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Self-Employment: Do you know the Difference between Rates and Wages

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



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