Permanent engineer considering contract work

Joe_pdx · May 16, 2012

Hello,

I have a permanent engineering job I have had for 8 months and I hate it. Long hours, new boss every month, etc etc etc. Before this I was with a company for about 4 years.

An opportunity for a contract job that sounds really exciting just popped up and I have an interview this week. It is only a 12 month contract, with potential for the company to hire full time if they like your work and have the budget.

My current salary including 401K, stock purchase plan, and bonus is about 85K (base is 65K), and the contract job would be $45/hr. It seems like a really small pay increase for switching to contract with the new company, but I am not using any benefits (spouse's are better) other than monetary ones with my current employer. And I am still breaking even if I take 10% of the time off for vacation or sick at $45/hr.

I have searched around, and the "norm" seems to be 125% to 150% for contract, where someone making ~80K should expect 100-120K as a contractor, but this "big" company said the cieling is $45/hr (93.6K at 2080 hrs/yr, 0 days off).

I have some certification and an excellent work history for being a young engineer (5+ years experience). This is in the Portland, OR area.

What is everyone's thoughts on the hourly rate? Anyone here have any insight on working as a contractor in engineering? They want to pay me C2C through an LLC I own, and I'm not sure if that puts me responsible for additional expenses I wouldn't normally have to pay with W2 income. I would really like to see some comments and thoughts since I won't have a week to sit on this before I make the call once I interview.

Joe

pbrme · May 16, 2012

I did the contractor gig for 9 mo's. Contract work can be good if your in high demand. Personally, I didn't like it, didn't like the swings and it wasn't nice not getting paid to be sick.

My only advise on the rates is to evaluate your current total package (which you've done) and compare that to what it would cost you out of pocket (your own IRA payments, medical, vacation/sick time, paid holidays, etc.). Sometimes taking a small cut in base wage for a better opportunity is good. Or just hate going to work to make more... totally up to you. You can't really get advise on a % because its speculative.

125% was where I was at, but from my base wage, not off package amount. Also, are you going thru a staffing service? I was thru a staffing outfit and they usually market their engineers out to a company for 65-75$/hr, give you 45$/hr and pocket the change for doing business. If you've got a company and are being paid by the company, you should be seeing the same premium said company would be paying a staffing service.

chaosiscash · May 17, 2012

I'm a contract worker, and have been for years. I know nothing about your area or industry, but that seems like a very small increase for a move away from direct work. Especially considering they want to pay you C2C, which sounds like you'll be responsible for the employer portion of medicare and SS (~7-1/2 %) in addition to the normal employee portion. But that may be the going rate in your area for someone of your experience/qualifications. I really enjoy life as a contract worker, so I'm not trying to talk you out of it, but just make sure you run the numbers to know that it is worth the move.

Joe_pdx · May 17, 2012

chaosiscash said:
I'm a contract worker, and have been for years. I know nothing about your area or industry, but that seems like a very small increase for a move away from direct work. Especially considering they want to pay you C2C, which sounds like you'll be responsible for the employer portion of medicare and SS (~7-1/2 %) in addition to the normal employee portion. But that may be the going rate in your area for someone of your experience/qualifications. I really enjoy life as a contract worker, so I'm not trying to talk you out of it, but just make sure you run the numbers to know that it is worth the move.

Chaos-

I appreciate the input. I think that is why they wanted me to go C2C, to be able to effectively pay me less. I am going to let them know that I want that rate at w-2 equivalent. I calculated all the taxes for oregon and federal, and it came out to a little over 9.5%...

FICA (SS + medicare) = 1.45%

Fed SSI = 6.2%

Fed UI= 6% of $7000, state deductable

State UI = 3.3% of 33K

State workers comp = $.028/hr

State bus tax = (i'm guessing here, $200 max)

So it looks like if I go C2C I am going to want

Pbrme- Through a staffing company. I'm sure they are going to make 10-30% on top or something. IRA payments are irrelevant, I already max out my personal IRA even with my employer providing a 401K. So I am taking the lack of that money into consideration, but it won't change my monthly budget or take food off my table.