As media organizations continue to trim staff positions, they are hiring contractors to do more of their photography work. For laid-off staff photographers, this presents an opportunity — if you know how much to charge for your services.
So, how should former staffers determine their value as contractors? Here are four simple steps to calculating an appropriate rate:
1. Start with your hourly pay rate at your last staff position. Most ex-staffers are looking to be compensated for contract work at a rate that equates to their former salary level — which is fine. Let’s say your former salary was $50,000 per year. Take 52 weeks, multiply it by five days a week, and you arrive at 260 days. Divide the $50,000 by 260 and you’re at $192 a day, or a rate of $24 per hour.
2. Bump up the rate to factor in paid days off. Think about it: did you actually work 260 days per year as a salaried employee? Probably not — because when you were on staff, you received vacation days, sick days, holidays, even training days. These might have added up to, say, nine weeks where you were paid, but didn’t actually work. So let’s take those 45 days and subtract them from the 260 days in Step 1 to arrive at the actual number of days you worked annually for your last employer — in this case, 215 days. Divide the $50,000 by 215 and your asking price has increased to $233 a day, or $29 per hour.
3. Add in health insurance and other non-monetary compensation. Since you are self-employed now, your former company is no longer paying for your health, disability and life insurance. They are no longer contributing a 401(k) match. They are no longer providing training and the equipment that you use in your job. What are these benefits worth? The Contract Employee’s Handbook offers a ballpark figure of $35,000 a year. Take that $35,000 in compensation, divide it by 215, and you’re at $163, or a rate of $20 per hour. Add that to the $29 per hour in Step 2 and you’ve arrived at a contract rate of $49 per hour.
4. Include a risk premium. When you are a contractor, you are not guaranteed the next day’s work like you were when you were an employee. You are taking on this risk to provide the company that contracts you with financial flexibility — which has value to them. So add a premium of 10-12 percent to your rate for this. For the contractor who had earned $50,000 as a staffer, this would increase your equivalent hourly rate to $55 per hour.
And that’s your final rate.
As you probably surmised, there’s a quicker way to arrive at this calculation. Here it is:
(Previous Salary + Non-Monetary Compensation)
/(Actual Work Hours Per Year)
+ 10-12% Risk Premium
= Hourly Contract Rate
I did the calculation the way I did, however, to make an important point.
You would be amazed how many photographers, who made $50,000 per year in their staff positions, are charging $24 per hour (or something like it) and don’t realize that they’ve cut their pay rate by more than half!
All because they’re not doing the math.