Nick, Warren, there's great value in both of your emails. There was a bit of discussion about this back at the first Adelaide Rails Camp - leading from suggestions I had around choosing rates - this blog post doesn't do the Rails Camp discussion justice, but the comments certainly add a lot of value: http://freelancing-gods.com/posts/freelancing_tips_via_rails_camp_4
That said, Nick's provided some much deeper (and better) distinctions on how contractors work situations differ from full-time, and the pros and cons of each. Thanks for sharing. -- Pat On 09/11/2011, at 1:00 PM, Warren Seen wrote: > Good post Nicholas. > > I contracted for 7 odd years, (not just as a Ruby dev) and everything here is > pretty much spot on. I used to aim for about 60% of my time being billable, > that was the break-even point for me - once I had covered my mortgage, living > expenses, feeding the kids, etc. anything else was "profit". > > When setting your rate, know your market value, and be prepared to justify it > and walk away from a bad deal if you feel like you're about to get screwed. > > Above all else, make sure you plan from the start to pay yourself at LEAST 9% > superannuation - although paying more can have tax benefits, so get a good > accountant if you don't already have one. > > Actually, scratch that: Above all else, get a good accountant. > > Happy to answer questions off-list if anyone wants to ask me anything. > > Cheers, > > Warren > > On 09/11/2011, at 4:45 PM, Nicholas Faiz wrote: > >> Hi, >> >> I've been watching job boards for Ruby related contracts lately and have >> noticed some low rates being offered with high expectations. It's happening >> frequently enough that I wanted to post my understanding of how to calculate >> an hourly rate. Setting *reasonable* standards of pay for the appropriate >> level of expertise is vital. There's a lot to say on the matter, so I've >> tried to be brief. >> >> For some reason it's very easy for software developers to match their >> experience and knowledge to a full-time rate, but for contracting there is >> less awareness. >> >> The difference between full-time employment and self employment. >> >> Employers gain certain benefits from contractors. On a financial level, they >> have less commitment, which means they do not have to pay for sick, parental >> and annual leave, training, redundancy payouts (for redundancy see >> http://www.netlawman.com.au/info/retrenchment-and-redundancy-australia.php) >> or superannuation (at least 9% of base income). To hire someone on a >> full-time basis is a serious commitment for an employer, and if the >> relationship isn't successful they cannot simply end the agreement (see >> unfair dismissal laws - >> http://www.fairwork.gov.au/resources/fact-sheets/conditions-of-employment/Pages/termination-of-employment-fact-sheet.aspx >> ). >> >> So, employers can take project risks, using contractors, to build a >> profitable application, without the consequences of supporting long-term >> staff. If they (read large corporations especially here) had to commit to >> long-term employment responsibilities before their endeavours became >> profitable it would be prohibitive to start them. Good contractors are >> essential for ventures hoping to build a profitable application and it's a >> typical scenario that applications are initially built with contractors and >> then, when mature, transition to full-time internal staff. >> >> Expertise. >> >> In addition, there's expertise to consider. Contractors are often experts >> (or aspiring ones) in their domains. Full-time staff might specialise on a >> particular use of a technology *and* the business. Contractors are expected >> to specialise in the technology, and to bring new perspectives and expertise >> to inhouse practices. So, these sorts of contractors also enrich the >> development habits of their employer by showing them new ways to solve >> problems which their own employees haven't had time to research. >> >> Remember, if these things don't happen, the agreement between the contractor >> and the employer can quickly end. >> >> The basic rate. >> >> The rough calculation is your expected annual income, at a full-time rate >> (including super, paid leave, etc.), divided by 1000. For e.g., for $75,000 >> pa (including a super payment, holiday pay, potential sick leave cover, >> etc.), the matching hourly rate is $75 (GST not included). This sort of >> package would like be advertised at somewhere like 62k with benefits >> attached, if converted to a full-time role. >> >> If you pull out a calculator and multiply the number of working weeks in the >> year by the number of working hours (46 x 40) then times that by the hourly >> rate, you'll find that this adds up to 138k. This seems to be excessive of >> the targeted 75k income. But that's okay, for two reasons. >> >> 1) The employer hasn't hired you for 46 weeks in the year. >> 2) If you are able to bounce between short-term contracts continually, then >> that's a good thing, but the employer's agreement with you doesn't guarantee >> this and it can't be used as a justification to lower the rate. The reality >> is, in the contracting scene, there are sometimes gaps in employment for >> upskilling (open source coding, etc.), rest, or securing the next role. >> >> This rate leaves to one side the notion of expertise. If you're an >> exceptional candidate, for whatever reason, or if the technology you >> specialise in has a rarer skillet, or is in high demand, then these rates >> can adjust to such things. The reality is that Ruby and the frameworks >> around it are an in demand skillset, so if anything the rates should go >> higher. >> >> So, beware of contractual roles which are, in reality, heavily benefitting a >> company or (more than likely, a middle man agent), and offering >> incommensurate rates for skillsets. Support the employers that do offer fair >> rates by doing good work. >> >> >> Cheers, >> Nicholas >> >> -- >> You received this message because you are subscribed to the Google Groups >> "Ruby or Rails Oceania" group. >> To view this discussion on the web visit >> https://groups.google.com/d/msg/rails-oceania/-/QDcQGFsvlCEJ. >> To post to this group, send email to [email protected]. >> To unsubscribe from this group, send email to >> [email protected]. >> For more options, visit this group at >> http://groups.google.com/group/rails-oceania?hl=en. > > > -- > You received this message because you are subscribed to the Google Groups > "Ruby or Rails Oceania" group. > To post to this group, send email to [email protected]. > To unsubscribe from this group, send email to > [email protected]. > For more options, visit this group at > http://groups.google.com/group/rails-oceania?hl=en. -- You received this message because you are subscribed to the Google Groups "Ruby or Rails Oceania" group. To post to this group, send email to [email protected]. To unsubscribe from this group, send email to [email protected]. For more options, visit this group at http://groups.google.com/group/rails-oceania?hl=en.
