As a freelancing writer or independent contractor, one of the biggest challenges is trying to figure out how much to charge per project or hour. Many individuals come from salaried positions and have no prior experience in calculating their expected hourly rate or income as a contractor. Luckily, there are simple methods to convert your previous salary to a contractor rate.
Firstly, it is essential to consider that a salaried position is different from a freelance role. As a salaried employee, you are eligible for benefits such as health insurance, retirement plans, and paid vacation, amongst others. As a freelancer, you are responsible for paying your benefits, expenses, and taxes.
To convert your salary to a contractor rate, you need first to determine your hourly rate. This calculation involves accounting for your expected work hours in a week and the number of weeks you plan to work in a year. For instance, let us assume you plan to work 40 hours per week for 48 weeks in a year. This calculation gives us the total number of work hours in a year, which is 1,920 hours.
Next, you divide your annual salary by the total number of work hours in a year (1,920 hours) to calculate your hourly rate. For instance, if your annual salary is $80,000, your hourly rate would be $41.67 ($80,000/1,920 = $41.67).
Now that you have determined your hourly rate, it`s time to convert it to a contractor rate. Contractors typically charge more per hour than salaried employees to account for taxes, benefits, and other business expenses. As a general rule of thumb, a contractor rate should be at least 20-30% higher than the hourly rate of a salaried position.
Using our example above, if your hourly rate is $41.67, you should add 20-30% to that rate to arrive at your contractor rate. Therefore, your contractor rate will be between $50.00 to $54.17 ($41.67 x 1.2 = $50.00, $41.67 x 1.3 = $54.17).
In conclusion, converting your salary to a contractor rate is a simple process that can help you determine your worth as a freelancer. By accounting for all your expenses, taxes, and benefits, you can ensure you are charging clients an appropriate rate for your services. Remember, your contractor rate should be at least 20-30% higher than your hourly rate as a salaried position. With the right resources and tools, freelancers can charge competitive rates while still making a profit.
