Now, if your post said for the right person, I had a budget to give them $150k in Austin, TX then we'd be getting somewhere. "top of the market rate" is just too ambiguous in most experiences.
Yes "top of the market" is $85 an hour as a W2 contractor. Using my rule of thumb - 1800 hour work year when contracting taking into account unpaid holidays, unpaid vacation and sick time, and gap between employment - that's a base pay rate of $153,000. More often than not, there will be more than 40 hours worth of billable work.
I am fairly aggressive about my contract rate when I am contracting, and I would take that in a heartbeat.
So yeah, all of the contractors that report to me make more than I do. For some strange reason, I'm okay with that.
[EDIT] Nevermind, saw your post clarifying/emphasizing the W2 angle down below. That's probably about right, then.
Of course if you need to pay for family benefits, that's an extra cost, a lot of the contractors I know are either married and get benefits under their spouse or are single and have a relatively cheap high deductible plan. When you work for an agency, you can buy insurance as their employee.
Apparently with a W2 this number is net whatever the agency skims while covering some things; not sure how that stacks up.
40 hours x 50 weeks = 2000 hours
So just 2x and thousands.
https://news.ycombinator.com/item?id=2185782 (Feb 2011)
> zipdog: $40/hr contract is about $40k/yr permanent
https://news.ycombinator.com/item?id=2438980 (Apr 2011)
> techiferous: But remember that there is non-billable work (accounting, etc.) and a 15.3% self-employment tax. [...] Working as a consultant for $175/hour is similar to being employed at $175K/year.
> danssig: Calling that pay rate $175K/yr is beyond conservative.
NOTE: two users here also recommended your equation
> slashcom: $x/hour * 40 hr/wk * 50 wk/yr = 2n1000 The general rule is always "times 2, add 3 zeros"
> jurjenh: yes, this is generally the rule I use as well, take the hourly rate and double it and add a K (eg $30/hr = $60K) [...] Personally I use an estimate of about 75% efficiency
> rapind: For 75% efficiency I assume you mean 3/4 * 2 * $175 * 1000 = $262,500 / year.
https://news.ycombinator.com/item?id=5299009 (May 2013)
> artumi-richard: The rule of thumb I was told is 1000 billed hours per year.
--
To try to be genuinely helpful: a discussion documenting that hourly rates are a bad idea vs. charging per day:
https://news.ycombinator.com/item?id=5714930 (May 2013)
> gknoy: If you're doing freelance, you also have to cover downtime, business development, benefits
Here's the article since the discussion's link 404's:
https://web.archive.org/web/20161210162901/https://alanholli...
> Charge More:
> · Take the salary you’d want to earn as a full time employee.
> · Double it.
> · Divide your doubled salary by the amount of days you’d work as a regular employee.
> · This is the minimum rate you should charge per day.
And this seemed helpful too (mostly connecting for my own future reference at this point):
Poll: long-term contractors, what is your hourly rate? | https://news.ycombinator.com/item?id=5769348 (May 2013)
If the idea is that independent small job (less than a year) contracting results in a 50% loss to overhead, then yes, just take hourly rate in thousands. This helps convince people to stop messing about with self-employment and just work for the man.
If you mean how much money is in your bank account after a year of work for one company, contrasting a 1099 to FTE for a regular company, it’s the 2x + 000s formula. Unlike comments above, if you have your own LLC consulting business and run the 1099 payments through that, you can pay less tax as self-employed taking care of your own insurance and benefits.