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Not sure if this is the correct stack but I'll give it a shot:

United States Software Designer/Dev Scenario:

I have a salary job, lets say 100K a year, and I now also have opportunities to work for other companies as an independent contractor in addition to that. I already have all of the benefits from my salaried employer, so I'm trying to understand what to charge in this situation.

I did lots of research on what IC's should be charging but they all take into account the health benefits / insurance / tax and what not so they basically double+ the hourly rate of what they would work for as a salaried employee (in terms of 2,000 hours; so if the 2,000 hours boils down to 50 per hour the contracting fee would be 100 per hour). (Obviously this isn't accurate for everyone but it's a ballpark)

I understand that I will be paying more taxes while doing IC work in the US, but since I am already employed and have benefits from another company should this factor in to decreasing my rate?

Does anyone have experience in this area as it seems to be some what of an ethical dilemma? Or maybe not? I will be working my ass off to work for more than one employer. I don't know, I've asked lots of people and they all say you should still use the contracting rate that you would use if you were not employed by a company already.

I guess my overall question would be: "as someone that is already paid a salary, should I decrease my contracting fee working for another company at the same time because I already have all of the benefits I need"

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  • Hi, user740521, just dropping in as part of the community QA. While I do feel like our Stack Exchange would benefit from this question, if you want answers from people who are definitely in Software Engineering, you could also try that Stack Exchange. Just another avenue for you to try to get even more answers. Meanwhile, thanks for your question and welcome to The Workplace!
    – Teacher KSHuang
    Mar 23, 2017 at 9:43
  • As for your question, for me, this would be a business decision and a personal one. If I can be content offering a lower contracting fee, then I could probably beat out some other ICs in acquiring certain contracts. But also know that I might get some not as nice contracts from people who want to nickel-and-dime me (which is why they had been so happy to find me offering a lower rate). Meanwhile, it's all really just up to you. I'd be more worried about making sure that the contract for my current job allows for IC (which I assume you've checked).
    – Teacher KSHuang
    Mar 23, 2017 at 9:45
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    I would also verify, if I were you, that you did not sign any sort of agreement that states you cannot moonlight ( contracting outside of work hours ). Some companies have a clause in either their HR handbook or other document that states you have to let your MGR know. Long and short of it is review any paperwork you have signed with your employer to make sure you don't get into hot water starting this new adventure ( new for you ).
    – Neo
    Mar 23, 2017 at 11:11

1 Answer 1

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Here is a different way of looking at the situation.

The ability to have your main employment cover all your benefits (health insurance, vacation days, holiday pay...) means that you have more flexibility in the positions you take for the extra job.

If you are making 100K gross in your paycheck, and the rule of thumb is $100 per hour if you had to replace all the income and benefits, then you can pick positions that will not allow you to charge $100 per hour. Instead of a software engineer, you can apply for second jobs that are more fun, and more like hobbies. You can be a bartender, tutor, make chain mail at the Renaissance fair...

If you do decide to pick positions that are similar to your full time job you might have to charge the going rate of ~$100 per hour. Don't forget that you will spend time on business development, paperwork, billing, and additional tax forms. These time sinks are one reason for the rule of thumb.

But the most important reason for charging closer to $100 per hour is that if you gain customers and then decide to try and make it your full time job, the old customers may not be willing to pay more per hour. They got used to paying $50 per hour. Even finding new customers when all your recommendations include the phrase "the rates are so low", will be very hard.

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    An excellent point regarding going to low on your hourly rate.
    – Neo
    Mar 23, 2017 at 11:09
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    To expound slightly, If you go in at a rate that is too far below market value, people will assume inferior work. If I sold you a gold ring for 500 dollars, and the local jewelers are selling the same ring for 1500, you'd assume that the ring was fake or stolen. People expect to pay a certain amount for goods or services. If the amount is not within the expected range, they will refuse said goods or services.
    – Old_Lamplighter
    Mar 23, 2017 at 12:28

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