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salary for full-time vs contracting?

I am leaving my current full-time position, and have tentatively agreed to contract for the company part-time. When they sent me a contract draft, I was shocked at the salary they proposed. They took my yearly salary and divided by 2,080 (52 weeks times 40 hours). They didn't take into account a number of things. They didn't account for paid vacation (my job offers 5 weeks of paid vacation). They didn't include any adjustment for 401(k) match. They didn't account for stock options that any executive at my level receives. Lastly, I've heard that contractors can expect a premium over full-time workers due to the uncertainties involved with contracting. Can someone confirm that I am approaching this properly and they are not? References to online information that covers this would be greatly appreciate. Thanks! RKiller, thanks for the response. My skills are very specific, and they really need me. If I wanted to, I could hold their feet over the fire. I just wanted confirmation that it is an unreasonable calculation to take my yearly salary and divide by 2,080.

Public Comments

1. Being part time cuts everything... Just to let you know. They ultimately don't have to give you any vacation etc... simply because it's only part time, contract or not.... I would have kept the full time job!!!
2. It's round one in a negotiation. Make a counter-offer. If you were full-time, you generally would take your annual salary and divide by 1000 ($50K = $50 per hour), but you're part-time, so it's gonna be tougher. Try to understand their options. Do you have unique skill or knowledge? Or is your skill a commodity? These will influence your salary, whether full-time or contract.
3. They are not realistic, but you have to decide how hard to push. That depends mostly on your criticality to the company at this time (special knowledge, unavailability of comparable skills in your region/area, etc.). Basically, it costs the company about 35-40% more than your salary for related benefits and support. Then, as a contractor, you are responsible for your own social security and medicare contributions on your earnings. Add to that the temporary nature of contractors, and if you have special expertise you should demand a premium. So, basically for you to break even on the costs (compared to your recent salary), you should get a rate 40% or more than your former hourly rate (annual salary / 2080). The elasticity in the contract rate largely depends on how critical you are to their business. Hiring a replacement and training is expensive (assuming they are hiring a replacement), and you will help bridge the gap until that learning curve is overcome. If your skills aren't critical to their business right now, or if others are readily available to step up in your place, then your counter-proposal should be lowered to reflect that reality. Remember, it is hard to do but you have to remove the emotion and look at it from their eyes as a purely business transaction. Best of luck to you.