Question about compensation

[unix]

Looking at a contract gig with HP, through a bork. Got this about the "compensation" issue.  Cannot make any sense of it. Why is per diem included there? And 25/hour? Hm. This is West Virginia but still looks really low. I was thinking along the lines of 60/hour. They are looking for a Solaris  systems admin.

Last time I did a gig with HP, through another bork, I got 70/hour. But that was 10 years ago and in Milwaukee.

unix,  It was nice to speak with you today.  Here below is what I calculated out for you.  The top numbers are calculated based on $83,000.00 Married claiming 2 on your W2 with Maryland taxes.   Underneath is partial W2 and 2 parts TAX FREE monies.  This is what we, xxxxxx, has to offer you.
 
http://www.bestplaces.net/col/?salary=&city  is a cost of living link that might assist you.  The cost of living in xxxx, MD is more than Charleston, WV as you will see in the link above I provided.
 
 
W2 pay:  Married 2    
$83,000.00/yr    
Payroll Semi-month by direct dep.    
     
Gross Salary      Semi-Monthly    $3,458.33
Federal Withholding    -$364.79
Social Security/Medicaid    -$264.57
MD State Withholding    -$147.65
   Net Take Home Semi-Monthly    $2,681.32
 
 
W2 Filing Stattus =  Married 2    
$25.00/hr W2                           Year =    $48,000.00
$15.00/hr Tax Free Per Diem   Year =    $28,800.00
$3.12/hr Tax Free Health Stipend Yr =    $5,990.40
Payroll                                 Annually =    $82,790.40
     
Gross Salary (80@$25.00)    $2,000.00
Tax Free Per Diem (80@$15.00)    $1,200.00
Tax Free Medical Stipend    $250.00
Federal Withholding    -$146.04
Social Security/Medicaid    -$153.00
CA State Withholding    -$78.38
   Net Take Home Semi-Monthly    $3,072.58

[The Original Henry]

W O W.....that is a whole new level of mind-fu@#ery that I've never seen.

Bottom line: you're getting jerked around....hard.

He's using a whole bunch of fuzzy math to rationalize that a 25/hour independent rate is equivalent to an 83k salary.

The per diem he's stating isn't really a per diem and certainly won't be tax free if you are audited. He's trying to say that the company will give you "tax free" compensation by calling it a "per diem" and that this amount is supposed to make up the difference between his way-below-market rate and a decent W2 salary.

Issue 1 is he's trying to pay you on par with a salary position, and issue 2 is he's doing it in a highly questionable way. I can nitpick other issues too, but those are the main ones you asked about.

I'd tell him to get stuffed. If the equivalent salary is 83k I wouldn't accept anything less than 60/hour straight up as an independent.

[Richardk]

This is a game.

He wants to "hire" you at the "equivalent" rate of $83K / yr. Where did he get that number? Maybe HP pays $100K for that position. Plus you should get more as a contractor anyway not the same wage as an employee.

The 'health stipend' is an interesting twist since an employee gets health insurance in addition to their salary and what happens to the money if you don't use it or leave / get let go early?

Bottom line he's trying to show you that you have an $83K / yr job.

He's paying you $43.12 / hour.

• $25 / hr as wages
• $15 / hr for housing / food
• $3.12 / hr for a health stipend

He then further sweetens the pot by showing you tax savings since $18.12 / hr is not taxed thus you're now making more than the guy with the $83K salary.

It comes down to do you want to work a contract with HP for $25, $40 or $43 / hour depending which number you want to use?

[Peter Gibbons]

Keep in mind that the per diem could only last for a year - then they have to add it to the rate and will be taxed.

You most likely already knew that ...

[The Gorn]

Unix,

Did you lose your permanent job? Have you been given notice yet?

If neither, I would NOT pay attention to this offer. If either is true, I would look a LOT harder to find something a LOT better and preferably not in a podunk wasteland.

The bork is using a per diem scam to attempt to inflate the apparent compensation. $25/hr is $fifty thousand a year.

Are you familiar with West Virginia? Try Appalachian rust belt. When I have stayed there, the biggest local business advertised on local TV was SSI claims attorneys and trial lawyers. WV has no economy besides tourism and a smattering of bronze age industry.

It's total podunk. IE, you mentioned Milwaukee. Why would someone in IT go to Milwaukee unless they had family there? Charleston will be worse, actually. It's a smaller city with even less of an economy.

Mark my words - if you make a move like this - in 7 months or 16 months when the gig ends and you are settled in, this gig will end and then you will have to find another contract. Someplace else.

For once in your life, think of where you will be later on rather than just plotting to "escape." You have family responsibilities.

This contract is garbage. The way the bork is twisting things like per diem, I wouldn't want to deal with him.

[Peter Gibbons]

Another thing to consider:

How is your wife going to feel in a small place like that?

( I am assuming she is from bigger city originally. )

[pxsant]

WV is a low pay area but I guarantee you the bork is billing far more than the $42 he is willing to pay you.  This is a contract, not FTE and it is being billed that way by the agency.  Even given the area and the times, you need another $10/hour for this to make sense.

The playing with numbers is an attempt to make it look better so you will take the contract.  If the broker does it correctly as a day rate, he can slide some of the compensation into per diem for a year.

This type of a contract and the area would be a strain on your family.  At $42/hr, I would walk.  Just not worth it unless you are actually out of work.

[unix]

Unix,

Did you lose your permanent job? Have you been given notice yet?

No, still have it. They seem to have forgotten about me.  I think I am marked man here so if there is a next round of layoffs (Last December they cut some contractors from my department but no FTEs), I don't feel confident they will keep me.  So I look, more or less.

Here is another interaction I just got in today.
I don't feel like leaving an FTE gig for this.  I like WV but if this gig ends, it's a road leading nowhere, strategically.

I told the borqette I would take the gig for 60/hour and that's that.  They said they have people at that client since 2003, etc. but the bottom line is, the client cannot guarantee even 40 billable hours.

unix,   The TAX FREE stipend and TAX FREE per diems do not show up at all on your W2 or a 1099.  The breakdown does however show on your pay stub.
 
There are many variables to the compensation depending on if you want:
 
1.  Salary - with or w/o medical, with or w/o vacation pay
 
2.  W2 - Hourly - with or w/o medical, with or w/o vacation pay
 
3.  1099 - Hourly - with or w/o medical, with or w/o vacation pay
 
4.  Corp-to-Corp - Hourly - with or w/o medical, with or w/o vacation pay
 
Here below might make it more simple for you to understand.  It's yours for the choosing.
 
Salaried - $75 with benefits (paid vacation, holidays, medical or stipend)
Salaried - $80K without benefits
 
or
 
1099 - $45-$50/hour for up to 40 hours/week.
Hourly - $40-$45/hour W2 for up to 40 hours/week.

Making it a Great Day,
 

[Richardk]

No matter how you slice it or dice it, they will pay between $40 and $45 per hour.

the client cannot guarantee even 40 billable hours

What the hell is that about? What happens if the client only has 10 or 20 hours per week? Also note that the per diem is NOT a real per diem but a strategy to avoid taxes. With a real per diem, you would still get the full weekly per diem even if the client doesn't have enough work. In your situation, it's tied to the number of hours that you work.

Lastly, if you took this job, I'd consider the W2 route since at least you'd still qualify for unemployment. Though I don't know what happens if they cut your hours enough that you can't survive but you're still making too much to qualify for even partial unemployment. You'd have to quit to get a better job, thus no unemployment so maybe the W2 route isn't the best plan. At least not from an unemployment point of view.

I'd walk and keep looking. He's already low-balling you and now he can't guarantee that the client has enough work. He's expecting you to take this high-risk job for peanuts.

[Richardk]

I'd ask what happens if you work salaried, so it's a fixed amount per pay period but the client cuts your hours to say 10 hours per week? Do you continue drawing your full salary? After all the number of hours worked shouldn't impact your salary except it's usually the same salary for way more hours than you expected not less.

[I D Shukhov]

Byrd managed to move a few Federal Government agencies to West Virginia.  There's the Justice Department's National Crime Information Center in Clarksburg and some IRS thing in Parkersburg.

If I was younger, I'd seriously think about trying to get a government job.  There is a big push going on now for bringing contractor jobs back into government agencies.  One is not going to get rich, of course, but the benefits and security should be pretty good.

If you want to live in WV, Unix, I'd take a look at the government agencies that Byrd had moved there.  It would be a glacial project, but one that might be worth starting to work on.

Unix,

Did you lose your permanent job? Have you been given notice yet?

If neither, I would NOT pay attention to this offer. If either is true, I would look a LOT harder to find something a LOT better and preferably not in a podunk wasteland.

The bork is using a per diem scam to attempt to inflate the apparent compensation. $25/hr is $fifty thousand a year.

Are you familiar with West Virginia? Try Appalachian rust belt. When I have stayed there, the biggest local business advertised on local TV was SSI claims attorneys and trial lawyers. WV has no economy besides tourism and a smattering of bronze age industry.

It's total podunk. IE, you mentioned Milwaukee. Why would someone in IT go to Milwaukee unless they had family there? Charleston will be worse, actually. It's a smaller city with even less of an economy.

Mark my words - if you make a move like this - in 7 months or 16 months when the gig ends and you are settled in, this gig will end and then you will have to find another contract. Someplace else.

For once in your life, think of where you will be later on rather than just plotting to "escape." You have family responsibilities.

This contract is garbage. The way the bork is twisting things like per diem, I wouldn't want to deal with him.

[The Original Henry]

The reason a per diem is normally TAX FREE (borquette's emphasis) is because it is used to cover expenses not normally incurred for providing services. It requires receipts, record keeping, and justifications if you want it to remain TAX FREE (borquette's emphasis) and is subject to limits. In other words, it is not TAX FREE (borquette's emphasis) cash into your pocket for you to keep, therefore it should not be considered part of your take-home pay.

Either this borquette is stupid or she thinks you are.

http://en.wikipedia.org/wiki/Per_diem

[The Gorn]

I forgot about Robert Byrd moving federal jobs into WV from beyond the grave, that crafty old buzzard. 

I D Shukhov has a good idea in general about government employment.

[The Gorn]

The reason a per diem is normally TAX FREE (borquette's emphasis) is because it is used to cover expenses not normally incurred for providing services. It requires receipts, record keeping, and justifications if you want it to remain TAX FREE (borquette's emphasis) and is subject to limits. In other words, it is not TAX FREE (borquette's emphasis) cash into your pocket for you to keep, therefore it should not be considered part of your take-home pay.

Either this borquette is stupid or she thinks you are.

http://en.wikipedia.org/wiki/Per_diem

The factor that makes tax free per diem available as an option in the first place is that you work at a business location that is outside the commuting range of your domicile. That always means that you have hotel bills, travel and eating out expenses.

If you don't have these expenses, then that means that either you are living in a homeless shelter while collecting per diem (unlikely), or, more likely, you are collecting per diem after you have moved yourself more or less permanently to the vicinity of the work location.

That latter condition makes you ineligible for per diem because you are now domiciled near work.

So, if you can legally collect per diem, it offsets actual (significant) expenses of maintaining extra living quarters. Either an extended stay inn, or a hotel, or a short term apartment.

If you don't have these extra expenses, because (for instance) you moved your family to the new job, then you can't collect the per diem legally (tax free.) If the IRS probes and finds that you had no presence as a household in your old city while you claimed tax free per diem, they will want to count it as wage income from the time that you moved your family to be closer to your job.

Unix, please be clear on this issue. Most recruiting agencies that attempt to explain per diem get it wrong and misrepresent it, because it is no skin off their asses. Per diem is only tax free when you have the financial hardship of split residency.

[Richardk]

So who's right?

Bork said:

The TAX FREE stipend and TAX FREE per diems do not show up at all on your W2 or a 1099.

The Wikipedia page for Per Diem says:

When an employer reports an employee's earning at the end of the year on a W-2, per diem is listed separately from taxable income, under 'Misc. non-taxable'.

All the advice here and the article should give you a good understanding of per diem.