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I'm currently living in Canada. I have very nice job and I'm happy with it. My previous company in the U.S. contacted me and they want to hire me as a 1099 (independent contractor) working remotely.

I want to know what would be a reasonable hourly rate to charge them. I understand technology, but let's say not so much the financial stuff (taxes, fees, etc.) so help is greatly appreciated. Here are my variables:

  • I know the company is genuinely interested in hiring me; they have seen my hard and quality work and they know I will do good. (They are minimizing risk here.)
  • I know the company's IT team is struggling as well, and I believe in opportunities, after all I'm doing this for the extra money.
  • I have a full time job in Canada now, so the work I will do for them will be after 6 PM and Saturdays.
  • I will be doing .NET (Web and desktop) and PHP work. If you have IT background, you will know each one of these is one person's job. So they are hiring one instead of three. They know that.
  • Of course they will not provide any benefits, they will not pay taxes, etc. And here is where I need help: I'm not sure If I have to pay U.S. and Canadian taxes? And what percentage is each?
  • What other fees should I consider?

And the most important question: How much should I ask for? If you have any experience in this, I would greatly appreciate it if you can help me.

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  • What is/are your citizenship(s)?
    – DJohnM
    Apr 19, 2015 at 2:41
  • I'm working toward my PR in canada. I'm neither US nor Canadian citizen now
    – EGN
    Apr 19, 2015 at 2:54
  • Have you considered the legal aspects? e.g. Would your current employment agreement permit you to do side work for hire?
    – Chris W. Rea
    Apr 19, 2015 at 14:40
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    Yes, my advice is to read your employment contract. Don't moonlight for another company until you understand the terms of any existing agreement. Many employers include clauses that can effectively prevent a developer from doing development work on the side; e.g. by claiming ownership of all intellectual property you produce while you are employed by them.
    – Chris W. Rea
    Apr 19, 2015 at 21:29
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    You seem to be financially well off enough to afford a consultation with an accountant and if necessary an attorney. Your situation is complex, and especially given your residency status I would strongly consider a professional consult as money very well spent.
    – Jeremy
    Apr 20, 2015 at 4:27

1 Answer 1

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$60-$100 US is typical for US 1099 contract IT work, but it varies quite a bit by location and industry. Contract agencies can charge more (sometimes significantly more), but you probably don't have the clout to ask for rates that are on par with those.

$85 per hour might be a good starting point.

Here are some factors to consider:

  1. Does the client already employ contract IT labor? If so, they might already be comfortable paying $100+ per hour. If not, they might balk at such a rate. Companies unfamiliar with contract IT work often make the mistake of comparing 1099 hourly rates to w-2 fulltime salaries for the same work, which makes them skiddish to pay out at the top end of that band.
  2. Consider starting an LLC, or whatever the Canadian equivalent is. This serves a legal purpose as well as giving your side business a professional appearance. "Bitopia Software LLC" may be able to negotiate a higher rate than "Bobs Basement of Bits and Bytes" or "Bob Jones".
  3. Think about getting a business credit card and using it to track all of your business expenses related to the 1099 work (computers, software, training and conferences, printer ink, internet and phone service, etc). This separation and organization will pay off at tax time.
  4. Do you currently get paid by the hour at your fulltime job? If so, then should you take on side work when you could just work more overtime at your current job?
  5. As a general rule, a 100k per year W-2 salary in the US with standard benefits is roughly equal to making $130k per year on a 1099 basis when you factor in the cost of health insurance and other benefits, having no 401k employer match, no bonus, and paying the self employment tax penalty. Keep this in mind when you compare your 1099 rate to the effective w-2 hourly rate you earn at your fulltime job.
  6. The time that you devote to this side work is premium time. You will be robbing time from family, friends, hobbies and relaxation time. IOW, all the reasons we enjoy life. That premium time deserves a premium rate.

I am not qualified to comment on the Canadian vs US legal and tax aspects fo your situation.

Good luck

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