makaveli26 — 2011-08-18T21:45:39-04:00 — #1
Hey guys.. got a question for you..
I started working for a company back in March. I was brought in to run their online retail and ebay store. I manage their online inventory, upload product, process their orders, handle their customer service (email, phone), tech support, and returns/refunds. Pretty much everything that has to do with the online store or ebay I take care of.
Right now I am getting paid an hourly rate and get a commission off of the gross sales.
This company will now be moving out of state in Oct. The owner wants me to go 1099 and do this on the side for him from my house. He does not want to keep me on the books or as an employee. I would be an independent contractor.
The question I have is he wants to to pay me straight commission. I would be using my own computer, printer, internet connection and phone.
What do you guys suggest would be a good percentage to charge? Right now I make about $2100-2500 a month with my pay and commission depending on how much I sell.
Thanks in advance
sagewing — 2011-08-18T22:21:33-04:00 — #2
It's hard for anyone to really give an opinion of how much that job is 'worth' but maybe you could look at it like this:
How much would it cost for him to get someone to replace you? That means someone who could work from home (which people like, so that means he will usually pay less) and has a computer/printer/phone/connection (which most people have anyways). So, it's mostly just the number of hours you need to work and the skill level required to do the job.
Figure out how many hours it will take to do the job, then figure out the approximate hourly rate that you were getting before. Then decide what to ask for based on that.
ted_s — 2011-08-18T22:30:50-04:00 — #3
You have an interesting opportunity here.
As a contractor you pay more in federal taxes [13.3% or around twice the withholdings as a w2 employee as the employer pays the other half]. You also don't quality for paid time off [2-4 weeks vacation + 10-14 paid holidays], sick time, unemployment assistance in the event of a "layoff", health insurance or any fringe benefits. In straight dollars it will cost you no less than 20% more to get the same results... and despite what anyone tells you, your deductions are unlikely to change this dramatically...
Thus you have a position from which to negotiate.
You could compute the increased cost to you with taxes, health care, time off and everything else and then back into a commission that gets you there but I think it's worth thinking higher. Even if your base is low, it's always there... going 100% commission means taking all the risk and should come with the reward opportunity to match.
Furthermore, you're doing things beyond selling, like returns, which will make you nothing to continue [until the negative pr hits the brand that is]. Your package has to cover and incent you to rock at this too or they'll end up with a big hole in the model.
Now hopefully you have insight into the margins to understand how much more you can reasonably expect to get and how to best structure it [i.e. tiers for reaching goals vs one flat rate].
Paint a picture that shows your soon to be 'former' employer how while it does cost you more to make the same, this is about giving you the reward for making the business to succeed... he has to remember that you know the job and are doing it well, or it's on to the next guy... and if you can show that what you're asking for means you have to make him more money, all the better [hence tiered systems].
At the same time compute the minimum you need to live. Lots of people ignore the costs of turning someone freelance [not to mention the IRS regulations that decide if it's even legal] and try to offer the same... that doesn't tend to make much sense.
And of course, do the homework on the agreement. Forum advice is great for discussing rates and approaches, but you need to check the T's & C's before you sign.
Lastly, review the IRS rules around this yourself so you can understand what's reasonable to expect of you, and how this lets you draw a different line on your own time and approach. Freedom is a big part of going 1099.
Self-Employment Tax (Social Security and Medicare Taxes)
makaveli26 — 2011-08-18T23:20:02-04:00 — #4
awesome. thanks for the info guys.
eloisem — 2011-08-26T05:44:59-04:00 — #5
The advancement of jobs throughout the financial recovery has been, at the best, anemic. Independent contractors are being hired more and more often to fill jobs that employees used to do. If ignored, incorrectly classifying yourself could have huge tax consequences. For both employees and employers, the differences are a hugely essential thing to understand. Making the difference; employee compared to independent contractor. They say that independent contractor are more paid than an employer but they are the ones who are responsible for paying their own taxes. It is a tough battle when it comes to choosing to become a regular employee or an individual contractor.
sagewing — 2011-08-26T11:40:41-04:00 — #6
It's not a battle at all, it's a matter of understanding the rules and acting accordingly.