Calculating Hourly Rate for A Temp to Perm Position

Introduction

Converting a temporary position to a permanent one requires careful consideration of the employee's experience, market rates, and company budget. The hourly rate calculation should reflect the value of the position and ensure fairness to both the employer and employee.

The process involves several steps:

1. Determine the employee's current hourly rate
2. Calculate the annualized value of the temporary position
3. Adjust for benefits and other compensation factors
4. Compare to market rates for similar permanent positions
5. Finalize the permanent hourly rate

Using the calculator on this page, you can quickly determine the appropriate hourly rate for the conversion.

Formula

The permanent hourly rate is calculated using the following formula:

The formula accounts for:

• The annualized value of the temporary position
• Additional benefits provided in the permanent role
• The number of hours worked per year
• An adjustment factor based on market rates and experience

Example Calculation

Let's walk through an example to illustrate the calculation process.

Scenario

• Current temporary hourly rate: $25/hour
• Temporary position duration: 6 months
• Hours worked per week: 40
• Benefits adjustment: $5,000/year
• Adjustment factor: 1.2

Step-by-Step Calculation

1. Calculate weekly earnings: $25 × 40 = $1,000
2. Calculate annual temporary earnings: $1,000 × 26 weeks = $26,000
3. Add benefits adjustment: $26,000 + $5,000 = $31,000
4. Calculate hours worked per year: 40 × 52 = 2,080 hours
5. Apply adjustment factor: $31,000 × 1.2 = $37,200
6. Calculate permanent hourly rate: $37,200 / 2,080 = $17.93/hour

The permanent hourly rate in this example would be approximately $17.93/hour.

Key Considerations

Market Rates

Research current market rates for similar permanent positions in your industry and location. This helps ensure the proposed hourly rate is competitive and fair.

Benefits Comparison

Compare the benefits package between the temporary and permanent positions. Additional benefits like health insurance, retirement contributions, or professional development opportunities should be factored into the calculation.

Experience Level

Consider the employee's experience and qualifications. Senior employees may justify higher rates than entry-level positions.

Contract Terms

Review the terms of the temporary contract, including any non-compete clauses or performance metrics that might affect the conversion.