Home
>
Small Business
>
Self-Employment: Do you know the Difference between Rates and Wages

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

The difference between rates and wages is not always clear to newly self-employed people and their wage-earning clients.

Both look similar on the surface; both are expressed in dollars and cents per hour. But they each represent something very different.

Wages are the payment a worker receives for his labor.

Rates are the payment a business receives for performing a serivce to a client. In addition to the labor used in performing that service, rates must cover the business's overhead.

Because of that, rates have to be higher than hourly wages earned by employees for comparable work.

Most newly self-employed workers are former employees. They are accustomed to receiving pay based on wages. Because they don't understand the difference between rates and wages, when they start out, they tend to set their rates too low.

To survive, your rates must be high enough to pay the bills and enable you to earn a living.

Some of the differences between a self-employed person's rates and an employee's wages are explained below.

WAGES

? If you are a wage earner, you are due an hourly wage just by being present and willing to work at a set time, for the period of time demanded by your employer.

Your wage is the payment for your labor.

? The employer supplies the necessary equipment and supplies for you to do the work. And, the employer supplies your workplace.

? You enjoy all of the legal and social protections due to employees such as Unemployment Insurance, and employer paid Worker's Compensation Insurance.

? Most full-time employees enjoy fringe benefits. These range from paid vacation and sick days, subsidized health insurance, retirement benefits, etc. to stock options and more to higher ranking employees at larger companies.

RATES

? As a self-employed service provider, you receive income based on your billable hours, that is, time spent on performing services for your clients.

? You furnishes your own supplies. Unless the service is one that is performed off- site, you supply your own workspace.

? You have to equip yourself to be in business and provide your services: You must procure and equip your workplace, invest in skill and product development, market your services, purchase business insurance, and handle billing, recordkeeping and collections.

? As a business owner you take on a great deal of risk. It is reasonable, and expected, that your rates should allow for a reasonable profit over and above your expenses and salary.

The above is true for any business. Below are additional costs you pay because you are self-employed.

? Unlike most of your employed counterparts, there is no employer subsidy for your health insurance. And, as an individual, your costs will be higher than they would be as part of a larger organization.

? Aside from Social Security, you are totally responsible for your own retirement nest egg.

? You will pay both the employee's and the employer's share of the FICA tax burden (15.3%); double the burden that falls upon your employee counterparts. The IRS allows limited deductions for this tax, but your net share is still far higher than for your employed counterparts.

But you can only bill for services rendered.

The upshot is that as a self-employed service provider you must cover many expenses that employees do not. Therefore you should have no qualms about charging an adequate rate to cover your expenses and make a living.

Ellen Zucker's site, http://www.selfemployment101.com, has articles and resources to help the creative sole-proprietor earn a living and create a life.

Have Ellen's articles directly sent to your inbox. Subscribe to http://www.selfemployment101.com.

Wood Dale Chicago prom limo .. Lockport Chicago limo O’Hare

In The News:

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents

Internet browsers are useful, but they can be dangerous. Clicking on malicious links can direct you to dangerous websites that steal information or infect your device.

Apple's latest iOS update introduces advanced artificial intelligence capabilities, which may be capturing and analyzing sensitive information.

Breach site confirmed 56,904,909 Hot Topic users' data leaked online. Tech expert Kurt “CyberGuy" Knutsson says the company's silence makes matters even worse.

Tech expert Kurt “CyberGuy" Knutsson discusses how an innovative Easy-Way kit turns standard strollers electric, simplifying navigation for parents.

Tech expert Kurt “CyberGuy" Knutsson talks about T-Mobile being hacked in broad cyberattack on global phone and internet companies.

Tech expert Kurt “CyberGuy" Knutsson shows you how to add, customize and manage widgets for quick access to apps and info from your iPhone home screen.

Wrong Google searches can not only compromise your device and personal data. They can also bring law enforcement to your doorstep. Hackers are targeting Google searches.

China's Shanghai Kepler Robotics has developed a new humanoid robot that can carry up to 35 pounds per hand for commercial applications across various industries

Checking your hearing has gotten easier with the new hearing test feature in AirPods Pro 2. You can take reliable hearing tests using your iPhone or iPad.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

Kurt "CyberGuy" Knutsson explains how a VPN — virtual private network — works and how running it can slow down the operation of your device.

The WalkON Suit F1, an exoskeleton developed to help people with disabilities, can actually walk over to a person in a wheelchair, solving a major problem.

ClickFix, a new scam targeting computer users, is on the rise in the U.S. The scam prompts its targets to click on a link to fix a problem.

Skydweller is the world's largest unmanned solar-powered aircraft that can stay airborne for weeks, and even months, without refueling.

The U.S. government said it is investigating after People's Republic of China hackers targeted commercial telecommunications service providers in the U.S.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

Scammers are using increasingly sophisticated ways to lure unsuspecting victims, and some are impersonating an email help desk or support team.

You can unsend or edit your iMessages with the latest iOS updates. Kurt the CyberGuy explains how you can save yourself some potential embarrassment.

Kurt “CyberGuy" Knutsson says there’s been a rise in cybercriminal services using hacked police and government emails to send subpoenas and data requests to U.S. companies.

Kurt “CyberGuy" Knutsson discusses how Axiom Space and luxury designer Prada are collaborating on NASA's Artemis III spacesuit design.

Voice assistants may cause confusion across devices. Tech expert Kurt “CyberGuy" Knutsson offers some solutions to fix it.

Shameless scammers trick veterans into giving personal info or cash. Tech expert Kurt “CyberGuy" Knutsson explores five common scams.

Tech expert Kurt “CyberGuy" Knutsson helps you honor our heroes with these powerful podcasts, audiobooks and documentaries this Veterans Day.

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

Small Business