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Comment by withzombies | Hacker News Reader

The standard rule is 2080 hours, it's 52 weeks * 40 hours. You might say, but what about vacation, and that's fair when talking about an employee-employer relationship but you're contracting. So your rate calculations have to include all your costs, including your vacation/sick days/etc.

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> So your rate calculations have to include all your costs, including your vacation/sick days/etc.

If I understand you (and the other replies) correctly, the advice is to ignore the benefit value of PTO when estimating the hourly equivalent rate, then add it back in after the fact based on... something?

Is there a better formula than $TOTAL_COMP / $TIME_WORKED?

Ultimately, your work has to be sold or monetized either by you or your employer. Rarely do we know exactly what benefits our employers get from our work. A helpful starting metric is to estimate what your employer's costs to employ you are. Employers pay for time off, benefits (health, retirement, professional development, etc), and employment taxes that you'll now be responsible for directly.

Folks get hung up on rule-of-thumb advice like hourly rate * 2.5 because they're thinking about their take-home pay and not the cost of employment. In many defense contracting roles, the "fully burdened rate" for contracts is 2.9-3.5x the employee's pre-tax pay. When switching to contracting you can compete by offering better services and by undercutting your (large company) competition -- and that's just where you start. Once you establish yourself as a better performer you can demand a higher price also.

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