Boost your income with higher rate and 80-20 billing option

Boost H1B career with higher salaryWorking on H1B visa in USA ? Want to boost your monthly income potential ? And, your H1B visa employer, who is in business of selling your IT services to other companies is advising you that if we get more money in your hourly billing than we could pay you more and you would earn more. Your H1B visa employer may

be correct/ How ? Let us consider following scenario for your reference:

Scenario : H1B Employer ( Dhokha Concepts) is getting paid $100 per hour for (h1B employee) Kartik’s work at the client site Dnfosys. Kartik demands to Dhokha Concepts ( his H1B employer) that he would like to go for 80-20 meaning that 80% of the $100 will be kept by Kartik ( the H1B employee) and rest 20% would be kept by Dhokha Concepts ( the H1B employer) . And Dhokha Concepts will run the payroll for the employee.

Kartik is now filled with joy when he runs the following number:

Kartik ( 80% ) – H1B employee
Dhokha Concepts (20%) – H1B Employer’

  • Hourly Rate : $80 ( 80% of $60)
  • Hours Per Month : 160
  • Annual Gross Pay : $80 X 160 X 12 ( month) = $153,600
  • Monthly Gross Pay : $153,600/ 12 = $12,800
  • Hourly Rate : $20 ( 20% of $100)
  • Hours Per Month : 160
  • Annual Gross Profit : $20 X 160 X 12 (month)= $38,400
  • Monthly Gross Profit :$38,400 / 12 = $3,200

Table 1 ( Gross Pay and Profit )

MYTH : Kartik find the $153K per annum a truly decent salary. Kartik’s friends also gets jealous of such high salary . Karthik thinks that his H1b employer is making too much moneyviz., $3,200 a month in a gross profit.

FACT : Kartik failed to recognize his tax liability. Kartik also thought that he would find a way to decrease his tax liability in his home country.

Kartik – H1B employee’s Tax Liability
Dhokha Concepts – H1B Employer’s Tax Liability
  • 6.25 % Social Security tax on $153,600= $9,600 annually
  • 1.45% Medicare tax on $153,600 = $2,227 annually
  • 15% Personal income tax on $153,600 = $23,040 annually

Total tax to be paid by Kartik to government = $34,867 annually

  • 6.25 % of Social Security tax on $153,600 = $9,600 annually
  • 1.45% of medicare tax on your salary $153,600= $2,227 annually

Total tax to be paid by employer to government = $11,827

Table 2 ( Tax Liability)

Boost H1B career with higher salary

FACT : Health insurance is very costly. A good quality health insurance for a two person will cost around $1,000 a month and typically 20% of the insurance premium is paid by employee and 80% of the insurance is paid by employer. So let us assume that the premium cost is $1,000 a month. Most of the time , H1B employer will not offer health benefit at all , if offered it will be like 45% premium is paid by employee and 55% is paid by employer. But here we are assuming that your employer is kind enough to share 80% in the premium cost.

Health Insurance ( Kartik’s share) 20%
Health Insurance ( Employer’s Share) 80%
  • 20% monthly premium = $200
  • Total Annual Premium = $200 X 12 ( month) = $2,400 anually
  • 80% monthly premium = $800
  • Total Annual Premium = $800 X 12 ( month) = $9,600

Table 3 ( Health Insurance )

Kartik’s ( H1B employee) take home pay
H1B Employer’s take home profit
  • Gross Annual Salary : $153,600 ( See Table 1)
  • Minus tax : $34,687 ( See Table 2 )
  • Minus health insurance : $2,400 ( See Table 3)

Total = $116,513 take home annual pay
Monthly Net Take Home Pay = $116,513 / 12 (Month) = $9,709

  • Gross Annual Profit : $38,400 ( See Table 1)
  • Minus tax : $11,827 ( See Table 2 )
  • Minus health insurance : $9,600 ( See Table 3)

Annual Net Profit = $16,973
Monthly Net Profit = $16,973 / 12(Month) = $1,414

Table 4 ( Take Home Pay)

H1B employee’s mindset is that Employer MUST pay during bench
Here is the H1B employer’s struggle
H1B Employer needs to come up with the following :

  • $12,800 : Employee’s gross monthly salary ( See Table 1)
  • Plus $800 ( 6.25% Social Security Tax – Employer side)
  • Plus $185 ( 1.45% Medicare Tax)
  • Plus $800 ( Employer side – Health Insurance Premium)

Total = $14,585 is the fully loaded per month cost of Kartik

    Do you think employer can afford it ?

  • Employer is making just $16,973( See Table 4) in a net profit thru this employee in the entire year.
  • By paying $14,585 per month to H1B employee on bench, the H1B employer’s profit will be minimal. It would be as good as running a charity!!

It does not make any business sense even with the higher billing rate! And employee MUST not expect a full salary during bench.

Higher rate provides really good income upfront with $9000 take home pay per month( as shown in the calculation above ) . And, if H1B employee can step a side certain portion of take home pay as a savings, such employee will not have any problem during the bench period. Such savings helps employee survive during the bench. 80-20 may not be a good option with the lower hourly rate because employee’s savings will be less and it will get depleted faster during your bench ( non-pay) period!

If H1B employee is living in an area where cost of living is very high than savings may not last long with the higher rate.

If you are too much worried about how much money I need to make to survive comfortably at XYZ location ? Google is your best friend. Run a search on Cost of Living Calculator or just click here.

If you get a long term contract with a higher rate than forget the fixed salary the 80-20 or 90-10 is the best option. Even if your employer ask you to take care of your health insurance ( meaning that employer will not pay anything towards the health insurance premium !!) from your own 80% share then also the 80-20 or 90-10 is the best option. If you propose to your employer to alter the payment arrangement from fixed salary to 80-20 option or 90-10 option and your H1B visa employer ( sponsor) refuses to alter the fixed salary option you should assume that your employer is making significant money in the particular assignment and wants to keep profit coming.

Boost H1B career with higher salary

H1B Employee must know that no one is going to give you favors for free. You work for an employer and you must generate some profit to keep the lights on in Employer’s office. Employer can not provide free services and employer has also family to feed and pay towards the cost of marketing, recruiting and other business expenses. Only thing H1B employee can look in to is whether my H1B employer is genuine one ? Whether I encountered any bench scenarios with this employer. Whether your H1B employer treats you with honesty, dignity and respect your H1B employee rights like Agile Attributes LLC. Our goal is not to run a Agile Attributes commercial on you ! If you think that you have been cheated/looted and looking for the H1B visa transfer ? Drop us an email at Agile Attributes can certainly help, if they can not , they will tell you upfront. If you are in good hands and wanted to share the positive vibe you had/have with your former/current H1B employer, please feel free to share with us in the comment section below.

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