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Old 10-24-2006, 01:49 PM   #1
Clayton
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Default Captive Vs "Contractor"

I was RIFed (reduction in force) recently and the company has nobody who can do what I've been doing for them over the last 11 years. I do full DTP, technical writing, layout, technical illustration, and product renditions, using Ventura, Draw, Photoshop, and the usual associated stuff (i.e. MS Office).

My final salary was a bit over $25/hour, with paid health benefits including dental, and Retirement IRA fund matching (3%). I felt underpaid by about $5 an hour.

The company wants me to continue doing my job but as a contractor. Supposedly their budget only allows for about 10 hours a week.

Is the following contract unreasonable?

10 hours/week X 6 weeks = 60 hours
60 hours @ $60 per hour = $3600
Contract expires December 31, 2006
Work over $60 per hour billed at same rate

$60 per hour in my area is comparable to charged rates for auto mechanics, plumbers, carpenters, etc. who of course are paid much less than that.

Upon contract expiration, a new contract can be negotiated.

I just want to know if this is a reasonable starting point for negotiations. Some have suggested I add the condition that if they do not give me enough work for the full 60 hours, they forfeit the remainder of the contract dollars, but I'm not sure if that tack is appropriate.

Any ideas are appreciated, as always.
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Old 10-24-2006, 02:04 PM   #2
roaryg
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Sorry for the job loss, hope it turns into a great opportunity. $60/hr is about what printing companies in my area charge for desktop formatting. Don't forget to offer your services to graphic design firms. You have a good niche: the design firms are usually staffed by mac snobs who wouldn't touch word or corel, but there is lots of demand by clients who want their documents in Word after they have been designed by some flashy kid at the design firm, and the kids of course only know macs.
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Old 10-24-2006, 02:45 PM   #3
Michael Rowley
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Quote:
I just want to know if this is a reasonable starting point for negotiations
You need to establish that the work is genuine freelance work: over here (UK, Germany) the income tax people examine such contracts carefully to establish that the work can (a) be turned down, (b) can be carried out when you decide, not the people commissioning it (that is obviously subject to deadline considerations though), and (c) doesn't interfere with any other work that may be offered you. I would consult the US IRS first.

Obviously I don't know anything about fees paid in the US, but $60 an hour seems not unreasonable (unless you compare it with high street lawyers' rates).

   
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Old 10-24-2006, 02:48 PM   #4
Clayton
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Very good point.

What is your area?? I live in Grand Junction, a city of 60,000 with very little manufacturing industry (all went either belly-up or to Mexico).
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Old 10-24-2006, 02:52 PM   #5
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Right you are. Since I don't intend to set up a business, the work must be described as "freelance".

YOu think lawyers get paid high? Try accountants. BAck in 1994 I was charged $350 an hour... $120 for 20 minutes.

And my mother told me accounting was not a good business...
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Old 10-24-2006, 03:31 PM   #6
Michael Rowley
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Right you are. Since I don't intend to set up a business, the work must be described as "freelance"
For the tax people, that's a 'business'. That's another point: for a business, you can charge any hardware & software (written off over a period) you use against the profits; I don't know whether the company will lend you the equipment you need though, or if you have it already (in which case you can charge its present value to your business). Probably the IRS has advisory leaflets for those that are forced into freelance work.

Quote:
And my mother told me accounting was not a good business
It is, but only if you're good at finding tax loopholes; otherwise it's a bit boring, I should think.

   
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Old 10-24-2006, 03:41 PM   #7
don Arnoldy
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Quote:
Originally Posted by Clayton View Post
My final salary was a bit over $25/hour... . I felt underpaid by about $5 an hour.
After you run the appropriate costing calculations, I suspect that you will need to be at around $75 - 90/hr to come out where your salary was/should have been.

You're going to have to gross 150 - 200% of your former base salary to cover health care, self-employment tax, and business expenses. And, your going to have to generate that in less than 2000 (I used 750) billable hours per year.

   
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Old 10-24-2006, 03:55 PM   #8
terrie
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First...so sorry to hear you have been RIF'd--from personal experience...it's not fun.

Some things to consider:

1. Do you have COBRA coverage for your health insurance--you should. If so, what will it cost you per month?

2. Do you have your own equipment? Assuming so, do you need to do any upgrades and how much will it cost you?

3. You may need to investigate the whole idea of depreciating what will now be your (home?) office space or will you be working out of their office?


Do have much else to offer except my sympathies and I hope that you can negotiate a fair freelance rate and that they continue the contract after December...

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Old 10-24-2006, 04:31 PM   #9
Steve Rindsberg
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Whatever rate you quote them, they'll tell you it's too high and that they can get a kid out of college for 1/x of that.

Be prepared to justify your rates. I don't imagine it'll be all that hard; you know the process, the culture, the specs ... all the stuff that it'd take a newcomer a long time to pick up. You're ready to go to work, work productively and, so long as they treat you fairly, probably not hop off to a job that pays 1.50/hour more at the first opportunity.

Executive summary: Paying you twice as much to get thrice the work is a hell of a deal.

   
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Old 10-25-2006, 06:28 AM   #10
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Originally Posted by Steve Rindsberg View Post
Whatever rate you quote them, they'll tell you it's too high and that they can get a kid out of college for 1/x of that.
And be prepared for them to take the first contract at your rate (I vote for the $90 range) since they will feel forced to. Then they will hire someone else at $25 for the next contract. Finally, they will come back to you on the third contract because they will realize that someone doing it right for $90 is better than someone messing up at $25 and taking four times as much time.
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