Negotiating a new contract can be a very delicate subject. Such important factors as 'Do you currently have a job?' and 'When can you start?' will make a major difference in the negotiation process. Some of the salary increase you will see as a contractor is compensation for the lack of job security, not just the lack of benefits. When negotiating a new contract, try and remember the following things:

1. You are working for you, and noone else. As all things in life, be true to yourself.
2. When asked 'What are you looking for in a salary?' respond, 'What are you paying?'
3. If pressed to set a price, bid high, then shut up. He who speaks next may loose. Put the ball in their court to come back with a reasonable price.
4. If the technology you're working with is hot (like Java) you have to ride the train, bid high, you can get what you're worth.
5. It is not guaranteed employment, always keep a reserve to survive on between job searches.
6. Pick a price you are happy with ahead of time, and don't go under that. (unless you're currently out of work and can't afford to wait).
7. Most contracting firms give you about 2/3 of what they got, but it varies based on benefits given and how greedy they are. Most don't like to let you know what they are billing for your time. If at all possible, a rate of 5-10% off your rate is optimal.
8. The area you are in can make a major difference to your pay rate. Some areas of the country are offering significantly higher than $50/hour for Java programming right now, while in others one would be lucky to get $35/hour.
9. The following things are all negotiable, make sure you get definitive answers about them, and have them IN WRITING in your contract.
   • Taxes
     Some contracts are what's called 1099, which is much different than I'm sure most of you are used to getting paid. With 1099 you pay all Social Security. This looses you about 7% and you have to understand there is zero withholding which means doing 1040-ES and state equivalent, and playing SS catch-up at filing time. (Translation, you better put aside all the tax money if you get paid 1099, the IRS has no sense of humor.
   • Pay frequency
     Some contracting agencies will bill the company you work for at the end of the month you work, and you receive the pay some time after that. I have heard of people getting paid in January for work done in November. Getting the lag time reduced will cost you in pay rate, but if you don't have your financial ducks in a row so to speak to eat 2 months between when you get paid, this may be a necessary evil.
   • Insurance
     Most companies will offer you an HMO, and if you reduce your hourly wage, will offer to subsidize some of it. I wouldn't recommend going without it, but make sure you figure out what they're willing to subsidize and at what cost to your pay rate.
   • Vacation
     Leaving this out can get you a higher rate, but at the cost of going unpaid if you want vacation time.
   • Sick time
     Obviously this is dependent on you and the contract. If you're not sick very often, this wouldn't be that important to you. If you leave this off you can get a higher rate (but go unpaid if you do get sick.
   • 401k
     Some companies offer to match a certain percentage of money put into a retirement stock fund (401K). The benefit of having this varies on what they will take off your pay rate to match what you put into this. Also, since you are short-term and potentially changing contracting agencies, is this investment going to stay till retirement? I would advise you to have your own, seperate retirement fund, and just let them increase your hourly rate instead of paying to retirement.
   • Overtime Pay
     In many states there is no law stating that you get time and a half for overtime if you make over a certain amount. Make sure this is negotiated before signing a contract.
   • Signing Bonus
     Sometimes you will be offered, or can ask for a signing bonus. It's not a definate, but can be used to offset things such as education costs that your last company paid and wants recompensation for should you leave.
   • Education costs
     Some companies will pay to send you to training. Some will want recompensation if you leave them within a year.
   • Relocation Fee
     If you don't live in the client area, make sure that they have in writing a relocation fee, if you need one to move to the client area.
   • Short/Long-term disability
     Of course this depends on the job as to how important it is to you, but don't look for this in every job, contractors are notariously short termed. All you can home for is you don't need this.

Other resources for information on Contracting can be found at The Computer Consultant's Resource Page.