Salary & and rates when working on assignments aren’t everything, but it’s important.

This article is a foundational guide for those considering contracting or interim employment, but perhaps have never done it before.

Converting Annualised Salary into Day/Hourly Rates

Although it’s a lot easier to compare a prorated fixed/max term salary to see the annualised salary equivalent, it’s not as easy, nor a fixed rule when it comes to converting annual salary to a day rate, as they are different employment arrangements.

There is a general calculation as a rough guide that can help as a starting point. To get an initial estimate of a day/hourly rate from an annualised salary, you can use a simple calculation by dividing the per annum salary by 220 working days, which would give you a fair market equivalent.

The 220 days are calculated by starting with total days in the calendar year = 365 days then minus 55 weekends, approx. 10 public holidays, 20 days annual leave, and 10 days personal leave which leaves 220 days (approx.).

Here’s an example below:

Positions around $150,000 p.a. including super, and considering day rate contracts, then:

$150,000 including super divided by 220 days = $681.81 per day including super.

The hourly rate would then be $681.81 divided by 7.6 hours = $89.71 per hour including super.

Bonuses

Some of the obvious differences that you need to consider when applying for contracting and interim work is, given you aren’t a full-time permanent salaried employee, a lot of the time you aren’t on the company’s annual benefit scheme so aren’t entitled to the annual bonus and company benefits. However, some contracts do pay a completion bonus, and some of the time you can negotiate this as part of your package. Completion bonuses are on average between 5 to 20%, with some industries paying more depending on the length of the assignment and seniority of the position. Completion bonuses can be variably calculated with links to performance objectives and/or company performance, or they are fixed. Fixed is designed to ensure candidates complete the contract to date, although even fixed completion bonuses can have clauses in a contract around performance measures, however, this is more a risk management policy protecting companies requiring paying contractors for serious underperformance of the contractor in the term of the contract, rather than variable bonuses which are designed for rewarding measures of performance and completing objectives. If the completion bonus is variable, a good question to ask is if the bonus can pay out more than 100% of the target, especially where the business has a chance for strong financial returns, or if the culture is one that financially rewards high performance.

Working through an ABN

If you're planning an extended career in contracting, consulting, and interim work, you may want to consider setting up an ABN (Australian Business Number) or even a Pty Ltd (proprietary limited) business, as that can provide benefits not possible if you are an employee.

Ensure you gain the necessary financial advice to ensure the contract work is eligible and compliant with tax legislation, and you are covered with the necessary insurance requirements. If choosing this option, you need to factor in the time and effort to independently manage your business administration, invoicing, and taxes. You may want to consider the convenience of outsourcing to a ‘contractor management’ company that can easily cover your insurance and handle all the invoicing, tax, and accounting services that independent contractors require, with a management fee.

If you are using an ABN on an interim assignment through an agency, they will ensure you have the necessary insurance and are tax compliant, however, most agencies also have the option to cover you on their insurance if you don’t have them without changing the agreed rate offered before receiving your contract. This is a good discussion to have before proceeding with the recruitment process for an assignment through an agent.

Negotiation & the Finer Detail

Where possible, ensure you understand the budget for the assignment and rate on offer early in the process before investing too much of your time in interviewing, and not leaving negotiating too late in the process if you want to discuss a higher rate than what’s been proposed. This isn’t always possible to do until offer, but most of the time salary and rate can be found out early in the application process. A degree of flexibility with your salary and rate expectations can minimise outpricing yourself in the market, missing an assignment due to budget constraints, and missing out on getting the offer to a competitive candidate with the same skills and experience who are more flexible. Ensure all the details are correct if any figures are provided in the recruitment process, including is the rate proposed is inclusive or exclusive of superannuation; details of any bonuses if any; perhaps how is salary packaging offered if you are working within a Not-for-Profit that may offer tax exemptions.

Details around notice periods and expenses, like travel between sites, etc. are also necessary to cover, as in certain situations, they may impact you financially.

The Bigger Picture

Salary and rates aside, the bigger picture is that contracting and interim work can accelerate your career at any stage, including those in the early stages of their emerging career who want development opportunities to learn, through to those that are at the executive and leadership level, who are seeking interesting, high-impact work and a chance to utilise and apply their extensive experience.

If you are a HR generalist or specialist professional in Sydney and have any questions or are interested in contracting, or contracting salary or rates, then please don’t hesitate to reach out, or re-contact us if it’s been some time and would like to update us on your availability, experience & circumstances.