[wikwocket]

Those links are really an excellent place to start. Patrick (patio11) and Thomas Ptacek (tptacek) have also talked extensively about this in HN comments, and as far as I know are open to questions by email.

Two things that I can emphasize off the top of my head are:

1) It is easier to sell features, or weeks of effort, as opposed to billable hours. Billing by the hour is asking for nitpicky accounting. Bill by the week, or by the project (if you are confident about scope and effort) and you can simply exchange money for delivered value.

2) If you "hire" someone as a subcontractor, they are effectively trading some of their earning potential for paycheck security and not having to deal with rainmaking. This is similar to the deal a day job offers. Hopefully they understand this, but you should definitely understand this. You will be absorbing the bulk of the risk and responsibility. Relative pay should reflect this.