Setting Your Rate
Members of the Facet Developer Network set their own hourly rates. If you aren’t sure what that should be, this article is for you!
At Facet, there are two hourly rates you will define, a preferred rate and a minimum rate. Your preferred rate is the ideal rate you would like to charge for your work. Your minimum rate is the lowest rate you would consider working at. We use these two rates to match you with the right work opportunities. Your minimum rate will never be shared with clients.
Preferred Hourly Rate Calculation Explained
Ok, so how do you set your hourly rate? For first time contractors, one way to calculate your preferred rate is to start with what you want your monthly income to be after taxes, insurance and basic contracting expenses. Some people like to use their current, after tax, compensation as a starting point for calculating their preferred hourly rate.
To start, multiply your desired monthly income by 12. From there, add $15,000 for health insurance if you have a family or $7,500 if you are single. Add in $3,000 a year for estimated contracting expenses (computers, monitors, desks, etc...).
Next, calculate your tax rate. To do this, look at your previous year’s tax percentage (this can be found on your tax return) and add 15% for self-employment taxes. You will pay more taxes as an independent contractor because your employer isn't covering part of your social security taxes.
Target Annual Income = ((Monthly Income * 12) / (1 - Tax Rate)) + Health Insurance + Business Expenses)
$204,615 = ((10,000 * 12) / (1-.35)) + 15,000 + 5,000
Now, take your target annual income and divide it by the number of weeks per year you plan on working. For example, if you planned on taking 5 weeks of time off, you would be working 47 weeks in the year (52 - 5 = 47). Lastly, divide that number by 40 and you will arrive at your preferred hourly rate.
Preferred Hourly Rate = (Target Annual Income / Weeks Working) / 40
($204,615 / 47) / 40 = $110/hr
There you have it - your preferred hourly rate! If you feel like you could still use some help figuring out your rate, you can email your support team at email@example.com or shoot us a message on Slack.