How much an Employer will pay on w2 or 1099 or C2C?

When the candidate asks about the Job Description, Pay Rate, and Benefits to the recruiter, few recruiters stumble to explain the salary part or billing rate per hour to the candidate or give irrelevant information, which makes the candidate unhappy.

To overcome this problem, before working on any requirement, the recruiter has to talk to the employer (hiring manager or someone else) about the overhead expenses that are involved in hiring the candidate on w2.

The recruiter may not get the exact break up details about the overhead expenses from the employer, but the recruiter may get the percentage of overhead expenses.

In 1099 or corp to corp there is no or less overhead expense.

Example:

Client offers to the employer (Billing Rate per Hour): 100$ per hour;

Employer needs: 20% gross margin (profit)

Formula for 1099 and corp to corp:

Pay Rate = Billing Rate per Hour – Gross Margin.

Formula for w2:

Step 1: Overhead Expenses = Overhead Expenses %( Billing Rate per Hour – Gross Margin)

Step 2: Pay Rate = Billing Rate per Hour – (Gross Margin + Overhead Expenses)

Assumption: Reply from the Hiring Manager of the employer

Overhead Expenses On W2: Hourly (With no Benefits) for that project – 15%

Overhead Expenses On W2: Hourly (With Benefits) for that project – 25%

Overhead Expenses on W2: Hourly (With Benefits) – Full Time Employee – 50%

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How much employer will pay on 1099?

After deducting the gross margin of 20$, employer will pay 80$ to the candidate.

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How much employer will pay on Corp to Corp (c2c)?

After deducting the gross margin of 20$, employer will pay 80$ to the candidate.

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How much employer will pay on W2 – Hourly (With no Benefits) for that project?

15% of 80$ is 12$. So the employer will pay 85% of 80$ = 68$ per hour to the candidate.

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How much employer will pay on W2 – On W2 – Hourly (With Benefits) for that project?

25% of 80$ is 20$. So the employer will pay 75% of 80$ = 60$ per hour to the candidate.

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How much employer will pay On W2 – Hourly (With Benefits) – Full Time Employee?

50% of 80$ is 40$. So the employer will pay 50% of 80$ = 40$ per hour to the candidate

Since this is a full time employment, usually for calculation purpose, you can take there are 2000 working hours in a year. So the employer will pay 2000 * 40$ per hour = 80,000 $ per annum plus benefits.

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