Hi I am a software engineer. I'm in the process of negotiating with my current employer about my 1099 hourly rate. The background is that I was contracted to my current employer through a contracting/staffing agency do software programming, the contract was originally for 6 months, it has since ended. While under the contract,I was getting paid w2 hourly for 35 dollar per hour. I was eligible for health insurance, dental insurance, vision insurance, 401k plan after 500 hours of working, short term disability insurance, long term disability insurance, workers compensation, life insurance etc. I don't get paid for any holidays, personal vacation days or sick days. I only get paid for the hours I work. and the maximum hour is 40 hours per week, no over time pay.

And now my employer decided that they want to convert me to a 1099 employee, and is now offering me the same rate at 35 dollars an hour. I realize that this is an offer lower than the 35 dollar w2-hourly since I will be losing all the benefits and will be paying more taxes, I am trying negotiate an offer that is equivalent to w2 hourly(when I had the mentioned benefits) According to my situation, what is a reasonable rate that I can bargain for? Thanks for the help, I am new to the 1099 world.

closed as off-topic by Lilienthal, Dawny33, nvoigt, gnat, Joel Etherton Jan 25 '16 at 13:15

This question appears to be off-topic. The users who voted to close gave this specific reason:

  • "Questions asking for advice on what to do are not practical answerable questions (e.g. "what job should I take?", or "what skills should I learn?"). Questions should get answers explaining why and how to make a decision, not advice on what to do. For more information, click here." – Lilienthal, Dawny33, nvoigt, gnat, Joel Etherton
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  • 1
    You need to know how much you're losing will cost you to replace. Negotiation without knowing this information seems like a mistake. $35/hr plus this number is your minimum. If your employer won't pay that you need to determine what, if anything, you're okay with losing and whether you need to start looking for a new job. – Ben Jan 25 '16 at 8:16
  • First: this question is personal advice and therefore off-topic. Second: check whether your employer can legally convert you to 1099. Some employee categories are defined by the roles and tasks, not the employer's preference. Third: the only way to answer your question is to calculate the value of the benefits you're losing, which only you or your accountant can do with any accuracy. – Lilienthal Jan 25 '16 at 9:48
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    I have no clue what you are talking about. That's a pretty sure sign you need a country tag. – nvoigt Jan 25 '16 at 11:31

The basic rule of thumb in the United States is that if your employer needs to contract you out, they had to charge their customer 2x the rate they pay you.

This would cover the hours they pay you plus: sick, vacation, holiday, health insurance, disability insurance, unemployment insurance, their part of the taxes, 401k matching, overhead, business development...

So if you need to replace all those benefits you need to charge 2x35 or $70 per hour. If you don't need all those benefits (insurance from a parent or spouse). Don't minimize the fact you will never work 40 hour every week, because of vacation, sick and holidays.

If you think in terms of yearly income: if you make $xx,000 per year your boss has to charge $xx per hour.

The switch from w2 to 1099 is not to be taken lightly. The company will no longer be able to say you will sit at this desk x hours per week, and they can't give you explicit instructions regarding what to work on each day. They will have to negotiate a contract with you regarding the goal of your work, you will have to determine the hours required to complete that task and the schedule for doing so. They will now be your customer.

The IRS doesn't take kindly when a person is listed as a 1099, when they should be a W2. This was true ever before the Affordable Care Act.

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