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Salaried vs. Independent COntractor

Posted on 2014-04-05
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Last Modified: 2014-04-07
What MINIMUM increase in your income would make you move from a salaried employee to an independent contractor?

    1.3 times higher pay
    1.5 times higher pay
    2 times higher pay
    Nothing
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Question by:Tiras25
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9 Comments
 
LVL 35

Assisted Solution

by:Dan Craciun
Dan Craciun earned 143 total points
ID: 39980298
At least 2x higher income.

You'll need to cover your own health insurance, training, accountant etc.

HTH,
Dan
0
 
LVL 25

Assisted Solution

by:Tony Giangreco
Tony Giangreco earned 72 total points
ID: 39980309
I agree with Dan, there are many additional expenses you incur when going independent:

Payroll taxes, Unemployment taxes, Liability insurance, medical insurance, traveling expenses, additional automotive expenses, additional software you may need to buy, classes you may need to take to get certifications and tests.

Company checks, check stamper and additional office supplies.

Possible server, Pc and Microsoft related expenses if you decide to purchased memberships like Microsoft's Action Pack.

There are many other expenses and options that might affect your situation. I've been independent for 13 years. Plan your steps first.
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LVL 37

Assisted Solution

by:Mahesh
Mahesh earned 142 total points
ID: 39980312
My answer would be NOTHING

Also it should be Independent Consultant instead of Independent Contractor

My understanding is contractor has to obey \ deploy the design \ solution provided by consultant, so the independence factor is less in case of contractor than Consultant

Now income vs independence.......for me independence is more powerful than twice \ thrice contract money
And this concept will change from person to person..
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LVL 35

Assisted Solution

by:Dan Craciun
Dan Craciun earned 143 total points
ID: 39980349
@Mahesh: freedom is nice, but not on an empty belly :)

I managed to remain independent for 8 years now, but I have friends that did not last 6 months as independent consultants.
They went back to steady paychecks...
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LVL 37

Assisted Solution

by:Mahesh
Mahesh earned 142 total points
ID: 39980359
I agree that and its really very true but that is why I mentioned there person to person in earlier comment....

One who is ready to be independent at any cost (Solo \ single person company with little pay)

One who is looking for money may take chance with business and if fails again get back to pavilion...
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LVL 95

Accepted Solution

by:
John Hurst earned 72 total points
ID: 39980383
I am an independent consultant and I did make the move 12 years ago.

When I was consulting full time, I could make as much as the managerial salary I was making before the leap.

There are a lot of factors in standing alone on your own two feet to make money.

1. You must have clients. This can be slow going at first.
2. You generally cannot bill full days: You need to get in after the client opens and leave before they close.
3. You cannot bill for lunch time, training time, travel time (so try, I don't), vacation time, time off for errands and so on.
4. Your rate per hour has to look reasonable. For small business clients, the rate is lower than for big business. But big business often have their own people.
5. You generally have to be wiser and more experienced than average.

It is rewarding but certainly not easy and there is no given about getting or keeping clients.
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LVL 13

Assisted Solution

by:notacomputergeek
notacomputergeek earned 71 total points
ID: 39983572
If you're in the US, check with the IRS. They are pretty clear about what is an employer/employee relationship and the employer can get into trouble if you are acting as a contractor, but the IRS considers the relationship as an employee.

Most of it has to do with how many hours, where you perform your work, and who controls your schedule and work to be performed. If you work 40 hrs/wk, at their office, they tell you what to do, and there's no end date, then the IRS will consider you an employee.
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LVL 95

Expert Comment

by:John Hurst
ID: 39984676
@Tiras25 - Thank you and I was happy to help. If you choose this path, good luck and fortune to you. It is not easy, but rewarding.
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LVL 17

Author Comment

by:Tiras25
ID: 39984702
Thanks, John.
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