If you are a regular reader of my blog, or you know me personally, you know that I recently lost my job. It’s a mixed blessing for sure. On the one hand, I now have time to finish my dissertation, to really focus on it, to get the writing done for myself. But, as I’m sure you can imagine, lack of income is stressful– but I’m managing.
As part of my job search, I have run across many freelance opportunities. The problem with most of these is that companies (usually small business owners) think that means that they can offer the same wage (or less) that they would offer a person who is on payroll– completely oblivious to the fact that as a freelance worker, that wage needs to cover the expenses of the business of working freelance.
Let me back up here. Last month I responded to a job, a posting on a student job board at the University of New Mexico. Someone was looking for a blogger. The pay was nowhere near what I wanted to earn, but I sent in a resume anyway. Immediately I got a reply from Jann–she was super excited about my skill set, and since she had posted that job listing a few months earlier, her needs had changed significantly. She didn’t need just a blogger, she needed someone to write technical articles for her website, edit white papers, and possibly help with search engine optimization. We arranged for a time to talk on the phone so I could get more details about her needs.
In the meantime, I checked out her website, and got an idea of the kind of work she did– selling LEED Certified products to improve energy efficiency. When I told her my rate, her response was “Whoa! you’re still on California rates!”
What I didn’t tell her was that “California rates” would have been twice that.
“What would you do for half that?” she asked.
Of course since then, I’ve thought of several juicy responses:
A half-assed job
Prose with no punctuation
Every third word missing
(you get the idea)
But at the time, working from a place of fear, I was determined to make it work. I said, “Let’s meet and go over in more detail the kind of work you need done, and I would certainly consider lowering my rate if this were to be a regular gig.”
We set up a tentative meeting, and then I went off to Portland to witness the wedding of my dear friend Nari, and hang with my cousin Katie. … and I did a lot of thinking, so when I returned I sent off this email:
I’ve returned from Portland, and while we had penciled in a time to
meet, I apologize for not following up to confirm or select
a place. I had some time to think while I was gone, and I’m going to
have to stick to my $XX / hour rate for writing. I don’t think that’s
out of line for a skilled freelance writer– even in Albuquerque.
Part of that income goes toward my own social security contributions,
health insurance, marketing and administrative costs, etc. So working
for half that as you suggested, would not be in my best interest…
and I’d hate to start working with you harboring resentment.
If you’re still interested in meeting to discuss opportunities, I’d be
happy to schedule a time. Otherwise I wish you well, your company and your products sound really interesting– you’re doing important work.
As a freelance / self employed/ contract employee, one who is not on payroll:
- I will be responsible for paying federal Self Employment tax. This is 15% right off the top. This tax replaces the Social Security and Medicare withholding that an employer usually handles via payroll. And since I will be the employee and the employer in a freelance situation, I pay contributions for both.
- I still have to pay income tax (anywhere from 11% to 19% depending on my income) after the self employment
- I get no 2 weeks paid vacation, no sick days, no PTO. Any time off I take, I don’t get paid for.
- Hours I spend marketing myself, invoicing clients, preparing proposals, preparing quarterly taxes… I don’t get paid for.
- Time spent running to the post office, or the store for office supplies…. I don’t get paid for.
How does this break down? Well, I am NOT an accountant or a CPA, but I am a self avowed geek with some mad Excel skillz. I created this handy dandy spreadsheet, using information from an article on AllFreelanceWriting.com and the Tax Rate Calculator they recommended over at SmartMoney.com:
(after SE Tax)
|30 hrs/ week
(no paid vacation)
Take Home Pay
|$ 10||$ 8||$ 254||$ 15,000||$ 2,295||$ 13,853||11.02%||$ 1,653||$ 12,200|
|$ 12||$ 10||$ 305||$ 18,000||$ 2,754||$ 16,623||11.49%||$ 2,068||$ 14,555|
|$ 15||$ 13||$ 381||$ 22,500||$ 3,443||$ 20,779||11.96%||$ 2,692||$ 18,087|
|$ 20||$ 17||$ 508||$ 30,000||$ 4,590||$ 27,705||12.44%||$ 3,731||$ 23,974|
|$ 35||$ 30||$ 889||$ 52,500||$ 8,033||$ 48,484||15.71%||$ 8,246||$ 40,238|
|$ 45||$ 38||$ 1,143||$ 67,500||$ 10,328||$ 62,336||17.35%||$ 11,709||$ 50,627|
|$ 65||$ 55||$ 1,652||$ 97,500||$ 14,918||$ 90,041||19.31%||$ 18,828||$ 71,213|
Some notes about this chart…
1. I assume 30 billable hours per week, which is really wishful thinking, especially at the onset of working freelance.
2. Some of the “taxable income” can be offset by allowable deductions for home office (including a percentage of utilities, mortgage or rent), supplies, equipment purchases, health insurance… this is where it comes in handy to have an accountant who can ensure you are in compliance.
3. Income Tax Due. This is a big one, you need to plan for this because you’ll have to pay estimated quarterly taxes… you’ll need the cash to do so.
4. I did not even figure the expense of doing business in New Mexico. I have heard there is something called Gross Receipts Tax, a tax on all items billed to a customer. There may be business registration fees or licensing fees that need to be paid– I’m still researching.
5. I have some mad Excel skillz, but HTML… not so much, so this chart does not look so pretty.
6. Most importantly… $20 per hour is NOT $20 per hour in your pocket. And keep in mind MINIMUM wage is $7.25 per hour.
So maybe I’ll be turning down jobs, and I’m okay with that. Really, if I don’t value myself who will?