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Brendan Tompkins [MVP]

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W2 Contractors - Get What's Fair in 2004

It's that time of year again. We all do our taxes and are reminded how much we *really* make. If you're a W2 contractor, like me, you may be surprised by how little it really ends up being.. Well, I've been doing research and thinking about this and have found out the following, that I thought I'd share:

Full time benefits are approximately worth 37% of your base salary. This means that if your base salary is $87,000, you're really getting $120,000 a year in compensation (gleaned from www.monster.com).

For comparison's sake, your W2 hourly rate is approximately 1/2000 of your full-time total annual compensation (from general consensus). So if you're making $35/hr, your total full-time compensation is $70K. Subtract the 37% benefits and your $35/hr job is worth ~~$44,100~~ $51095 a year (base salary). See http://donxml.com/grokthis/articles/249.aspx for more info (Thanks DonXML).

Not making as much as you thought? Then consider this. From all the research I've done, a *FAIR* overhead that your agency should take on a W2 contract is 30%. Any more than this, generally accepted, is gouging. Many agencies will take as much as they can from you. I'm aware of many consultants who are giving 40-50% (even 200%) to their agencies.

Many agencies will attempt to make you feel guilty when asking for a fair wage. My advice: your compensation should be fair, period. If you are a W2 contractor, you're essentially a commodity. Don't fool yourself by considering otherwise, and get everything out in the open with your agency. Find out what they charge for you. Find out what you're worth. Demand a fair wage.

If you're re-negotiating for a fair amount, don't let them tell you what “other employees” are making. Remember, you are a commodity. Does the guy who fixes the copy machine care how much the guy who delivers the water gets paid?

If my assumptions and or math are wrong, I'm sure I'll hear it, but friends, it's time to get what's fair.

-Brendan

“And I'll give my consent to any government That does not deny a man a living wage.” - Billy Bragg

Published Jan 06 2004, 08:36 AM by Brendan Tompkins

Filed under: Consulting

Comments

DonXML Demsak said:

I tried to cover this very topic a couple weks back by creating a consulting worksheet that can be used to convert FTE salaries to and from W2 rates.

DonXML Demsak

# January 6, 2004 5:29 AM

Brendan Tompkins said:

Very cool. This is one reason I posted this, to get this type of feedback. We should all be as aware of this stuff as we are of design patterns, IMO.

# January 6, 2004 5:32 AM

Queen said:

Is this the real life ?
Is this just fantasy ?
Caught in a landslide,
No escape from reality.
Open your eyes, Look up to the skies and see,
I'm just a poor boy, I need no sympathy,
Because I'm easy come, easy go, Little high, little low,
Any way the wind blows doesn't really matter to me, to me.

Mama, just killed a man,
Put a gun against his head, pulled my trigger, now he's dead.
Mama, life had just begun,
But now I've gone and thrown it all away.
Mama, ooh, Didn't mean to make you cry,
If I'm not back again this time tomorrow,
Carry on, carry on as if nothing really matters.

Too late, my time has come,
Sends shivers down my spine, body's aching all the time.
Goodbye, ev'rybody, I've got to go,
Gotta leave you all behind and face the truth.
Mama, ooh, I don't want to die,
I sometimes wish I'd never been born at all.

I see a little silhouetto of a man,
Scaramouche, Scaramouche, will you do the Fandango.
Thunderbolt and lightning, very, very fright'ning me.
(Galileo) Galileo. (Galileo) Galileo, Galileo figaro
Magnifico. I'm just a poor boy, nobody loves me.
He's just a poor boy from a poor family,
Spare him his life from this monstrosity.

Easy come, easy go, will you let me go.
Bismillah ! No, we will not let you go.
(Let him go) Bismillah ! We will not let you go.
(Let him go) Bismillah ! We will not let you go.
(Let me go) Will not let you go.
(Let me go) Will not let you go. (Let me go) Ah.
No, no, no, no, no, no, no.
(Oh mama mia, mama mia) Mama mia, let me go.
Beelzebub has a devil put aside for me, for me, for me.

So you think you can stone me and spit in my eye.
So you think you can love me and leave me to die.
Oh, baby, can't do this to me, baby,
Just gotta get out, just gotta get right outta here.

Nothing really matters, Anyone can see,
Nothing really matters,
Nothing really matters to me...

Any way the wind blows.

# January 6, 2004 5:40 AM

Brendan Tompkins said:

Wow.. Well, okay. Someone posted the lyrics to Bohemian Rhapsody. The only connection I can make to this topic is that the operatic part whic sees the Bohemian begging to be let out of prison "Bismilla!
We will not let you go! Let me go!.." But again realizes that he is doomed to
live his life in prison "Never let me go!"

So, someone's saying that we're (W2 contractors) imprisoned ?

# January 6, 2004 5:49 AM

Mark Bonafe said:

I think it was an excellent post, Brendan. I just went though a negotiating process where I switch from salaried. I used the company's own documentation on their benefits and what it cost to provide them. Funny how these costs get played down in one direction and played up in the other.

# January 6, 2004 6:43 AM

Veintitres Puros said:

You went from full time to W2? Good for you! You're right, funny how they'll double-talk you about $$.

Have you ever noticed that when dealing with agency people, they never actually speak the figures? They instead write numbers down on pieces of paper and pass them over the desk to you. Funny. It's like they can't say out loud how badly they're screwing you. The only other people in the world I know wo do this are car salesman.

In the language of my home country, we have a saying "Quien paga manda"

# January 6, 2004 7:09 AM

John said:

Who Offers, pays

# January 6, 2004 7:13 AM

Veintitres Puros said:

Lo siento,

- He who pays the piper, picks the tune.

# January 6, 2004 7:16 AM

John said:

Veintires poopos, aren't you supposed to be on "patrol"?

# January 6, 2004 7:22 AM

Darrell said:

37% for benefits? That's pitiful. Even at the shipyard it was around 42%.

With CapTech I'm sure it is more, since they pay 100% of my health care.

# January 6, 2004 11:33 AM

Brendan Tompkins said:

Hey D.

So, it's 42%... Good. The higher the better, as Mark B said, he was able to use this information to negotiate a better W2 wage.

-B

# January 7, 2004 12:47 AM

Dren said:

"Many agencies will attempt to make you feel guilty when asking for a fair wage. My advice: your compensation should be fair, period. "

My advice - AVOID agencies all together. Yes there are good ones but its like 1 out of 100. You waste time dealing with leeches who often will not pull through for you. Imagine dealing with someone with no IT experience whatsoever yet has the nerve to tell you what your worth? Those greedy bastards will do anything to pay you crap including letting you take a "skill test" thats so retarded as to make sure you dont score well. You'd be much much better served (and rewarded) by getting your gigs and building your own client list. Piece of cake especially with in demand .NET skills. Always go direct.

# January 9, 2004 6:38 PM

kfcpub said:

While your point is valid, your math is a little off. You made a classic percentage error that you often see in the media. In the first calcuation you added 37% of the base salary to get the total salary (87,000 + (.37 * 87000) = 119,190) or b + .37b = t. In the second calculation you subtracted 37% of the total salary to get the base (70000 - (.37 * 70000) = 44,100) or t - .37t = b. After looking at example salaries on Monster, it appears that the first equation is correct. So a little algebra yields 1.37b = t, so b = t/1.37. Applying this to your second example, you get b = 70000/1.37 = 51095, which is 16% more than 44100.

# June 1, 2004 8:55 AM

Brendan Tompkins said:

You are absolutely correct. I've updated my post! Thanks!

# June 1, 2004 9:01 AM

Big Al said:

My company figures about 120k per US employee.

My total cash compensation is around 90k. Add 37% and its 123k.

I think you're right on the money. (haha).

# April 3, 2007 4:15 AM

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About Brendan Tompkins

Brendan has been programming with .NET since the first public beta and is owner and operator of Port Technology Services, a consultancy company providing .NET application development services to the Maritime industry. In July, 2007, he was awarded the Microsoft MVP award for ASP.NET. He's also a proud co-founder of failed .COM startup Intrinsigo, and has had a hand in the failure of numerous other businesses. He currently runs CodeBetter.Com and Devlicio.us, and lives in Norfolk, Virgina with his wife Tiara and son Ian.