If you can’t afford all this, stop right now. Then there’s sick leave – potentially another 10 days – superannuation and other costs like maternity pay. You’ll most likely have an idea of a new hire’s base salary, but what about all the associated costs? Annual leave might be built in, but you still need to remember that you’re effectively paying their salary for 48 weeks of the year. If you haven’t factored in the full costs involved, you could be in for a bumpy ride. And to keep your business going, you’ll need enough sales to cover the additional expenses your new employee brings as well as enough cash to pay them – this is where an employment costs calculator (XLS 116KB) can help. If you have to turn away work, raise your rates immediately.Like it or not, the true cost of employing someone stretches well beyond what you pay them. If you make more money in the second period, raise your rates again, else lower your rates by 5%.

Then raise your rates buy 10% for the next period. Record your chargeable hours for a period.

The other way is to feel your way through. If you want a cushion, charge about $150 per hour. That’s assuming that you work full-time (1600 hours a year) if you have down-time without work, you will make less. So to equate to a $120,000 USD annual salary, you need to charge at least $131 per hour. As a freelancer, you have to charge enough for those 1600 hours to pay the overhead expenses and give your self a salary.

You only have about 1600 actual working hours out of the 2087 hours in a 8 to 5, five day a week year. Of course, I still had to pay my personal share of social security tax, income tax, health insurance, etc. Assuming one-third of that overhead was profit for the middleman, there was 75% of my salary going for the expenses above. The intermediate company charged my salary and charged another 105% for “general and administrative charges” on top of my salary to the people I was working for. I was once employed by one company through another company. You have vacation, sick leave, holiday leave, health insurance, self-employed tax, social security tax, etc.

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