Alright so some more research about this option:
- The value of 401k tax reduction shouldn't really count. As those taxes will eventually be paid. They are worth something for tax-free growth, but I can open an individual 401k or SEP-IRA with vanguard if I am an independent contractor (sole proprietorship or form an LLC). In fact there is the advantage of contributing more than $18,500 to these plans. So let's just account for the lack of 401k Employer Match (say, $5000).
- Health Insurance is tricky. I looked at the Healthcare.Gov today and the options are extremely limited (really only very high out of pocket max of 6,500 with 5000 deductible for HSA). Also The premiums are not taxed federally so I don't know if I need $15k to cover insurance for one person. And most employers cover only 75-90% of the premium. It's probably more like $10,000 for good health insurance, or $4000 for high deductible and high OOP max. However with HSAs and high OOP max employers sometimes provide contributions to the HSA to help offset these issues. So, Insurance probably is valued $2000 higher. So $6,000-10,000.
- Invoicing risk. If monthly I bear bigger risk than weekly. I need to find this out (e.g. financial trouble and hearing: "Don't worry we'll pay you..." and then what if they go out of business?). Weekly reduced the amount of money lost as if they start missing payments you start looking for new work sooner.
- Currency risk. This is one of the biggest risks. Is it possible to purchase currency exchange futures as individual? And for small weekly or monthly income amounts? If so how expensive? The added expense would need to be factored in to the compensation (unless they pay me in USD)
- Invoicing cost. Paypal and similar will charge fees. So let's add on $4000 in invoicing costs.
- Currency Exchange cost. Assuming this isn't covered by future contracts, let's add another $4000. (unless they pay me in USD)
- Long term disability insurance: Say $2000.
- Family Medical Leave, value of this? How do you bake that in to compensation?
- Misc costs (extra utilities working from home, extra coffee shop purchases (e.g. office space -- renting via buying stuff every hour or two or hoping around coffee shops), Internet costs (adding mobile hotspot features), lack of free food at work, time spent bookkeeping and invoices, filing extra tax paperwork, etc). Let's say this all adds another $5000 or so.
- Paid time off, it's possible that the company might let me invoice for time off. If that's the case I don't need to include it.
So total extra comp needed that I've been able to identify in this email and last plus updated adjustments:
- $5000 (401k match)
- $6000-1000 (Health Insurance)
- $0-$15,000 (30 PTO days see point #10)
- $10,000 (FICA)
- $0-4000 (Currency Exchange Fee)
- $0-???? (FX Future contracts?)
- $2000 (Long term Disability)
- $???? (Family Medical leave)
- $5000 (Misc)
$30,000-53,000 or more (e.g. cost of FX hedge, value of Family Medial Leave, etc).
Again it's currency risk that I'm most concerned about. Last year one Euro was worth ~0.95 USD. Today it's ~0.85. In 2014 it was about ~0.75. So the swings look like they can be at least 25% (I realize there really is no limit to how bad or favorable it can get). If forward contracts are possible, practical, of cost effective, and I'm not paid in USD, this seems super risky!
Assuming I have to bear the burden of risk for FX and family medical leave, then I'd need to add essentially a risk premium to my compensation. What is a fair amount to charge for this? Say 12.5% (half of the probable currency exchange swing in the coming years?). That might add $20,000 alone. Of course just going this route vs typical salary W2 employee is risky. Should I add even more markup? This starts getting really expensive and probably begins to push me out of the range of what the company is willing to pay. Even if not, I don't think this company has employed or contracted anyone in the US, only Europe, South America, and Asia. As such I'd be one of the most expensive workers even though I live in a LCOL area of the US. Would I be first to be laid off if they had some financial trouble? Would I be able to work fulltime every week? The list of risky unknowns seems sky high. I have one more interview with the company. I'm one of three they will do final interviews with. If this proceeds to an offer, what should I ask and how should I negotiate. Any ideas are welcome.
At a minimum I'd be looking at $45-68k more as a rough estimate for marked-up compensation. Basically this amounts to something in the range of ~40-60% more compensation than a salaried employee.