Why are contract writer’s rates not similar to an employee’s wage?

Learn why the convenience of only paying for hours worked and not having employment costs play into the rates for a technical writer.

I’ll explain the above table by starting with the PeopleBank Survey below. I use salary surveys as a benchmark for my pricing.

Current Salaries and Contract Rates

Few companies can afford to employ technical writers. In this day of lean business, writers have become a luxury. Those who can pay for employees, pay lower salaries than 10-15 years ago. (WA Business News, April 2018 https://www.businessnews.com.au/article/WA-unemployment-hits-highest-rate-since-2002 )

Let’s drill down into the salary trends for my market, technical writing. PeopleBank assesses salaries and day rates by role and state. Find the full survey at https://www.peoplebank.com.au/knowledge/salary-guide-australia

No Budget for Luxury Roles

Business in Perth is slow right now (May 2018). Businesses are serving fewer buyers and buyers are looking for the lowest possible price. The lack of money limits what a business can spend on labour.

As a technical writer, I find the demands for lower priced services dominate the conversation. The negotiations with businesses for technical writing deteriorate to comparisons of the cost of hourly employees to rates for hourly services.

My vision is to provide as-needed work for only the period needed, in lieu of a company needing to hire a employee for my specialist contract services. In my market of Western Australia, the going rate for a Technical Writer is

$480 to $560 per day,
if it’s a full day that’s $60-$70 per hour

Salaries Cost Less – Or Not?

If you’d like to look at only the direct employment costs, this pay calculator matches the Australian Tax Office’s Pay As You Go (PAYG) schedules.

https://www.paycalculator.com.au/

What About Office Expenses?

The salary is lower than gross a sole trader might gross. Keep in mind the salaried employee has superannuation (retirement), paid holidays, sick leave, insurance (the Workers Comp I mentioned earlier) … office space, computer, HR & payroll processing, and the list goes on.

Oh, and did I mention the employer has the legal obligation to pay on time, even during holidays?

The rule of thumb most often suggested to me is overhead on an employee (including the above pay burdens) can add 38%-40% more costs to the employer.

A $55,000 to $80,000 per year employee …
… can cost a company $77,000 to $112,000 per year.

The Cost of Convenience

I am a sole trader and my status is a benefit to the companies I work for. They do not have the burden of insurance (like Workers Comp or Liability) nor the obligations of an employee (minimum of 4 hours of work, providing for break times, sick leave, and paid holidays).

What is the cost of only have a service when you need it, and not have the “bum-warming-a-chair” when you don’t?

If I were an employee and my employer could bill for my hours, they would not be able to bill for my holidays. (The actual number of working hours in a year are 2,087.) I’m also leaving paid holidays out of my estimate to keep it simple. For example, a casual employee does not get the benefit of paid holidays.

From my years of experience doing “as-needed” work, 60% of my total workdays are used doing billable work. 40% of my time in a year ends up not being billable.

What accounts for the 40% of un-billable time?

20% of my time is un-billable time due to delays, cancellations, jobs I cannot work due to conflicting deadlines, and clients not booking around holidays. And, 20% of my time is spent on bookkeeping, administrative, education, marketing, and sales calls.

Expense of As-Needed Services

Let’s look at the average income I earn instead of the seasonal highs and lows. Averages make it easier to compare an independent contractor’s rates to an employee’s earnings.

Paying Myself and Other Costs

The expense of paying myself the fair market value work is my biggest cost. My business has expenses are my next biggest cost. My next biggest costs are professional indemnity insurance, software subscriptions (bookkeeping software, MS Office, gMail) and my communications (mobile phone and internet service).

Think about this. The closer I get to maximising my billable hours, the less my costs are!

My expenses are consistent and don’t change even when I have more work. In fact, my costs might be slightly higher when I’m not working because I spend slightly more on phone calls, marketing, and meetings.

My maximum efficiency is working 20 of 20 billable days. At my highest monthly efficiency, 20% of my income is spent on expenses. I give favour to clients who offer long-term, consistent work because this is more efficient than half-days or piece work.

Earning More than Employment

A self employed person would ideally have a consistent income throughout the year. Whilst my tables above look like I’m earning more income than if I was employed, the reality is different.

See my 2015 article, How much should I charge?

Financial Limitations of Work in 2018

I’ve found that seasonal fluctuations in when I work and delays in payments cost me money. Some of the hardest times of year are around Christmas. This means I need to maximise the number of days I work during peak times. I give more consideration to booking clients that pay my full rate and pay on time.

Per piece jobs (5 web pages or 1 brochure) tend to be the most inefficient. I find I need a mix of direct hire and temp agencies to aggregate more income in the time available. The months of March to October are usually the best months to earn income.

In the first 6 months of this calendar year, I’ve had too many small copywriting piece-work jobs. And of those jobs, I’ve had several opportunistic businesses who are slow to pay or who owe me significant amounts of money on mid-size jobs. Part of my issue is my inability to qualify the integrity and financial stability of the companies I’ve sold to.

I listen to my clients and I wanted to address their needs. I spent a year managing a group of independent copywriters. My vision was to fill the gaps in their schedule. I could edit and write during the gaps. The “denser work” benefit all of us.

I learned that managing even a group of people, the clients, and rostering the jobs was nearly a full-time job in itself. My margin wasn’t enough to cover the amount of time needed to coordinate and brief the copywriters.

What’s Next?

I am actively searching for full-time employment.

The cost of running my business (and funding other’s work) has exceeded my threshold. Prospects complain my rates are too high. Where I’ve negotiated a lower rate for a slightly larger scope of work, I’ve been burned by non-payment and late payment. (I can make a better income as an employee.)

I will continue to offer my smaller, as-needed tech writing services until I land a full-time role.

The secondary consideration is that written documents may no longer be needed as technology and business evolve. My search for full-time work has expanded to include sales and business development roles. Companies will need income generating employees more than documentation (except where laws require written documents for compliance).

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