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United States Software Designer/Dev Scenario:

I have a salary job, lets say 100K a year, and I now also have opportunities to work for other companies as an independent contractor in addition to that. I already have all of the benefits from my salaried employer, so I'm trying to understand what to charge in this situation.

I did some research on what independent contractors charge and they all take into account the health benefits / insurance / tax / leave / sick pay and what not so they basically double+ the hourly rate of what they would work for as a salaried employee (in terms of 2,000 hours) at minimum, so $100/hr fee in place of a $100k a year job at the least.

I understand that I will be paying more taxes while doing IC work in the US, but since I am already employed and have benefits from another company should this factor in to decreasing my rate?

Does anyone have experience in this area as it seems to be some what of an ethical dilemma? Or maybe not? I don't know, I've asked lots of people and they all say you should still use the contracting rate that you would use if you were not employed by a company already.

I guess my overall question would be: "as someone that is already paid a salary, should I decrease my contracting fee working for another company at the same time because I already have all of the benefits I need"

This is a slight revision from This Workplace Exchange Question Hoping to get some more insight.

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No. If you're charging less than "market", then clients may get the impression that you're taking on work for cheap because you're not very good at it. The other side of the situation is that your 9-to-5 may not last forever, and if you have an opportunity to transition your side gig into full-time type hours, it's obviously not going to yield as much as the other job. Also, it'll be harder to justify a seemingly arbitrary increase in your rate to your side-gig client.

So start out getting paid what you're worth.

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There are some ethical implications where your industry is concerned, in addition to personal implications.

If you wish your industry to thrive and be a viable source of income, you really shouldn't undercut all your competition merely because your circumstances allow you to do so.

If you are willing to complete projects at rates drastically below market rates, you give clients the impression that everyone could complete their projects for that relative amount. This, in turn, creates obstacles for everyone in your industry. Inevitably it drives pricing for everyone down, Yourself included. Good luck raising your rates later after the entire industry has seen a 40% drop in overall pricing.

Just ask professional photographers how the mico-stock photo web sites killed their profession. Or at least made it very difficult to sustain a viable income the way they used to.

This is also currently happening in the writing industry. Writers are continually having to lower pricing because anyone with a laptop can claim to be a writer and charge next to nothing. This is making it very difficult for others who have been in the industry for years to maintain their current pricing levels.

In addition to all this.. if you ever intend or desire to work full time for yourself, you are setting up your freelance (contracting) arm to be a non-livable income. Which means, if you want o venture out full time into contracting, you'll have to find all new clients at a new, higher rate because most existing clients won't support a dramatic rate increase, regardless of the reason.

Charge normal rates.. factoring in healthcare, electricity, and all overhead. You'll thank yourself later for doing so. Not to mention, you'll be making more money.

If anything, a small percentage discount may be okay due to slower turnaround times because you have a full time job. The reality is many clients with larger projects don't want to hire someone who's merely moonlighting. In my experience, they tend to favor full time freelancers. So it's feasible that you will only get work as a moonlighter, if your rates are a tad below market level. "tad" meaning roughly 10% lower, nothing dramatic.

  • I agree with the spirit of this answer, but it seems a little silly to say that if one programmer lowers his rates, rates for the entire industry will drop by 40%. He's not even freelancing full time. – user45623 Mar 24 '17 at 1:32
  • 40% was a random figure.. although.. again.. ask photographers what happens when many sources all lower pricing. Sure 1 person isn't going to have that great of an impact... but if many do this.. there's impact. And there's no way of knowing you are part of a rising problem until it's too late. the gist is that if you want to work in the industry, you should support others in the industry, not undercut pricing so much it hurts everyone. Stay within a reasonable range. – Scott Mar 24 '17 at 1:42
  • Photography isn't the best example because there's no real software analog for 'stock photos'. You can buy simple ready-made apps from some sites, but they aren't having a big impact on the industry. Wordpress is probably most the most applicable analogy, but even then a lot of people who buy a $30 template end up hiring a developer to customize their page anyway. – user45623 Mar 24 '17 at 1:46
  • Photography is absolutely a good example if you compare the industry 15 years ago to today. And as stated, the writing industry is going through the same thing now. – Scott Mar 24 '17 at 1:47
  • I'm sure that the prevalence of stock photos has caused a decline in pay or at least opportunities for some categories of photographer (presumably not wedding photographers), but I don't think that has much relevance to the software industry because it's a ready-made good. An ad exec might be able to buy a stock photo and slap the company logo on it instead of hiring a photographer, but a software publisher usually can't go buy a stock app and slap the company logo on it instead of hiring a developer. There are exceptions, but they aren't impacting the industry. Writing is a better analogy – user45623 Mar 24 '17 at 4:12

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