What should my daily contract rate be?

Q. How much per hour should a per diem CPA make in the Jackson, Mississippi, metropolitan area? I'm considered self-employed, and I have 16 years of public accounting experience. My area of specialty is income tax.

A. Per diem is a Latin term that literally means "per day." A per-diem CPA is one whose rate of pay is based on a day of work, rather than on a full-time salary. The term per diem is also used sometimes to indicate a flat fee for daily reimbursable expenses, such as a per diem for full-time employees who travel.

People who work on a per diem basis are often called contractors. Contract work is an alternative to full-time employment that has become more popular in the last decade. In 2004, according to the Bureau of Labor Statistics, approximately 10.6 million people in the United States were classified as self-employed.

Contractors and other self-employed people can use the Salary Wizard to research the value of a contract position, by following just a few steps. First, determine the full-time salary for the job. Because of your level of experience, I benchmarked your job to a tax accountant III. The median salary for that job in Jackson, Mississippi, is $60,365.

The next step in calculating a per diem rate for the job is to divide the full-time salary by 2080, the number of hours in a 52-week year of 40 hours per week.

But contractors must pay for their own benefits, including healthcare, vacation pay, sick leave, and more. And contractors can't pay themselves bonuses. So it is fair for an employer to pay a contractor more than the equivalent hourly rate of a full-time job. Depending on the cost of benefits in the region, contractors should charge a premium of 25 to 35 percent. In Jackson, I would stay closer to 25 percent.

I recommend that you charge your clients $35 per hour for your services, or $280 per day.

Good luck.

- Erisa Ojimba, Certified Compensation Professional