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I'm in discussion with a company for a full-time web development position. Since the position would require telecommuting or a relocation of my family, we've agreed on doing 2-4 weeks of contract work as a sort of evaluation period. Now they're asking what I would like my contract rate to be.

I know generally what I'd like my salary to be, should this progress to the full time job, but I have no idea how that translates to the contract work. Taxes are different (I'm in the U.S.) and there are no benefits since I'm not yet an employee. Should I aim about on par with the salary I'm eventually hoping for, or do I need to adjust upwards to make up for taxes, etc.? (Or would I be expected to adjust down, since this is a sort of extended interview process?)

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I think you are making a mistake. Just go full time right ways and Quit after 4 weeks if you are not happy. Offering them a trial period was a mistake, you now have 1 month to prove your self or they will fire you. When you start a new job you don't want your new employer thinking in terms of "trial periods". – Morons Jul 7 '11 at 20:16
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@Morons you do not know all of the concerns or what is involved in the situation to realistically judge that. They may be considering offering him relocation expenses, or other considerations. Though I agree that if they are demanding a trial period it is a red flag and you need to make sure you protect yourself. – Chad Jul 7 '11 at 21:02

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2 Answers

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Short and sweet - xK per year = x per hour.

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Meaning the contract work should be almost double the salary, or did you just miss a "2" in there somewhere? (There are 2080 work hours in a year) – keithjgrant Jul 7 '11 at 19:56
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Exactly, you are responsible for a whole load of stuff that your employer normally pays for, insurance, training, travel, risk, professional fees - the list is endless. With it being the start of a contract-to-hire you should perhaps scale it back a bit, but that's the formula I always start from. – Matt Jul 7 '11 at 19:59
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+1: Right on the money. That's been the standard formula for 25 years in the US that I've been aware of. Don't scale it back for contract-to-hire; until you're hired, it's just a contract. And don't adjust down for an "extended interview" - if you're doing production work, it's not an interview, and you should be paid at a normal rate. – Bob Murphy Jul 7 '11 at 20:10
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@Matt: don't forget about self-employment tax. – Ken Bloom Jul 7 '11 at 20:25
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+1... If only more neophyte contractors realized the amount of overhead involved with the sales pipeline, etc... – red-dirt Jul 8 '11 at 4:13
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I'm not sure how taxes are there, but I'd try to go for a rate that gains you the same net income as the salary. Here it's even cheaper for the company to contract you than to pay a salary, so they won't complain for that deal. If it would be slightly more expensive for them to contract you, and they really consider taking you, then they won't make an issue out of it, since it's only 1 month. Plus you're making the sacrifice of losing extra benefits for a month, which shows them you're serious about it too.

You might think to lower your rate because it's an evaluation period and to try to land the longer contract, but keep in mind it's rather hard to raise your rate for an existing client (speaking in terms of freelance/consulting now). What's usually the best way is to keep your higher rate and offer a discount on it (percentage or number of free days). But this shouldn't be needed for you, since it seems you don't need to convince them anymore to hire you.

I'm not sure if this is possible in the USA, but when we sign for our job, there's always a trial period as employee (usually 6 months) in which both sides can end the agreement (1 day or 1 week notice) without any further consequences. That might be a solution instead of working 1 month under contract.

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I agree with your first sentence, however the rest of the answer indicates a serious lack of understanding of the cost of doing business as a contractor. The cash rewards for being on a short term contact must outweigh the risk of lost income, though cost of sales (e.g. It takes 4 weeks after being told "no thanks" to land the next job, I need to learn xyz so I can get more work etc...), opportunity cost (e.g. I'll will pay you buckets of money if you can start tomorrow, but you can't so I'll give it to the other guy who can etc). – mattnz Feb 19 '12 at 23:22
@mattnz: In this case, it's a contract that serves as a trial for hiring. That means that one or both of the parties think it may fall through, so the uncertainty is still there. The trial period should be billed as just another contract. – David Thornley Feb 20 '12 at 19:02

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