| The difference between rates and wages is not | | | | provider, you receive income based on your billable |
| always clear to newly self-employed people and their | | | | hours, that is, time spent on performing services for |
| wage-earning clients.Both look similar on the surface; | | | | your clients.- You furnishes your own supplies. Unless |
| both are expressed in dollars and cents per hour. | | | | the service is one that is performed off- |
| But they each represent something very | | | | site, you supply your own workspace.- You have to |
| different.Wages are the payment a worker receives | | | | equip yourself to be in business and provide your |
| for his labor.Rates are the payment a business | | | | services: You must |
| receives for performing a serivce to a client. In | | | | procure and equip your workplace, invest in skill and |
| addition to the labor used in performing that service, | | | | product development, market |
| rates must cover the | | | | your services, purchase business insurance, and |
| business's overhead.Because of that, rates have to | | | | handle billing, recordkeeping and |
| be higher than hourly wages earned by employees for | | | | collections.- As a business owner you take on a great |
| | | | deal of risk. It is reasonable, and |
| comparable work.Most newly self-employed workers | | | | expected, that your rates should allow for a |
| are former employees. They are accustomed to | | | | reasonable profit over and above your |
| receiving pay based on wages. Because they don't | | | | expenses and salary.The above is true for any |
| understand the difference | | | | business. Below are additional costs you pay because |
| between rates and wages, when they start out, they | | | | you |
| tend to set their rates too low.To survive, your rates | | | | are self-employed.- Unlike most of your employed |
| must be high enough to pay the bills and enable you to | | | | counterparts, there is no employer subsidy for your |
| earn a | | | | health insurance. And, as an individual, your costs will |
| living.Some of the differences between a | | | | be higher than they would be |
| self-employed person's rates and an | | | | as part of a larger organization.- Aside from Social |
| employee's wages are explained below.WAGES- If | | | | Security, you are totally responsible for your own |
| you are a wage earner, you are due an hourly wage | | | | retirement |
| just by being present and | | | | nest egg.- You will pay both the employee's and the |
| willing to work at a set time, for the period of time | | | | employer's share of the FICA tax burden |
| demanded by your | | | | (15.3%); double the burden that falls upon your |
| employer.Your wage is the payment for your labor.- | | | | employee counterparts. The IRS |
| The employer supplies the necessary equipment and | | | | allows limited deductions for this tax, but your net |
| supplies for you to do the | | | | share is still far higher than for |
| work. And, the employer supplies your workplace.- | | | | your employed counterparts.But you can only bill for |
| You enjoy all of the legal and social protections due to | | | | services rendered.The upshot is that as a |
| employees such as | | | | self-employed service provider you must cover many |
| Unemployment Insurance, and employer paid | | | | expenses that employees do not. Therefore you |
| Worker's Compensation Insurance.- Most full-time | | | | should have no qualms about |
| employees enjoy fringe benefits. These range from | | | | charging an adequate rate to cover your expenses |
| paid vacation | | | | and make a living.Ellen Zucker's site, has articles and |
| and sick days, subsidized health insurance, retirement | | | | resources |
| benefits, etc. to stock | | | | to help the creative sole-proprietor earn a living and |
| options and more to higher ranking employees at | | | | create a life.Have Ellen's articles directly sent to your |
| larger companies.RATES- As a self-employed service | | | | inbox. Subscribe to The Self-Employment Lady. |