- April 27, 2024
- Posted by: legaleseblogger
- Category: Related News
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# Seeking Help with Contract Rate vs Wages Conversion
Hello All,
I am currently trying to calculate the contract rate in comparison to wages, in order to negotiate my payment terms effectively.
For instance, I am wondering what $60 per hour as a contractor would translate to in terms of wages per hour. Is there a specific formula or method that can be employed to convert these rates accurately?
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Create a spreadsheet with all of your costs per year.
Decide on your chargable hours per year.
Divide your costs by your chargeable hours.
Thats your charge out rate.
You’ll have to figure out what your ACC is likely to be (its higher than paye) https://www.acc.co.nz/for-business/received-an-invoice/estimate-your-levy
Is your contract providing any tools? You need to factor in costs of working that an employer normally provides (heating in an office, computer, furniture…other tools depending on industry). Does an employer pay any licensing or training you need to do? Reimburse mileage? Yeah you can claim expenses, but it’s money you’re spending.
Then you’ve got four weeks annual leave, two weeks sick leave and 11 days public holidays, potentially even the 3 days inbetween. Then kiwisaver matching. And any other benefits. Is the contract long term or short term? I load short term contracts higher cos it’s more likely I’ll spend time finding another one. Are you really going to have 12 months of contract work? Might do if it’s just one contract (and where someone’s just doing it to avoid employing you…classic nz).
Also factor in all the time to do the boring stuff, invoicing, accounting, are you going to have to register for GST and file those returns.
There’s loads of factors, there’s no straight calculator.
It varies but as a ballpark figure: https://www.h2r.co.nz/h2r-consulting/services/contractors/salary-vs-hourly-rate/
For what service. You would expect to make more as a contractor as you are taking on some risk.
Contracting is around double the hourly rate of wages, I guess it depends on where you work and what you do. In most cases the difference would be that you supply your own vehicle and tools when contracting vs using a company items as an employee, you’re not 100% productive, holidays stats and sick days, and the company needs some margin or profit to survive.
Depends on your industry, I could be way off the mark, but my experience has been to take the hourly contract rate x 1000 = yearly salary. So $60 x 1000 = $60,000 salary. That works out to about $28/hr on wage assuming 40 hours per week, 52 weeks per year (which seems pretty accurate to me if comparing to $60/hr contract rates which include business overheads, holiday and ACC). Hope this helps!
EDIT: just re-read your question – I would ask for as much as you can!!! If you can share what industry/role you’re in could give you a more accurate answer. $60K is quite low in most industries now.