I got many questions from Data Visualization Blog’s visitors about differences between compensation for full-time employees and contractors. It turned out that many visitors are actually contractors, hired because of their Tableau or Qlikview or Spotfire skills and also some visitors consider a possibility to convert to consulting or vice versa: from consulting to FullTimers. I am not expert in all these compensation and especially benefits-related questions, but I promised myself that my blog will be driven by vistors’s requests, so I google a little about Contractor vs. Full-Time worker compensation and below is brief description of what I got:
Federal Insurance Contribution Act mandates Payroll Tax splitted between employer (6.2% Social Security with max $$7049.40 and 1.45% Medicare on all income) and employee, with total (2013) as 15.3% of gross compensation.
In addition you have to take in account employer’s contribution (for family it is about $1000/per month) to medical benefits of employee, Unemployment Taxes, employer’s contribution to 401(k), STD and LTD (short and long term disability insurances), pension plans etc.
I also added into my estimate of contractor rate the “protection” for at least 1 month GAP between contracts and 1 month of salary as bonus for full-time employees.
Basically the result of my minimal estimate as following: you need to get as a contractor the rate at least 50% more than base hourly rate of the full-time employee. This base hourly rate of full-time employee I calculate as employee’s base salary divided on 1872 hours: 1872 = (52 weeks*40 hours – 3 weeks of vacation – 5 sick days – 6 holidays) = 2080 hours – 208 hours (Minimum for a reasonable PTO, Personal Time Off) = 1872 working hours per year.
I did not get into account any variations related to the usage of W2 or 1099 forms or Corp-To-Corp arrangements and many other fine details (like relocation requirements and overhead associated with involvement of middlemen like headhunters and recruiters) and differences between compensation of full-time employee and consultant working on contract – this is just a my rough estimate – please consult with experts and do not ask me any questions related to MY estimate, which is this:
- Contractor Rate should be 150% of the base rate of a FullTimer
In general, using Contractors (especially for business analytics) instead of Full-timers is basically the same mistake as outsourcing and off-shoring: companies doing that do not understand that their main assets are full-time people. Contractors are usually not engaged and they are not in business to preserve intellectual property of company.
For reference see Results of Dr. Dobbs 2013 Salary Survey for Software Developers which are very comparable with salary of Qlikview, Tableau and Spotfire developers and consultants (only in my experience salary of Data Visualization Consultants are 10-15% higher then salaries of software developers):
This means that for 2013 the Average rate for Qlikview, Tableau and Spotfire developers and consultants should be around 160% of the base rate of a average FullTimer, which ESTIMATES to Effective Equivalent Pay to Contractor for 1872 hours per Year as $155,200 and this is only for average consultant... If you take less then somebody tricked you, but if you read above you already know that.