 1 time in total.

rmax
Posts: 6080
Joined: December 8th, 2005, 9:31 am

### Full Time Salary to Contracting Rate

There have been a lot of these kind of posts on here recently. Key things are:Work out how much holiday you usually take + factor in illnessMultiply this by your day rateWork out the tax you are going to pay + factor in lack of pension, training etc as you will have to fund these yourselfNow look at your take home and see if it matches your perm payNow look on a job site for similar jobs to see if you are earning market rate.If contract < Perm pay - do not proceedIf contract ~=> than proceedRemember that your career will stagnate when you contract (pretty much).

bluetrin
Posts: 292
Joined: September 9th, 2005, 6:41 am

### Full Time Salary to Contracting Rate

Some theory would say that risky jobs should yield a premium for people to take them, therefore you may want to take a contracting job only if it yields a premium after factoring training/stagnation/pension ... etc as it is inherently more risky ?

neuroguy
Posts: 408
Joined: February 22nd, 2011, 4:07 pm

### Full Time Salary to Contracting Rate

QuoteOriginally posted by: bluetrinSome theory would say that risky jobs should yield a premium for people to take them, therefore you may want to take a contracting job only if it yields a premium after factoring training/stagnation/pension ... etc as it is inherently more risky ?I get it. So does that mean that being on the dole is like owning a bond?

ArthurDent
Posts: 1166
Joined: July 2nd, 2005, 4:38 pm

### Full Time Salary to Contracting Rate

QuoteOriginally posted by: blycmIn the US you'll need to know if it is W2 or 1099. You'll be paying extra taxes directly if it is 1099. With a day rate you probably aren't going to be billing overtime, from there it should be pretty easy to estimate. If you take the same amount of vacation, then to break even, you'll probably need a contract rate 30-40% higher than your full time compensation.You'll be paying about 6k in extra taxes on a 1099, but can put 50k in a tax deferred 401k, and can deduct all of your business expenses like commuting, laptop, traveling, half of your home rent etc. At 40% premium to W2 comp, you'll come out far ahead on a 1099.

capafan2
Posts: 924
Joined: June 20th, 2009, 11:26 am

### Full Time Salary to Contracting Rate

QuoteOriginally posted by: ArthurDentQuoteOriginally posted by: blycmIn the US you'll need to know if it is W2 or 1099. You'll be paying extra taxes directly if it is 1099. With a day rate you probably aren't going to be billing overtime, from there it should be pretty easy to estimate. If you take the same amount of vacation, then to break even, you'll probably need a contract rate 30-40% higher than your full time compensation.You'll be paying about 6k in extra taxes on a 1099, but can put 50k in a tax deferred 401k, and can deduct all of your business expenses like commuting, laptop, traveling, half of your home rent etc. At 40% premium to W2 comp, you'll come out far ahead on a 1099.I think that extra 6k doubled this year with the expiration of the Bush tax cuts. But the 50k 401k is the clincher for me. Home rent and some expenses are risky and can get you audited. But overall you come ahead. Vacation is an issue but if you can make up a few hours it compensates

farmer
Posts: 13472
Joined: December 16th, 2002, 7:09 am

### Full Time Salary to Contracting Rate

In the long run, how much you get paid will vary according to many factors, including how productive you are. I believe productivity is always reduced by working with people who have a different pay/incentive/schedule structure.I don't know the details of how you contract works. But consider a hypothetical where they have budgeted $300k to get a project done. And they are using contractors since it is a one-time job, and they want it done faster. And suppose you have to cooperate and coordinate with full-time salaried employees. You may find that on the day when you have billed$280k, and the project is 90% done, the people you have to work with decide to go on vacation, or work on something more urgent inside the business. You may find that it is impossible to finish the project on time or on budget, or impossible for you to get continuous pay, because the people you have to work with don't give a fuck. Especially if your hourly rate gives the appearance you are making more than them, even if it comes out to less.If you were on salary, you might welcome two weeks reading football scores while your emails go unanswered and your project is forgotten.

ElysianEagle
Posts: 93
Joined: February 7th, 2012, 7:25 pm

### Full Time Salary to Contracting Rate

QuoteOriginally posted by: farmerIn the long run, how much you get paid will vary according to many factors, including how productive you are. I believe productivity is always reduced by working with people who have a different pay/incentive/schedule structure.I don't know the details of how you contract works. But consider a hypothetical where they have budgeted $300k to get a project done. And they are using contractors since it is a one-time job, and they want it done faster. And suppose you have to cooperate and coordinate with full-time salaried employees. You may find that on the day when you have billed$280k, and the project is 90% done, the people you have to work with decide to go on vacation, or work on something more urgent inside the business. You may find that it is impossible to finish the project on time or on budget, or impossible for you to get continuous pay, because the people you have to work with don't give a fuck. Especially if your hourly rate gives the appearance you are making more than them, even if it comes out to less.If you were on salary, you might welcome two weeks reading football scores while your emails go unanswered and your project is forgotten.ppl that are salaried cannot just "decide to go on vacation" whenever they feel like it, especially not when a project is near a critical deadline. that's usually understood when you get hired as a salaried employee.that's the whole gimmick behind the salary thing - the ideal that most ppl have in their minds is that "as long as the work gets done in time, i can come and go as i please". yet the fact is that most salaried grunts don't have nearly as much control over what needs to get done and what the deadlines are. these are almost always decided by higher ups with very little input from those below. companies these days especially would much rather burn out their salaried employees by under-staffing and overloading the remaining employees, than hire enough ppl (salaried or otherwise).if you can't enjoy your life because you have to be at work all the time, you might as well get paid for the time you're putting in.