3 ms·
> The benefits package a direct employee is typically worth 40% of the salary. Hence, a contractor without benefits or employment stability gets paid more to co
by lsc 8y ago
> The benefits package a direct employee is typically worth 40% of the salary. Hence, a contractor without benefits or employment stability gets paid more to compensate.
I... think you may be mistaken.
I've heard that big companies have a total overhead of 40% for a worker, and that might be true once you factor in the cost of middle management and office space, though again it would vary a lot by pay (I imagine office space costs a large portion of a less well paid salary. Around here, quarter-million dollar a year SWEs get the same tiny desks you'd expect of someone making 1/4 that.)
but I've got a reasonable idea of what benefits cost, and it's nowhere near 40%, at least for a SWE in my jurisdiction, where total comp is so high and the benefits are... comparatively minimal.
- dajohnson89 8y agodon't forget about equipment and payroll tax
- lotsofpulp 8y agoIt’s 7.65% for first $128k for federal, maybe a couple extra % for state level taxes.
- polskibus 8y agoAs a contractor you don't get paid holiday (incl bank holiday) or sick days. That by itself can account for 20% of pay, not counting other benefits.
- lotsofpulp 8y agoMost salaried people have 7 to 9 holidays per year, and if you’re lucky and highly paid, maybe another 4 weeks paid time off. 6 weeks of paid time off divided by 52 weeks is just 11.5%, and that probably puts you in top 10% of the population in terms of paid time off.
- C1sc0cat 8y agoOnly in the USA - I had 30 days when I joined part of Relex in the UK
- akvadrako 8y agoBut contractors do get paid overtime.
- bsenftner 8y agoha ha ha ha ha! Long ago companies figured out to pay by the "work unit", and unless you are working 50% to 100% more then your paid time you are under performing and at risk of being fired.
- mancerayder 8y agoTrue, but on the flip side the contractor gets paid per hour (unless they're daily), whereas the salaried employee has no idea how many hours he/she will work. It's not said in interviews (although "this is not a 9 to 5 shop" is common here in NYC). It's also not written in the employment contract. It's a wildcard, and gets worse due to instability in the environment or team competitive culture or crazy upper management or a million other things.
- citizens 8y ago"this is not a 9 to 5 shop" - this just gave me flashbacks.
- WalterBright 8y agoThe benefits are: 1. health insurance 2. stock options 3. so-called "employer's contribution" to social security 4. 401k employer match contributions 5. sick leave 6. vacation 7. maternity/paternity leave 8. stock purchase plan 9. unemployment insurance taxes 10. 2 weeks severance pay 11. holiday pay 12. various legal rights contractors don't have 13. employer provided equipment that a contractor would be expected to provide Here's the first hit on google: https://www.bankrate.com/finance/financial-literacy/the-value-of-employer-benefits.aspx https://www.bankrate.com/finance/financial-literacy/the-valu...
- lotsofpulp 8y agoIf we restrict this to people working in high demand engineer/software related fields, then I would say #1,3,4,5,6,7,9,11 add up to at most 30% And #2,#8,#12,#13 could be worth 10%. I don’t think #10 is a guaranteed benefit, and usually is in exchange for forgoing any other grievances you might have against employer. But that would be restricting it to highly paid, in demand professions. For other people (upwards of 80% of the US), many of the items on that list don’t apply to them, so I don’t see how it would cost 40% more for an employee versus contractor.
- WalterBright 8y agoAlso factor in that some of these benefits are paid for with before-tax money, while if you paid them yourself they would be with after-tax money. This is not a trivial consideration.
- lotsofpulp 8y agoAs far as I know, the only tax benefit would be for health insurance, but if you are a sole proprietorship (which you should be), then you can purchase health insurance pre tax also.
- extra88 8y ago401K contributions are also pre-tax.