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What to Consider when switching from Employee to Contractor (US Market)?

Sammy Bill
Ranch Hand

Joined: Dec 29, 2008
Posts: 96
Hello,

I m planning to switch from Employee to a contractor with the same Company doing the same job.
I m switching so I can get H1B through a consulting company as my employer is not ready to sponsor now.

I have 2 years of experience ( most of it with my current employer )

What should I consider when switching from employee to consultant?
How should I calculate my hourly rate? if I make 50K/year + bonus + tuition reimbursement and other benefits, how much should I ask for contracting?

What other things I should consider when doing the switch....

Please advice.
Jeanne Boyarsky
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Joined: May 26, 2003
Posts: 30377
    
150

Think about what benefits you are losing. Health insurance, paid vacation, 401K, etc. All of these are factors when considering a rate. As is the percentage the consulting company takes.


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Jimmy Clark
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Joined: Apr 16, 2008
Posts: 2187
I m switching so I can get H1B through a consulting company as my employer is not ready to sponsor now.


This is not clear. If you become an employee of a consulting company, then you will still be an employee. You will not be a contractor and will not have a need to calculate a hourly rate. You will receive the rate that your employer dictates and/or what you can negotiate during the employment process.

Aside, an hourly rate for someone at your level would be roughly $ 50 USD per hour for a 40 hour week. Multiply this by 48 to get a yearly figure. Keep in mind that for someone with very little experience, it will be very difficult to negotiate terms as an independent contractor.
Paul Anilprem
Enthuware Software Support
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Joined: Sep 23, 2000
Posts: 3286
    
    7
Sammy Bill wrote:Hello,

I m planning to switch from Employee to a contractor with the same Company doing the same job.
I m switching so I can get H1B through a consulting company as my employer is not ready to sponsor now.

I have 2 years of experience ( most of it with my current employer )

What should I consider when switching from employee to consultant?
How should I calculate my hourly rate? if I make 50K/year + bonus + tuition reimbursement and other benefits, how much should I ask for contracting?

What other things I should consider when doing the switch....

Please advice.


Remember that it is extremely difficult getting H1B and extensions getting approved these days for consulting companies. So even if you think a consulting company will sponsor you, there is no guarantee that it will be approved.

There are many different models on which consulting companies operate. For example, 90/10, 80/20, 70/30, or fixed salary. Overall, if you are on H1B, everything will work out to about the same for you. Your biggest worry in not the rate. It is H1B. If you get that sorted out, everything else will fall in place

Even so, 50K/Yr will be about 30$/Hr, assuming 2000 hrs/yr and about 10K in benefits. But again, you can't really work on hourly basis on H1B. You have to be a full time employee. The company has to run payroll for you. Hence, the different models.


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Sammy Bill
Ranch Hand

Joined: Dec 29, 2008
Posts: 96
Thanks Paul and Jimmy,

I m trying to be careful when selecting the consulting company and checking their H1B record for the past couple of years to make sure i select the right one.
I m also trying to apply early and through premium processing to have some extra time for a back up plan if things didn't work out.

But does it really require that you work with a salary and not hourly rate if you requires H1B, you will still get your W2 and be on the consulting company payroll in both cases, right?

Paul, is 30$/Hr ( with no benefits ) really the average hourly rate if working as a contractor knowing your base salary as an employee ( other than benefits and bonuses .... ) will add up to ~ 25$/Hr if you divided your salary / 52 weeks / 40 Hrs?

How realistic to calculate your hourly rate as a contractor as follow :

If you have X k/Year as an employee, you should ask for X$ / Hr as a contractor.

Thanks again
Jimmy Clark
Ranch Hand

Joined: Apr 16, 2008
Posts: 2187
In the U.S.A., contractors do not receive IRS W2 forms, they receive IRS 1099 forms. For calculation of hour rates between contractor hourly rate and employee yearly salary, things are a bit more complex than trying to calculate equivalent dollar values. These are two fundamentally different pay structures and there are many other relevant considerations besides actual take home pay.
 
 
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