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.

family-safe home cleaners Northbrook ..

In The News:

FBI warns cybercriminals are stealing family photos from social media to create fake proof of life images in virtual kidnapping scams targeting victims.

Instagram's new 'Your Algorithm' tool lets you control your Reels feed in real time. The app now gives you power to customize what videos you see.

Major Marquis fintech breach exposes 400,000-plus Americans' data through unpatched SonicWall vulnerability, with Texas hardest hit at 354,000 affected.

Free up iPhone storage fast by clearing large photos and videos from Messages app. Simple steps for iOS users to delete attachments without losing chats.

Scammers are flooding inboxes with fake tracking alerts that mimic real carriers, exploiting the holiday rush to steal logins and personal data.

The Fox News AI Newsletter brings you the latest news on AI technology advancements and the challenges and opportunities AI presents now and for the future.

Texas family reunites with missing 11-year-old cat Grayson after 103 days using Petco Love Lost's AI photo matching technology and community help.

Tired of AI customer service loops? These insider tricks help you escape "frustration AI" and get real human help when you need it most for urgent issues.

Unlock richer audio from your streaming apps with simple tweaks to volume normalization, equalizer settings, and quality preferences for cleaner sound.

Scammers are sending fake Facebook settlement payout emails that mimic legitimate notices from the privacy settlement administrator to deceive users.

Holiday shopping scams surge as fake refund emails target distracted consumers during Black Friday and holiday seasons, costing Americans billions annually.

The AI-powered IRMO M1 exoskeleton features four modes, including turbo, eco, training and rest for hiking, running, cycling and sports with eight-hour battery life.

OpenAI announced upgrades for its ChatGPT Images platform on Tuesday, saying the program can now make more precise edits and produce images more quickly.

Chrome for Android now turns web articles into AI-powered podcast conversations. Get hands-free browsing with Google Gemini's natural audio summaries.

LastPass faces $1.6 million fine from U.K. regulators after 2022 data breach exposed 1.6 million users. Password manager failed proper security controls.

Petco disclosed a data breach exposing customer Social Security numbers, financial account details, and driver's license information due to a software error.

Baseball teams can now analyze complete swing mechanics in normal training environments using Theia's markerless AI system that processes standard high-speed footage.

Smart home hacking fears overblown? Expert reveals real cybersecurity risks and simple protection tips to keep your connected devices safe from hackers.

MIT develops needle-free glucose monitor using light technology. Revolutionary device could replace painful finger pricks for diabetes management.

The ClickFix campaign disguises malware as legitimate Windows updates, using steganography to hide shellcode in PNG files and bypass security detection systems.

Researchers from Osaka Metropolitan University designed a 21-foot dome that combines aquaculture and hydroponics to create a self-sustaining urban food system.

The Fox News AI Newsletter gives readers the latest AI technology advancements, covering the challenges and opportunities AI presents.

ChatGPT data breach exposes personal info of users through partner Mixpanel. OpenAI confirms names, emails compromised in security incident.

Android rolls out Emergency Live Video for 911 calls, letting dispatchers see real-time scenes during emergencies. Great for holiday travel safety.

Malicious Chrome and Edge extensions collected browsing history, keystrokes and personal data from millions of users before Google and Microsoft removed them.

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

Small Business