From Spend Matters, MBO Partners describes how to budget for independent contractors compared to w-2 employees. The article states:
“If you hire project-based ICs, you may be able to roughly compare rates to that of a W-2 employee. Keep in mind that the employee rate will need to include taxes, expenses, insurance and the other inherent costs of doing business – usually 18% to 30% on top of the rate.
One solution is to put in place “guardrails” that define the cost of using similar resources from a temporary staffing agency. The IC would fill out a Scope of Work (SOW) form that would also identify tangible value points that justified their proposed project cost. As long as the consultant’s cost was in between these “guardrails,” then purchasing has done their due diligence and it’s up to the engagement manager to justify the value identified in the SOW document to make the final buy decision.
Comparing Rates
You may receive a wide range of rates for the same project. If you are comparing prospective consultants and trying to determine if the rate is in line, you can use the FTE equivalent as a rough basis for comparison. At the low end of the skill level, you can take a comparable FTE hourly rate and add 30%…”
Read the full story at What Should You Pay for Independent Contractor Services?
