How do you translate a per year salary into a part-time per hour job?

Question

Let's say I'm working part-time and remotely for a company in NY, paid per hour. If I would work there full-time, I would be getting 55K per year + benefits. Instead, I'm working part-time on an hourly basis, with a range of about 15-20 hours per week, give or take a bit. How much should I be getting as an hourly rate?

Factors to take into consideration - my pros and cons -

Pros

• Part-time
• Remote
• Choose my own hours, within reason

Cons

• No insurance/benefits
• No paid time off
• No guaranteed amount of hours

Answer 1

If you're really a part-time worker, then there are some simple considerations....

• Depending on definition, there are 1920 to 2080 work hours in a year. Given two weeks vacation a year, we can assume 2000 hours a year, which amounts to $27.50 an hour.
• Not having paid time off is already accounted for because we subtracted the vacation hours for our $27.50 calculation.
• Benefits are harder, but it's reasonable to assume 15-25% of gross salary as the value of benefits. However, I can't see a company giving bonus money to part-time employees just because they don't need to pay benefits for them.

The remote working environment, choice of own hours, and non-guarantee of work availability point to your "part-time" situation being more like a consultancy, and that would normally double or triple the gross hourly rate. But if they're already offering or paying you a low hourly figure, they are unlikely to give you consultant rates.

Answer 2

Rule of thumb: Double your hourly rate to get a yearly salary (in thousands). Halve your yearly salary to get your hourly rate. (assuming a 40hr/week job).

eg: $50k/year = $25/hr.

Answer 3

All things being equal, a $55,000/year job with 25% benefit load is about $68,750/year. That's a little more than $34/hr.

Your rate really depends on the nature of the work. If it's strictly a part-time job where you are an employee, you're probably looking at a $28-38/hr range.

If you're an independent contractor, the rate should be higher, as you're paying the taxes, doing other administrative stuff. How much higher depends on the industry... software/it rates are usually 1.5-2x, construction is driven by the union scale in many places, etc. Note that you need to meet criteria defined by the IRS to successfully maintain independent contractor status from a tax POV.

Answer 4

There is no fixed formulae, its more of how much you can negotiate Vs how many others are willing to work at a lower cost.

Typically in software industry the rates for part time work would be roughly in the range of 1.5 to 2 times that of the full time work for the same job.

With the above premise roughly the company would be willing to pay $100,000 for 2000 hrs of Part time work(1), translating into around $50 per hour. How much you actually get would depend on if there is someone else who can work for less say at $30 at hour.

(1) The company does not have 2000 hrs of work and hence its engaging part time worker instead of full time at lesser cost.

Answer 5

As an easy and rough rule of thumb, a job for $55,000 per year is $55 per hour as a contractor.

That's roughly twice the hourly rate. In return, the company gets the rate to vary your hours or cease your employment with less financial, legal or managerial overhead than a full time employee. You have less stability, less benefits, perhaps need to put some time into finding another job sooner.

Of course the ultimate, though less helpful, answer is "whatever the market will bear."

Answer 6

It's difficult to quantify the intangible benefits, so I would recommend that you begin by quantifying the financials and then determine whether the difference between the pay of the two jobs justifies the value of the intangible benefits to you.

Some Explainations

You are making $55,000 per year, but your employer is also paying for a number of benefits that do not come free as a contractor. Begin by writing down everything they are providing you that you would like to continue to have. This may include:

• health insurance
• life insurance
• dental insurance
• legal consultation
• 401k matching or retirement contributions
• stock options
• bonuses
• and more

You also need to account for the FICA tax that you need to pay completely as a part time employee (normally a company pays half of it for you). This usually amounts to 7.8% of your income.

Quantification

Start by researching the cost for providing each item in the list above to yourself. For health insurance get quotes from providers. For bonuses average your yearly bonuses for your work history with the company. Items like stock options you need to make your best guess on.

Calculations

Now lets call your original salary S. Add up all of the costs of the list items mentioned above and call them B. This formula will tell you your real current annual compensation (RAC):

• RAC = (S * 1.078) + B

Now you want to break your part time job into hours per year, not hours per month, as months have differing numbers of working days. Assuming no vacations that is 52 weeks per year multiplied by 20 hours, or 1040 hours (780 if working 15 hours per week). So to earn the same at the new job as the old you would need to earn an hourly wage of:

• HW = RAC / (Working Weeks * Hours Per Week)
• HW = RAC / 1040
• HW = RAC / 780

The full equation for 20 hours per week works out to be:

• HW = ((S * 1.078) + B) / 1040

Assumptions

DO NOT TAKE THIS SECTION AS REPRESENTATIVE OF YOUR SITUATION; ONLY A BALLPARK ESTIMATE

You must do the math yourself. I recommend a little spreadsheet to simplify things and play what-if scenarios. However, we can ballpark your situation and show how the math works with a few assumptions.

When I got quoted for health insurance for myself and my partner it was $700 per month, or $8400 per year. If we assume the same for you, then add 3% 401k matching that we'll assume you're taking advantage of ($1650), the equation becomes:

• HW = ((55000 * 1.078) + 10050) / 1040
• HW = (59290 + 10050) / 1040
• HW = 69340 / 1040
• HW = $66.67

Other Considerations

Keep in mind that there are other considerations that could offset these calculations. Variable hours are a big risk, as is your status as a 'temporary' employee. Though on the flip side you don't need to pay taxes out of each check, allowing you to invest that money throughout the year until taxes are due. Also, if you are considered a private contractor you can write off many expenses that you cannot as a full time employee.