Updates on the freelancer calculator

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I’ve been working lately a bit more on the freelancer calculator, and was able to identify and fix some of its errors.

Main important one was not properly using the inverse of the fractions, like increasing a number by a third, and later decreasing the result also by a third instead of a quart to get the original number (a + a/3 = b -> 4a/3 = b -> 4a = 3b -> a = 3b/4 -> a = 0.75b).

So, having this fixed, numbers conversions match better both from employee to freelancer and viceversa. They don’t really fully match, but differences are in the order of 0.1%, so seems they are due to rounding errors. What’s more annoying is that this calcs confirm my concerns about having asking for such high rates when using a 1:150 relationship between freelance daily rate and anual gross salary (as already said, the usual value used in Spain to negotiate the salary as employee, instead of net salary as it’s common practice in other countries), resulting in a relationship of about 1:200 for same costs to the client company, or a higher relationship if we take same net salary as reference, being as high as 1:300 with the bare minimum costs. That’s a huge difference, so I’ve tried to close the gap by adding some not-so-superfluous costs that could be covered by companies for an equal position as employee and a freelance needs to pay by himself, like mortages, civil responsabilities, co-working space, laptop (some USA or Japan companies gift the work laptop to their employees and provides them a newer one each year), internet access, public transport card, daily meals, or also gym membership pass. After all these monthly fixed freelance costs (more than 1300€ in total…) that includes a self-assigned social beneficts VIP package, the relationship is still as high as 1:260.

This shows that due to Spain per-employee taxes, in all cases working as freelancer cost less to the companies than contracting an employee for the same position by a huge margin (up to a 20%), and at the same time can provide more net salary to the worker. This could lead to think that’s better to work as freelancer instead of employee and administer yourself your own costs, but I’m not advocating for that since these calcs are done in the ideal case of working full-time in long-term projects in both cases (that’s not the usual for freelance contracts), and the increased margins are at expenses of unemployment and retirement mortages and other social beneficts (both provided by goberment taxes or by companies themselves). Instead, this calculator shows how much is a safe range to ask for as a freelance, since for a worker with the same net salary a company could be saving up to a 20% of costs than contracting an employee, so don’t be afraid of asking for high bucks, and in the case of a freelancer not working at the same time as employee, it shows that he should pay a higher freelance quota (in Spain, currently you decide your own social security compensation and 80% of freelancers pay the minimum exigible by law due to the small ROI we usually get for it, and so this calculator use that number), pay for a retirement mortage… or more probably, do both things.

Written on April 11, 2020

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