Self-employed workers, and people paid on a commission basis, often ask themselves the same question: Am I charging enough on an hourly basis to realize my income goal?
To begin with, we have to define what income refers to: 1) the total company earnings or 2) net income, before or after taxes.
I suggest that we use the term “revenue” to describe the total proceeds showing on your company financial statements, and “income” to define the total earning, after taxes, you receive as an individual from your company.
Below is a model I use to calculate what the real income target and hourly rate of a self-employed worker should be, if he or she is working alone – being the only employee is essential in the calculation.
Basis:
- You are currently employed but thinking about starting your own company. If you are working on a commission basis, you will initially have to set your goal hourly rate.
- We have to take the adverse effects of personal income tax into account to determine the hourly rate. Note that the effect of the income tax rate is different if you are incorporated.
- We will include in our calculation the extra charges you are not paying right now as an employee.
- The simple rule of three should not be applied to the results in order to apply them to your capabilities.
For more information, please contact me.
To determine your rate according to your capabilities, please make an appointment. You can do so by using the form in the Contact section, by sending us an email at cogesmont@cogesmont.ca, or by calling us at 450.466.9399 or 1.888.466.9399.