News

Insights from practitioners in Information Management

Issue 33 – Monetary considerations

In this issue we will look at:
• Latest News from IEA
• Tax
• What are you worth?
• A Thought to ponder

Latest News from IEA
You might  be interested to know that we have been making some changes to our web site – www.iea.com.au for those of you who haven’t stopped by and had a look recently, there are some brand new pages for you to look at, and some existing pages have been re-vamped.
For instance, we have new pages for books and downloads and a brand new booklet entitled “F is for Filing: a simple guide to managing and storing necessary information for individuals and small business” which is due from the printers very shortly. Pre-publication orders are being taken, and yes you get a discount for getting in early and purchasing a copy. As you know we don’t like to use this forum for blatant marketing of our products and services, but we thought that just for once we would break our own rule and let you in on the news.
We have also re-vamped the Employment Links page. This is available via the employment section of our web and gives you links to associations and academic institutions as well as those all important job sites in Australia and overseas which are ideal for those of you who are planning on travelling and working overseas. One organisation – Jinfo (Jobs In Information – Formerly Freepint Jobs Update) based in the United Kingdom has a fortnightly e-newsletter listing all the latest jobs on offer which you can subscribe to, along with a careers advice section, for which I am one of the regular guest editors. If you would like to take a sneak peak, then go to www.jinfo.com. If you would like to have a look at the changes we’ve made so far to our web site then go to www.iea.com and let us know what you think.

Whilst we have lots of plans for the further development and changes to our web site, we are always open to suggestions we do look forward to hearing from you. Any comments or suggestions can be sent to Lorraine at training@iea.com.au

Tax
I hope you have all decided what you are going to do with the few dollars you will be receiving as a result of the recent changes to the amount of tax that you are going to be paying from the start of the new financial year. I think mine will be used to offset the rise in petrol prices, but then again maybe I’m just being cynical!!

For those of you who are working more than one job, you need to remember to obtain the tax-free threshold from the organisation with whom you are doing the most work for. Put simply, the “second” job will be taxed at a higher rate than the first, so it would make sense to ensure that you get the maximum benefit from the government that you can, otherwise you might be in for a nasty surprise when you get around to doing your tax return.

If you are re-joining IEA after a period with another employer, and IEA will be your sole employer for the duration of the contract that you are on, then you should ensure that you claim the tax-free threshold from us. If you don’t receive a tax form from us, or would like to check your details, contact the office on 9335 2533.

What are you worth?

There have been some recent discussions on the list servs regarding job postings that do not list the amount of money that is being paid. IEA’s weekly job postings, do quote the salary ranges (if given), however we do not advertise the rate if the position is one that we are advertising. Whilst this can be an inconvenience if you are truly interested in the position, a simple email or telephone call to our offices will solve that. The reason we don’t advertise the amount of money is a simple one, we would like to hear from people who are genuinely interested in doing the work and have the skills and abilities (or would like the opportunity to enhance their careers), and we find that out when you contact us. 

However, you will be pleased to know that we never, ever place you in a position that pays less than the award rate, and the salary can sometimes be negotiated with the right person and the host employer. To view a copy of the current Clerks (Commercial, Social and Professional Services) Award rate – please visit – www.wairc.wa.gov.au. In addition we take into consideration the recommended rates for Library Personnel as quoted in the ALIA pay scales – www.alia.org.au/employment/salaryscales/.

But what happens if you are planning on obtaining a position yourself, or are planning on contracting your own services. How do you work out your true worth, so that when you attend the interview and you are asked the question – “what salary/hourly rate would you be expecting to receive?” you have a figure you can quote. But you can also the comment, but I am open to negotiation.
If you’ve ever tried to convert your annual salary into an hourly rate to try and figure out if you are being paid a reasonable amount, or conversely tried to convert an hourly rate into an annual salary to try and figure out why the ends never seem to meet in the middle, it is perhaps because you are not taking into consideration everything you need to. In determining our true worth we need to look at more than how much we are being paid each week and multiplying it by the number of weeks in the year. Let me explain.

Let’s assume you are a freelance librarian and you want to earn $50,000 per year, not a bad salary to begin with.  In order to know how much to charge your clients per hour, most people would simply divide the amount of money by the number of weeks in the year and then by the number of hours in a typical working week (say 38), which equates to $25.30 per hour. Now before you say – ok that’s not bad, I now know what figure to stick on the invoice. Let me ask you this, what if I told you that you were undercharging your services by at least $4.95 per hour would you believe me?

Maybe? OK, well lets give you some more food for thought and then you can make up your own mind.

If you use ALIA’s formula for casual employees, this requires you to add on an additional 20% to cover sick leave and annual leave entitlements, which you will not get as a freelance librarian, and an important form of insurance for you to consider should the unthinkable happen and you can’t work for a couple of weeks.  

The formula is as follows:
[minimum annual salary] x 1.2      = 50,000 x 1.2                    = 60,000 per year
————————————-             ———————                   —————–
52.2 x [hours in a standard week] =  52.2 x 38                         = 1983.6                                 = $30.25 per hour

(http://www.alia.org.au/employment/salary.scales/casual.part-time.html)

Immediately you can see that by using the correct formula for calculating your hourly rate, you now know that you should be charging a minimum of $30.25 per hour.
Perfect I can hear you cry, now I can put that extra money aside and I can still have money in the bank if I decide to take holidays or if I am sick and unable to work.  

But there are a few other things to think about.  

What about superannuation?  If you are working as a freelance librarian then you won’t be getting superannuation from your employer, because you are your own employer.  Therefore you should be making provisions to pay yourself.  Whilst you could take the 9% recommended out of the money you receive, most organisations offer salary plus superannuation, so you need to do the same.  Therefore you need to add an additional $2.72 per hour, taking your hourly rate to $32.92 per hour in order to cover this additional figure.  

Now ask yourself, how many unpaid hours do you put in to your business? How much time do you spend on the administration of the work you do for your clients? – For example, do you have to submit timesheets and invoices, how about the time you spend on the telephone chasing up payments, as well as doing your bookkeeping and accounts.  Do a quick calculation and I am sure you will quickly realise that you can add an extra 10 – 20% to the amount of hours you are actually working for your client – just to keep your business ticking over. In other words if you work a 30 hour week (you want to spend some time doing things you enjoy besides working), you can actually expect to work a 33 to 36 hour week i.e. 3 to 6 hours of unpaid work to keep your accounts up-to-date.  However, this may not be enough if you take into account GST and BAS these days. If you are working for more than one client, then you should take into account the number of telephone conversations you have with your clients that are not part of your paid working hours.  Do you charge them for this time or give it to them as good will? 

If you are working for more than one client what kind of record keeping do you have in place to ensure that you are up-to-date with the client’s requirements?  Have you costed the time taken to maintain the records into your worth or do you perform these tasks as unpaid hours?  I am sure you are beginning to see where this is heading.

Now let’s think about other requirements of freelancing.  Do you have professional indemnity and public liability insurance?  How much per year does it cost?  Let’s assume it costs $1,500 per annum – and that’s conservative – it therefore costs $28.74 per week.  How many hours per week are you working?  If you are working a 38-hour week, you need to add another 75 cents onto your hourly rate to cover your insurance cost.  Please bear in mind that you may not covered by your client’s workers compensation, so you may also need to cost in some form of income protection or workers compensation insurance. Do you know how much it costs?  Do the same calculation as you did for the public liability insurance and for your workers compensation and/or income protection and add it to your hourly rate.  

Now, how much have you have invested in equipment that you use to support your business: – PC, modem, printers, mobile telephone, and car?  How much do you spend on consumables: – paper, toner, electricity, telephone calls, postage, fuel?

Whilst some people may say that the tax benefits of claiming their vehicle, equipment etc. means that they can charge less per hour, are you absolutely sure?  How does the taxation system on personal services income affect you?  The tax benefits may not be so good if you work for only one client.  

Of course there are added benefits to being a freelancer that it is hard to put a monetary figure on. There is the ability to stay at home with the sick children, choices of when to work, where to work and with whom you work.  

Why are many companies choosing to use freelance contractors over agencies and permanent placements?  Because most freelance contractors don’t know their worth and significantly undercharge for their services and expertise.  At the end of the day you think you are getting a good deal by invoicing at a rate of $30.25 per hour but when you take all other costs into consideration you are more than likely earning less than $20 per hour.

Part of this item was submitted and published in the October Edition of Biblia.

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A Thought to Ponder
“I’m living so far beyond my income that we may almost be said to be living apart”
e e cummings (1894 – 1973)
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