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I'm not sure where to post this so I figure I would post it here.
I'm in the process of negotiating with my current employer about my 1099 hourly rate. The background is that I was contracted to my current employer through a contracting/staffing agency do software programming, the contract was originally for 6 months, it has since ended. While under the contract,I was getting paid w2 hourly for 35 dollar per hour. I was eligible for health insurance, dental insurance, vision insurance, 401k plan after 500 hours of working, short term disability insurance, long term disability insurance, workers compensation, life insurance etc. I don't get paid for any holidays, personal vacation days or sick days. I only get paid for the hours I work. and the maximum hour is 40 hours per week, no over time pay.
And now my employer decided that they want to convert me to a 1099 employee, and is now offering me the same rate at 35 dollars an hour. I realize that this is an offer lower than the 35 dollar w2-hourly since I will be losing all the benefits and will be paying more taxes, I am trying negotiate an offer that is equivalent to w2 hourly(when I had the mentioned benefits)
According to my situation, what is a reasonable rate that I can bargain for? Thanks for the help. And don't let my name fool you. I don't actually own a penthouse apartment, I do want to own one eventually, hence the name. haha
Last edited by penthouseOwner; 01-24-2016 at 10:58 PM..
You need to add up all those benefit costs. Then you'll see what it's costing them to keep you as a employee on a hourly basis. Now you see why they want you as a 10-99.
All those costs probably add another 10-15a hour in cost. So you're making $35 a hour but you're costing the company $50 a hour. They bill your labor out at $100 a hour and they are getting $50. You're part of the overhead cost too. By making you a 10-99 they now pocket $65 bucks and you have to make do with $35 a hour, pay ALL your income taxes and try to get any of those bennies back. But you're paying out if that $35 a hour. You just took a minimum of $10-15 pay cut
A comparable rate as 10-99 would be about 2x your current hourly. If you bill hourly. If it's a contact job there as needed or be there whatever it takes till it's done, you can do a on call as needed but $200 show up fee and 4 hr minimum at $100 a hour. If they want you there 8/40 but you to shoulder all the cists they gotta pay for it. At $35 a hour you will be getting a screwing. Sans Vaseline and no reach around
Last edited by Electrician4you; 01-24-2016 at 10:39 PM..
I actually negotiated with the manager before and he changed the offer to 36 dollars an hour. which is still low balling. I feel like I am being taking advantaged off by them. This is my first time dealing with 1099, so I have no clue. This is pretty low pay for a software engineer. This place is pretty cheap when it comes to paying its employees, I will bargain for as much as I can, since at the end of the day no one is going to take care of you but yourself. Thanks for the advice, any idea about how I can negotiate this with my employer and bring up the fact that I am underpaid? Thanks.
I agree with the poster above. My health plan that my employer fully covers is $700/mo or $4 per hour, my dental and vision runs about $60 a month and calculate into that whatever your 401k match was. The added taxes will at least be an extra 8% in social security taxes. However you will have more expenses you can write-off as a 1099. Add in any other benefits you were getting to establish the amount you negotiate.
If you are being paid hourly you are probably still considered an employee by the IRS and should be on W-2. Your employer can't just decide to call you a contractor and put you on 1099 to save money. Of course if someone else is willing to go along with it you could be out of a job.
Agreed 1099 status is strictly regulated by the IRS and for good reason. If it wasn't, no company would have employees everyone would be 1099 contractors with no benefits and there would be no workers comp nor unemployment insurance. 1099 is primarily for hiring an independent person for completion of a project of defined length and scope like replace a roof, design a web page etc not show up every day from 8am-5pm and do whatever you are assigned for however long we need you.
You will have to pay DOUBLE social security/medicare taxes versus what you paid when you were on W2. This is because when on W2, your employer also pays the employer's share of social security/medicare taxes, on top of what you paid. You don't see the employer's share on your W2, but they have to send it to the IRS.
If on 1099, YOU must pay your share plus the employer's share.
In addition, you have to send quarterly Federal tax payments to the IRS, including medicare/social security taxes. This is a hassle. If you don't pay these on time there are penalties. Also you have to fill out extra tax forms when it's time to file your 1040. Because you are considered self employed.
You won't be eligible to collect unemployement compensation if you get laid off.
I actually negotiated with the manager before and he changed the offer to 36 dollars an hour. which is still low balling. I feel like I am being taking advantaged off by them. This is my first time dealing with 1099, so I have no clue. This is pretty low pay for a software engineer. This place is pretty cheap when it comes to paying its employees, I will bargain for as much as I can, since at the end of the day no one is going to take care of you but yourself. Thanks for the advice, any idea about how I can negotiate this with my employer and bring up the fact that I am underpaid? Thanks.
I have a feeling they won't feel you are underpaid. They are low balling you to save money. Most temporary employers charge the client twice the salary the employee makes. You should accept no less than that amount.
Quote:
Originally Posted by sware2cod
You will have to pay DOUBLE social security/medicare taxes versus what you paid when you were on W2. This is because when on W2, your employer also pays the employer's share of social security/medicare taxes, on top of what you paid. You don't see the employer's share on your W2, but they have to send it to the IRS.
If on 1099, YOU must pay your share plus the employer's share.
In addition, you have to send quarterly Federal tax payments to the IRS, including medicare/social security taxes. This is a hassle. If you don't pay these on time there are penalties. Also you have to fill out extra tax forms when it's time to file your 1040. Because you are considered self employed.
You won't be eligible to collect unemployement compensation if you get laid off.
Read that last line and start looking for another job. You should keep all documents pertaining to this offer and file for unemployment when you leave the job. You might get benefits based on your W2 work, if you file your unemployment claim right. Check out the unemployment forum for advice on how to proceed BEFORE you file a claim.
Hi, I am a fellow Programmer, only with like 20 years of experience. Even got a gray hair or two.
I am going to repeat what was stated above:
1. A 1099 is defined by IRS that you have to use your own equipment and not have a formal manager who directs you .... https://www.irs.gov/Businesses/Small...ed-or-Employee
2. Additional taxes are about 15% for the 1099 workers, you will probably need to hire a cpa to do your taxes and those guys really like tot stick their hands into your pockets. https://www.irs.gov/Businesses/Small...Medicare-Taxes
3. You will not be eligible for unemployment benefits and will not be paying unemployment taxes (unless your CPA gets creative.
4. You have to buy your own health coverage.
5. Employment laws, on w4 you have employee rights and on 1099 you do not. This means legal protection.
I do not think that $36/ on 1099 is worth it. With a 1099 you you have to have business expenses. In a couple of years, when you gain more seniority, and have a 60-75/h rate, you can revisit the 1099 relationship to see if it's right for you.
Your "Manager" is taking advantage of you and many reputable companies would never allow this. It kinda makes me wonder about your manager, company and their intentions towards you.
35/h is about 60-70k, for my area you are mid-level, not Sr yet. You have 3-5 years of relevant experience. It might be a better choice for you to look for full time job. No overtime pay to an hourly w4 worker... I mean your employer is pretty disgusting.. Dump that looser. Find yourself some good to do business with. Normal employers do not make you work uncompensated overtime. Either you are paid for your time (with in the same pay cycle as it is incurred) or in case of many full time jobs, if you work an extra 4 hours this week you get 4 hours of extra PTO.
I also have to wonder; are you working in a low wage state like mine? The SE is notorious for low balling salaries and then wonders why they can't get top performing employees.
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