How do I Calculate a Contractor Hourly Rate?

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Negotiating a fair and defendable hourly rate for an independent contractor has always been an undertaking shrouded with mystery and cryptic ambiguity.  As HR professionals or hiring managers, we often settle on a rate simply because there's no tangible science or formula we can refer to.  The variance in rate for the same work can span 200% from one independent contractor or consultant to another.  Contractors often communicate their rates based on their requirements rather than a fair market calculation for that work. 

One way to determine a contractor rate is to understand what that individual would be paid in a similar full-time regular position and reverse-engineer the hourly rate. 

Once this ConnectsUs document has been modified for your company, it will be used by:

• HR and/or Finance, who will collaborate with the Hiring Manager to complete the details for each contractor position.

Why use a Contractor Rate Calculation Spreadsheet?

It ensures that your company:

• Compensates all contractors at a rate that is comparable to market value.
• Factors in all expenses that affect a contractor's rate - both from the contractor's side and the company's side.
• Can justify your contractor compensation rates.

What you risk by not using it

• You may end up paying contractors an inflated rate.

• You may offer a rate that is below market value and risk losing strong contractor candidates.