Can't Start ASAP = HR asks if I'd 1099. Figuring out a rate?

December 13, 2011 10:28 AM

I have a hybrid question about working 1099, going rate for Enterprise Content Management/Digital Asset Management work, & maybe even accounting for costs when it'd be in San Francisco. No secret snowflake details, just how the heck do I figure out if it could work and for what amount of money?

Hopefully not too much tl;dr but the basic story:

* Interviewed for a job in San Francisco.
* Live in Sacramento, have family-related commitments here through New Year's that preclude moving quite yet.
*Employer is a month away from the first release of this project and already in crunch, we need help mode.

I've had several phone interviews, they like me and I like them, so yesterday was the first in-person interviews. The hiring manager got sick so I had to talk to her on the phone again and then had a follow up with the HR person. I've explained to them about my commitments and so far the hiring manager has said that's something they'd be willing to work around.

After all the other interviews, I had to meet with HR and that person started talking about how maybe if my schedule right now is crunched, I could freelance for them until the start of their next fiscal year. It's a little out of left field and hasn't been mentioned to me at all by the hiring manager, but for the sake of due diligence I said I would give an hourly rate quote. Except now I'm trying to figure out all the details ~

1. It would be 1099, so what % mark-up to cover paying your own taxes. From reading here and a little on the IRS site, it sounds like you should reserve 30% of your pay rate for the taxes.

2. It's Enterprise Content Management/Digital Asset Management work. I know what the rate is here in Sacramento, so besides using that as a baseline when the cost of living/salary is lower, what % more for San Francisco given the increased cost of living there?

3. Other expenses like gas/train and if I have to get housing for something like AirBnB if my friends' couches aren't free for a given week/night.

It's a bit of a crazy question, but I am still interested in this company and am willing to entertain the quote request as part of my due diligence process. Any insight into what factors to include in calculating a rate would be much appreciated!

posted by gov_moonbeam to work & money (9 answers total)

A not-bad rule of thumb for this sort of thing is to take your salary & divide by 1000, so if you were looking at an annual salary of $100k, you'd do an hourly of $100/hour (or $80/hour on $80k salary, etc). It's easier than making yourself crazy calculating relative cost of living. If they're in crunch mode and need you to do them a favor at a busy time of year, you've got leverage in negotiation.
posted by judith at 11:16 AM on December 13, 2011

Also make sure to budget for state income taxes.
posted by Ghostride The Whip at 11:19 AM on December 13, 2011

Sounds like you have the details covered (and I trust you're aware that this sounds like it might violate 1099 requirements, for what that's worth).

I've done work that involves some management of content/digital assets, have found too often in recent times that hourly rates in SF are atrocious, lower than areas with lower costs of living--because the supply-and-demand equation in SF heavily favors employers. Unless this is really high-level, technical work, the sad reality is that they'd almost certainly have good people lining up to take the work for $40 per hour.
posted by ambient2 at 11:32 AM on December 13, 2011 [1 favorite]

You should reserve anywhere from 30-50% for taxes and additional costs for you due to being freelance -- you'll have to pay for your own health insurance, you don't have any other benefits (401k, etc.) your taxes are different (more difficult if you've never done this before, which it sounds like is the case), and you'll have to be there/commute.

It also sounds like a type of gambit to get you to name your price -- i.e. a way to avoid having a regular salary negotiation. Why not just hire you, declare you part-time until you actually move to SF, and then ramp you up to your full salary then? If they really want to have you there before you're able to move, they should pay for your housing and travel costs when you're staying in SF.

Basically, beware of the "well, gov_moonbeam has agreed to work for us for $xx/hr now, that means for a full-time job we could probably get away with $xxK/year".
posted by polexa at 11:35 AM on December 13, 2011 [1 favorite]

Thanks for the fast responses! I am in a goodish position for negotiation & figure if it works out great and if it doesn't I have more industry insight/experience and haven't risked anything financially.

ambient2 ~ OK I'll bite, how does this violate 1099? My gut reaction is that the HR person who floated this offer probably doesn't know any of the requirements for taxes and the law and I am learning this as I go along. But if there's a conflict of interest, I'd definitely be citing that as part of my response.

Also polexa, I had dinner after with a friend and that was her exact same response, that if you agree to go contract with somebody, what's to keep them from deciding to keep you contract or saying "We'll just keep paying you this rate as a salary." So I'd be giving a very large number that would translate to a salary I'd ideally like to have.
posted by gov_moonbeam at 11:48 AM on December 13, 2011

Here's some info about 1099 vs. W2.

Dunno if this is something you've encountered, but it's far from unprecedented that people will try to get someone on a 1099 when they shouldn't be, either because they don't know the rules or they wanna save money.
posted by ambient2 at 12:08 PM on December 13, 2011 [1 favorite]

Haha, why yes I am aware of the different court cases of companies trying to classify staff at 1099 instead of employees. And thanks for the IRS details.
posted by gov_moonbeam at 12:50 PM on December 13, 2011

More than 30%. Freelancers need to pay their own taxes, pay their own healthcare costs and pay for their own retirement and they don't get things like paid vacation/sick time/etc.
posted by Brian Puccio at 6:03 AM on December 14, 2011 [1 favorite]

Well that issue got settled fast! I wrote up a proposal stating that it would need to be at least 40% mark-up from the hourly rate to at least cover my tax liability and that I wanted the terms in writing (to cover myself because of the 1099 v W-2 issues that can come up). Needless to say, 2 hours later I received a "Thanks But No Thanks" response. It seems like a great opportunity for the right person, but I'm pretty happy to have done my due diligence instead of just saying Yes and later finding myself on the hook for taxes. All of the input is much appreciated and I'm looking at it as a learning experience for any future opportunities involving either 1099 or that specific job market.
posted by gov_moonbeam at 12:38 AM on December 15, 2011