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What to Pay Your Independent Contractors

Do you want to clone yourself?

What I mean is, do you dream of the day when you aren’t the sole provider of your service? 

Where you can help more people because it isn’t only you delivering your services? 

I know, how freakin’ cool would that be, right? 

Many business owners have a vision of helping more people. And yet, they get tripped up at an easy-stages step in the process. 

How much do I pay an independent contractor who isn’t on the admin side of my team but actually working directly with clients, facilitating my work? 

Oh it’s a conundrum for sure, if you allow it to be. 

Actually, though, the answer is quite simple. And it’s exactly what I’m here to share with you today. 

To demystify the question of… How on Earth do I know what’s a fair rate to pay my service providing team?

The first route is super simple – you pay people what you want to pay them. 

I know, not totally the answer you were hoping for. 

And for most smart, successful business owners, they didn’t get where they are today without a little strategic planning. 

There’s another way to go about it.

One that’s fair. One that’s logical. One that just makes sense.

Here it is:

  1. Look around online at what this position or role would pay in the open market if the person worked as a full-time employee at a company. You can use sites like indeed or glassdoor to get a good estimate. Or, ask around and tap your network to get a sense for what the average salary is.
  2. From there, take the annual salary and calculate the hourly rate for that position as if they worked 40 hours per week, 52 weeks per year. That’s the average hourly rate.

    For example, say you wanted to hire someone to work as a career coach in your business. You can look it up and see that the average annual salary for a career advisor is $56k. $56,000 ÷ 52 weeks ÷ 40 hours = $27 per hour.

    Or, you want to add a speaking coach to your team to work with clients. You find that the annual salary for a corporate speech pathologist is $77k. $77,000 ÷ 52 weeks ÷ 40 hours = $37 per hour.

  3. Next, look at how much time it’ll take this independent contractor (IC) to do this specific type of work with the client. Will delivering a particular package, including prep and post-session time, mean 10 hours of work or 20 hours? Since you’ve already delivered this service many times over, you should have a good idea of the total time it takes.

    I also like to be a bit generous and pad the overall time. So if I know it takes me 9 hours to work with a client, I usually estimate 11 hours for someone else. 

  4. Do the math. Take the hourly rate and multiply it by the total number of hours.

    In the example of the career coach above, if it takes 12 hours to work with a client during a 3-month package, at $27 per hour, you can expect to pay that person $324.

    For the speaking coach, at $37 per hour and 12 hours of client work, you can expect to pay $444.

  5. Do you like the number? Or not? Do you feel the person brings more value to your business than that? This is your business and you get to adjust accordingly.

    You may realize that your time is even more valuable and you want to get the best and brightest into your organization.

    Pro tip: Instead of taking the annual salary and dividing it by 52 weeks per year then 40 hours per week, divide it by 52 then 20 hours per week.

    Here’s how that would look at in the two scenarios above:

    Career coach: $56,000 ÷ 52 weeks ÷ 20 hours = $54 per hour
    Speaking coach: $77,000 ÷ 52 weeks ÷ 20 hours = $74 per hour

    You now also have an upper limit to look at pay rate ranges for this team member, $27-54 per hour and $37-74 per hour, respectively.

  6. See if with the way your business is structured, you can afford to pay a contractor within those ranges. If so, great!

    If not, ask yourself, what needs to change in order for me to pay my team and myself? It may be that you need to increase your prices or that you can cut back on your expenses or pull another lever available to you. 

  7. Decide if you want to pay the person a flat rate per client engagement or an hourly rate based on time they submit to you on a regular basis. Either way has its merits.

    Personally, I’m a fan of the flat rate, as it helps with your budgeting and is easier on your admin tasks. 

A few added notes about cloning yourself in the service delivery side of your business:

You don’t need to pay your independent contractors for training them in how to facilitate your method.

Remember that the reason the pay rate is lower than your own rate is because you as the business owner are doing all the work to fill the client pipeline, including content creation, marketing, sales, managing your admin team, etc. The IC is showing up to really just work with the clients.

If you offer added perks for being on your team, like 1:1 access to you for their own business questions, a lively team atmosphere, opportunities for in-person meet-ups, whatever is unique to your organization, tell them. Make sure they feel included. 

Most people are going to like getting paid for the work but it won’t be money alone that makes the decision of joining and staying on your team. It will be for reasons beyond money. 

What questions do you have about hiring people to facilitate your work and methodology with clients? 

Post below – I’m happy to get them answered for you. 

Disclaimer: This article is for general informational purposes only. Any business decisions you make as a result of information posted are your sole responsibility. Consider speaking with your attorney or tax professional when it comes to hiring independent contractors in your business, and check with your federal, state and local agencies to make sure the manner in which you pay your independent contractors is in accordance with the law.

Photo by Jorden Haland on Unsplash

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