Let me clarify. The hourly rate I was referring to was what the contractor gets. Not what the agency gets. I tell the recruiter and my manager the offer I think we should make the person and let the higher ups negotiate the bill rates the agency will charge the company. I haven't been second guessed yet.

No, double the hourly rate plus zeros.

40 hours x 50 weeks = 2000 hours

So just 2x and thousands.

Here's examples on HN of others using the rule of thumb I shared, which is definitely conservative:

https://news.ycombinator.com/item?id=2185782 (Feb 2011)

> zipdog: $40/hr contract is about $40k/yr permanent

https://news.ycombinator.com/item?id=2438980 (Apr 2011)

> techiferous: But remember that there is non-billable work (accounting, etc.) and a 15.3% self-employment tax. [...] Working as a consultant for $175/hour is similar to being employed at $175K/year.

> danssig: Calling that pay rate $175K/yr is beyond conservative.

NOTE: two users here also recommended your equation

> slashcom: $x/hour * 40 hr/wk * 50 wk/yr = 2n1000 The general rule is always "times 2, add 3 zeros"

> jurjenh: yes, this is generally the rule I use as well, take the hourly rate and double it and add a K (eg $30/hr = $60K) [...] Personally I use an estimate of about 75% efficiency

> rapind: For 75% efficiency I assume you mean 3/4 * 2 * $175 * 1000 = $262,500 / year.

https://news.ycombinator.com/item?id=5299009 (May 2013)

> artumi-richard: The rule of thumb I was told is 1000 billed hours per year.

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To try to be genuinely helpful: a discussion documenting that hourly rates are a bad idea vs. charging per day:

https://news.ycombinator.com/item?id=5714930 (May 2013)

> gknoy: If you're doing freelance, you also have to cover downtime, business development, benefits

Here's the article since the discussion's link 404's:

https://web.archive.org/web/20161210162901/https://alanholli...

> Charge More:

> · Take the salary you’d want to earn as a full time employee.

> · Double it.

> · Divide your doubled salary by the amount of days you’d work as a regular employee.

> · This is the minimum rate you should charge per day.

And this seemed helpful too (mostly connecting for my own future reference at this point):

Poll: long-term contractors, what is your hourly rate? | https://news.ycombinator.com/item?id=5769348 (May 2013)

Depends what you’re trying to calculate.

If the idea is that independent small job (less than a year) contracting results in a 50% loss to overhead, then yes, just take hourly rate in thousands. This helps convince people to stop messing about with self-employment and just work for the man.

If you mean how much money is in your bank account after a year of work for one company, contrasting a 1099 to FTE for a regular company, it’s the 2x + 000s formula. Unlike comments above, if you have your own LLC consulting business and run the 1099 payments through that, you can pay less tax as self-employed taking care of your own insurance and benefits.