| The difference between rates and wages is not | | | | services for your clients.- You furnishes |
| always clear to newly self-employed people | | | | your own supplies. Unless the service is one |
| and their wage-earning clients.Both look | | | | that 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 very | | | | provide your services: You must |
| different.Wages are the payment a worker | | | | |
| receives for his labor.Rates are the payment | | | | procure and equip your workplace, invest in |
| a business receives for performing a serivce | | | | skill and product development, market |
| to a client. In | | | | |
| | | | your services, purchase business insurance, |
| addition to the labor used in performing | | | | and handle billing, recordkeeping and |
| that service, rates must cover the | | | | |
| | | | collections.- As a business owner you take |
| business's overhead.Because of that, rates | | | | on a great deal of risk. It is reasonable, |
| have to be higher than hourly wages earned by | | | | and |
| employees for | | | | |
| | | | expected, that your rates should allow for a |
| comparable work.Most newly self-employed | | | | reasonable profit over and above your |
| workers are former employees. They are | | | | |
| accustomed to | | | | expenses and salary.The above is true for |
| | | | any business. Below are additional costs you |
| receiving pay based on wages. Because they | | | | pay because you |
| don't understand the difference | | | | |
| | | | are self-employed.- Unlike most of your |
| between rates and wages, when they start | | | | employed counterparts, there is no employer |
| out, they tend to set their rates too low.To | | | | subsidy for your |
| survive, your rates must be high enough to | | | | |
| pay the bills and enable you to earn a | | | | health 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 an | | | | as 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 and | | | | nest 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 the | | | | burden |
| period of time demanded by your | | | | |
| | | | (15.3%); double the burden that falls upon |
| employer.Your wage is the payment for your | | | | your employee counterparts. The IRS |
| labor.- The employer supplies the necessary | | | | |
| equipment and supplies for you to do the | | | | allows 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 and | | | | your employed counterparts.But you can only |
| social protections due to employees such as | | | | bill for services rendered.The upshot is that |
| | | | as a self-employed service provider you must |
| Unemployment Insurance, and employer paid | | | | cover many |
| Worker's Compensation Insurance.- Most | | | | |
| full-time employees enjoy fringe benefits. | | | | expenses that employees do not. Therefore |
| These range from paid vacation | | | | you should have no qualms about |
| | | | |
| and sick days, subsidized health insurance, | | | | charging an adequate rate to cover your |
| retirement benefits, etc. to stock | | | | expenses 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-employed | | | | to help the creative sole-proprietor earn a |
| service provider, you receive income based on | | | | living and create a life.Have Ellen's |
| your billable | | | | articles directly sent to your inbox. |
| | | | Subscribe to The Self-Employment Lady. |
| hours, that is, time spent on performing | | | | |