Would you take this tech contractor position?

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Topic Author
benaaye
Posts: 67
Joined: Wed Jun 27, 2018 10:13 am

Would you take this tech contractor position?

Post by benaaye »

Hi welcoming any thoughts. If base comp for an equivalent FTE role is around $225K with total comp around $300K, what rate should a contractor (hourly) propose if there is negotiation room? I am potentially considering a contract role with a prominent tech company (have also previously interviewed and simultaneously applied to FTE and also under consideration for FTE roles with this company in another group I may be actually slightly more interested in).

My very obvious preference is FTE with this company but my current opportunity is I have discussed conversion in an initial 6 mo contractor role and was told there is quite likely possibility of the role needing to be made permanent but also no promises there will be eventual headcount. I would be reporting to someone who was previously converted into the role. I do not want to continue contracting and would definitely continue to apply to FTE roles with target/stable companies during their contract with the hope of conversion/fit but also not depending on it.

However, the contracting role would be through a recruiting/staffing agency (W2 of that company) and I do not know exactly what its mark up for the vendor contract is. I was initially quoted $90 by the agency before exploring the opportunity and would anticipate this would be the floor if there is room for negotiation.

I am new to contractor issues so any thoughts on this or things to think about are welcome. I want to be compensated fairly as well now and in the event I could get converted. How would you go about this?
Thegame14
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Re: Would you take this tech contractor position?

Post by Thegame14 »

first if you are not working, making $90 an hour is about $180K per year, so that is a lot better than unemployment. I wouldnt worry about if I take X amount as a consultant they will think this is the salary I will get, I would just get the consulting job, provide them value to get them to want to hire you full time, and then you can negotiate and you are using a recruiting firm so just let them know what it would take for a full time position.
bwalling
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Joined: Thu Nov 25, 2010 1:04 pm

Re: Would you take this tech contractor position?

Post by bwalling »

$90/hour is insanely low for a role that pays that salary.

$225k/year is around $225/hour on contract. Agency is going to take a 35% cut. You should see $146.25/hour for that contract. 1099 doesn't come with benefits, severance, or any guarantee of work. There's a price for that.
gips
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Re: Would you take this tech contractor position?

Post by gips »

i was an owner of a consulting company, $225k base has another 30 per cent of benefits loaded into employee cost so call your loaded fte salary $285k. divide by 220 to get equiv daily rate and then by 8 for an hourly rate of $161/hour. if that was your ask, we’d ask the client for $300/hour or $2400 per day. prob a non starter for the client. also if the negotiation started at 90 you’re not getting close to $161.

if you take a position through the consulting company make sure it doesnt violate your contract or the contract the consulting company has with the client to be converted to fte. we had a non-hire agreement with many of our clients which we enforced depending upon the situation.

luck,
Last edited by gips on Mon Jan 11, 2021 2:25 pm, edited 1 time in total.
Topic Author
benaaye
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Re: Would you take this tech contractor position?

Post by benaaye »

bwalling wrote: Mon Jan 11, 2021 1:00 pm $90/hour is insanely low for a role that pays that salary.

$225k/year is around $225/hour on contract. Agency is going to take a 35% cut. You should see $146.25/hour for that contract. 1099 doesn't come with benefits, severance, or any guarantee of work. There's a price for that.
Thanks for your thoughts! My sense was that it would be at least 25-30% for the recruiting firm/placement as well.

To clarify though, I would not be a 1099 but a W2 of the recruiting company. So I can have tax withholding and SS etc. through them. As you would expect their benefits are not at all comparable to FTE especially at a company like the placement. I would have access to a 401k but no match and relatively expensive premium for health insurance (I would sign up for the HDHP for access to HSA though). But benefits like sick days and vacation would also not be compensated the same I believe.

What are your thoughts if its technically W2? My initial thought was that at least base/2080 hrs would yield something like $110/hr.

Also, there is overtime of 1.5x but I'm at a point in my life/career where WLB is very important to me. I was told because there is some international exposure there might be some long/strange hours (concern for me) but I have done this in a previous FTE role where in general hours were still usual 40-45. But there is a concern because the only contract experience I have previously was hell with a private startup (never again) working 70-80/hrs that basically imploded and where promises made fell apart and because each of my bosses/senior management were let go or quit. I am only considering this contract because if any companies are stable right now, this company would be in the select group of them.
Topic Author
benaaye
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Re: Would you take this tech contractor position?

Post by benaaye »

Thegame14 wrote: Mon Jan 11, 2021 12:48 pm first if you are not working, making $90 an hour is about $180K per year, so that is a lot better than unemployment. I wouldnt worry about if I take X amount as a consultant they will think this is the salary I will get, I would just get the consulting job, provide them value to get them to want to hire you full time, and then you can negotiate and you are using a recruiting firm so just let them know what it would take for a full time position.
thanks for your thoughts! I hear you on "position is better than no position." Fair point. A little bit of context though I do especially think yours is a fair point given the current economy and times.

I am of the FIRE mindset and while I am not close to my FIRE number, I have financial freedom (have also made some downshifts in past several month even amplifying this) and am in my 30s. "Any job" isn't the primary motivating factor for me other than that I have financial goals this year and I would still really like to meet them (e.g., max 401k etc.). On principle, I do also care a lot about equitable compensation.

I am very much looking for the right job/long term career fit right now and am open to this opp even though it is not what I'm looking for due to very particular reasons that this could've been a fit if it was a FTE position/existing headcount. Both the placement agency and company know this and that is why there were discussions on potential to convert.

It's definitely not an ideal market but I think another contractor position paying even at least $75/hr wouldn't be crazy difficult for my skills/experience...it would still be a bargain from a market perspective. Though I think the economy is exposing the companies that are stronger but I am not interested in less stable companies. I am looking for WLB and fit at a stable companies and that search takes/has taken time.
oilrig
Posts: 199
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Re: Would you take this tech contractor position?

Post by oilrig »

bwalling wrote: Mon Jan 11, 2021 1:00 pm $90/hour is insanely low for a role that pays that salary.

$225k/year is around $225/hour on contract. Agency is going to take a 35% cut. You should see $146.25/hour for that contract. 1099 doesn't come with benefits, severance, or any guarantee of work. There's a price for that.
Im not sure your math is correct here. The easiest way to calculate annual salary equivalent is to multiply the hourly rate by 2080(these are the typical amount of hours worked per year) . For example someone making $50/hour will make $104,000 a year, $108/hour is $225k/year.

Remember you typically wont have benefits, retirement, paid time off, etc. I would add an additional 25% to your ask to compensate for the lack of benefits, but be sure and ask the contracting agency if they offer benefits or 401k match. Some do, most dont. But in my case, if Im used to making $100k/year, then I would ask for $125k/year(about $60/hour).

Hope this helps!
Topic Author
benaaye
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Re: Would you take this tech contractor position?

Post by benaaye »

oilrig wrote: Mon Jan 11, 2021 2:58 pm
bwalling wrote: Mon Jan 11, 2021 1:00 pm $90/hour is insanely low for a role that pays that salary.

$225k/year is around $225/hour on contract. Agency is going to take a 35% cut. You should see $146.25/hour for that contract. 1099 doesn't come with benefits, severance, or any guarantee of work. There's a price for that.
Im not sure your math is correct here. The easiest way to calculate annual salary equivalent is to multiply the hourly rate by 2080(these are the typical amount of hours worked per year) . For example someone making $50/hour will make $104,000 a year, $108/hour is $225k/year.

Remember you typically wont have benefits, retirement, paid time off, etc. I would add an additional 25% to your ask to compensate for the lack of benefits. For example, if Im used to making $100k/year, then I would ask for $125k/year(about $60/hour).

Hope this helps!
hi oilrig, thanks and that makes sense with my math for $108/110. And yes, I think all those other benefits you mentioned are basic or non-existent through the recruiting company. So was your suggestion to add 25% to the 90/hr the agency provided before interviews or to the $108/110 that tracks more with what I know is the base comp for FTE? Appreciate your thoughts on the ask or other things to think about.

Also, someone else I think mentioned it but there aren't any contractual prohibitions on a conversion. This is openly my goal and primary reason I am even open to it as expressed through both the recruiter to the company/manager and my conversations with the manager/senior management. Of course, management has stated it is the hope but no promises. So at face value it would still be a 6 mo. contract/promise. I don't know how or if the agency would get a cut if there was a conversion. That would be the compensation hamper since a FTE equivalent usually wouldn't come with that cost.
oilrig
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Re: Would you take this tech contractor position?

Post by oilrig »

benaaye wrote: Mon Jan 11, 2021 3:26 pm
oilrig wrote: Mon Jan 11, 2021 2:58 pm
bwalling wrote: Mon Jan 11, 2021 1:00 pm $90/hour is insanely low for a role that pays that salary.

$225k/year is around $225/hour on contract. Agency is going to take a 35% cut. You should see $146.25/hour for that contract. 1099 doesn't come with benefits, severance, or any guarantee of work. There's a price for that.
Im not sure your math is correct here. The easiest way to calculate annual salary equivalent is to multiply the hourly rate by 2080(these are the typical amount of hours worked per year) . For example someone making $50/hour will make $104,000 a year, $108/hour is $225k/year.

Remember you typically wont have benefits, retirement, paid time off, etc. I would add an additional 25% to your ask to compensate for the lack of benefits. For example, if Im used to making $100k/year, then I would ask for $125k/year(about $60/hour).

Hope this helps!
hi oilrig, thanks and that makes sense with my math for $108/110. And yes, I think all those other benefits you mentioned are basic or non-existent through the recruiting company. So was your suggestion to add 25% to the 90/hr the agency provided before interviews or to the $108/110 that tracks more with what I know is the base comp for FTE? Appreciate your thoughts on the ask or other things to think about.

Also, someone else I think mentioned it but there aren't any contractual prohibitions on a conversion. This is openly my goal and primary reason I am even open to it as expressed through both the recruiter to the company/manager and my conversations with the manager/senior management. Of course, management has stated it is the hope but no promises. So at face value it would still be a 6 mo. contract/promise. I don't know how or if the agency would get a cut if there was a conversion. That would be the compensation hamper since a FTE equivalent usually wouldn't come with that cost.
I used to work for a staffing agency and now work in house in corporate talent acquisition. If the agency quoted you $90/hour, then Im not sure there is going to be a ton of wiggle room on their end. Why dont you ask them what is the highest they can go up, because youre used to making $225k/year. My best guess is they'll be able to go up to $95/hour or something similar, but not much higher than that. Either way, just be honest with them. They want to get you the highest offer possible because that means they will make more money off you.

Typically if its a 6 month contract-to-hire position, then there is no conversion fee to make you a full time employee. The staffing agency will just drop you from their payroll and thats it. However, lets say the company wants to take you on full time before the 6 months is up, thats when there will be a fee charged by the staffing agency to the company since they technically broke the contract/agreement of 6 months. Either way, I wouldn't worry too much about this, its between the staffing agency and the company, not you.
bwalling
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Re: Would you take this tech contractor position?

Post by bwalling »

oilrig wrote: Mon Jan 11, 2021 2:58 pm
bwalling wrote: Mon Jan 11, 2021 1:00 pm $90/hour is insanely low for a role that pays that salary.

$225k/year is around $225/hour on contract. Agency is going to take a 35% cut. You should see $146.25/hour for that contract. 1099 doesn't come with benefits, severance, or any guarantee of work. There's a price for that.
Im not sure your math is correct here. The easiest way to calculate annual salary equivalent is to multiply the hourly rate by 2080(these are the typical amount of hours worked per year) . For example someone making $50/hour will make $104,000 a year, $108/hour is $225k/year.

Remember you typically wont have benefits, retirement, paid time off, etc. I would add an additional 25% to your ask to compensate for the lack of benefits, but be sure and ask the contracting agency if they offer benefits or 401k match. Some do, most dont. But in my case, if Im used to making $100k/year, then I would ask for $125k/year(about $60/hour).

Hope this helps!
It's not math - it's what is normally seen. There's a significant value to benefits and regular income. To put someone on hourly contract necessarily drives up the rate. You should see double the hourly rate equivalent of the salary, if not higher.

I won't work for less.
bwalling
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Re: Would you take this tech contractor position?

Post by bwalling »

gips wrote: Mon Jan 11, 2021 2:10 pm i was an owner of a consulting company, $225k base has another 30 per cent of benefits loaded into employee cost so call your loaded fte salary $285k. divide by 220 to get equiv daily rate and then by 8 for an hourly rate of $161/hour. if that was your ask, we’d ask the client for $300/hour or $2400 per day. prob a non starter for the client.
Do you normally post contract workers into positions that would otherwise see a total comp of $300k? I have no problem getting $250-300/hr for contracting work on positions that would otherwise pay near that range. I've not had a single client balk at my rate.

The key here is that the FT position would be in the $300k range. That's telling you the value of the labor.
oilrig
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Re: Would you take this tech contractor position?

Post by oilrig »

bwalling wrote: Mon Jan 11, 2021 4:09 pm
oilrig wrote: Mon Jan 11, 2021 2:58 pm
bwalling wrote: Mon Jan 11, 2021 1:00 pm $90/hour is insanely low for a role that pays that salary.

$225k/year is around $225/hour on contract. Agency is going to take a 35% cut. You should see $146.25/hour for that contract. 1099 doesn't come with benefits, severance, or any guarantee of work. There's a price for that.
Im not sure your math is correct here. The easiest way to calculate annual salary equivalent is to multiply the hourly rate by 2080(these are the typical amount of hours worked per year) . For example someone making $50/hour will make $104,000 a year, $108/hour is $225k/year.

Remember you typically wont have benefits, retirement, paid time off, etc. I would add an additional 25% to your ask to compensate for the lack of benefits, but be sure and ask the contracting agency if they offer benefits or 401k match. Some do, most dont. But in my case, if Im used to making $100k/year, then I would ask for $125k/year(about $60/hour).

Hope this helps!
It's not math - it's what is normally seen. There's a significant value to benefits and regular income. To put someone on hourly contract necessarily drives up the rate. You should see double the hourly rate equivalent of the salary, if not higher.

I won't work for less.
Yea, I get that. Im just saying your math isnt correct on the $225k/year being the equivalent of $225/hour on contract. $225/hour is the equivalent of $468k/year (225 x 2080 = 468,000).

Also, most contracting agencies will pay you as a W2 employee, not 1099. Too many headaches for the contracting agency to have you as a 1099 contractor. So the agency cut is not being taken from your pay, the actual company pays that separately. If they quoted him at $90/hour, then he gets that full $90/hour minus normal payroll taxes.
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ClevrChico
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Re: Would you take this tech contractor position?

Post by ClevrChico »

$300k salary to hourly is $300k/2080 = $144/hour

That's at least how I've always handled this calculation. It's seems pretty simple given both are W2 jobs. If it were W2 > 1099, it would be different.

Most staffing agencies low ball candidates, and I've had them significantly increase (a still terrible rate) simply by asking. As someone else said, if you're not working, anything is better than nothing. Part of going through a staffing agency is working for less than you're worth.
gips
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Re: Would you take this tech contractor position?

Post by gips »

bwalling wrote: Mon Jan 11, 2021 4:14 pm
gips wrote: Mon Jan 11, 2021 2:10 pm i was an owner of a consulting company, $225k base has another 30 per cent of benefits loaded into employee cost so call your loaded fte salary $285k. divide by 220 to get equiv daily rate and then by 8 for an hourly rate of $161/hour. if that was your ask, we’d ask the client for $300/hour or $2400 per day. prob a non starter for the client.
Do you normally post contract workers into positions that would otherwise see a total comp of $300k? I have no problem getting $250-300/hr for contracting work on positions that would otherwise pay near that range. I've not had a single client balk at my rate.

The key here is tha the FT position would be in the $300k range. That's telling you the value of the labor.
yes, we had a hard time getting more than $2k/day for wall st tech. there were some exceptions for cxo level candidates but by and large, that’s what we found.

to be clear, our business model targeted 50 percent gross margin so consultant billed at $2000 per day received $1k per day.
Last edited by gips on Mon Jan 11, 2021 4:57 pm, edited 2 times in total.
Topic Author
benaaye
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Re: Would you take this tech contractor position?

Post by benaaye »

oilrig wrote: Mon Jan 11, 2021 3:55 pm
benaaye wrote: Mon Jan 11, 2021 3:26 pm
oilrig wrote: Mon Jan 11, 2021 2:58 pm
bwalling wrote: Mon Jan 11, 2021 1:00 pm $90/hour is insanely low for a role that pays that salary.

$225k/year is around $225/hour on contract. Agency is going to take a 35% cut. You should see $146.25/hour for that contract. 1099 doesn't come with benefits, severance, or any guarantee of work. There's a price for that.
Im not sure your math is correct here. The easiest way to calculate annual salary equivalent is to multiply the hourly rate by 2080(these are the typical amount of hours worked per year) . For example someone making $50/hour will make $104,000 a year, $108/hour is $225k/year.

Remember you typically wont have benefits, retirement, paid time off, etc. I would add an additional 25% to your ask to compensate for the lack of benefits. For example, if Im used to making $100k/year, then I would ask for $125k/year(about $60/hour).

Hope this helps!
hi oilrig, thanks and that makes sense with my math for $108/110. And yes, I think all those other benefits you mentioned are basic or non-existent through the recruiting company. So was your suggestion to add 25% to the 90/hr the agency provided before interviews or to the $108/110 that tracks more with what I know is the base comp for FTE? Appreciate your thoughts on the ask or other things to think about.

Also, someone else I think mentioned it but there aren't any contractual prohibitions on a conversion. This is openly my goal and primary reason I am even open to it as expressed through both the recruiter to the company/manager and my conversations with the manager/senior management. Of course, management has stated it is the hope but no promises. So at face value it would still be a 6 mo. contract/promise. I don't know how or if the agency would get a cut if there was a conversion. That would be the compensation hamper since a FTE equivalent usually wouldn't come with that cost.
I used to work for a staffing agency and now work in house in corporate talent acquisition. If the agency quoted you $90/hour, then Im not sure there is going to be a ton of wiggle room on their end. Why dont you ask them what is the highest they can go up, because youre used to making $225k/year. My best guess is they'll be able to go up to $95/hour or something similar, but not much higher than that. Either way, just be honest with them. They want to get you the highest offer possible because that means they will make more money off you.

Typically if its a 6 month contract-to-hire position, then there is no conversion fee to make you a full time employee. The staffing agency will just drop you from their payroll and thats it. However, lets say the company wants to take you on full time before the 6 months is up, thats when there will be a fee charged by the staffing agency to the company since they technically broke the contract/agreement of 6 months. Either way, I wouldn't worry too much about this, its between the staffing agency and the company, not you.
this is a really interesting background for your perspective so thanks for your thoughts. I think that's at least one way of broaching the convo ("what is the highest you/they can go") but I think I would like to anchor it on what I know from research/prior interviews the comp for this as a FTE role would be. The manager was a converted contractor with a similar profile/background/skill and there is no realistic way to do the role any differently than a FTE.

also, that is very helpful re the contract to hire aspect..I was under the impression there was an additional or separate "finders" fee or something if there was a conversion to FTE. I don't know what the vendor contract (btwn recruiter and company) would have in it but that is interesting you have that knowledge from your staffing company experience and working in talent acquisition. actually to piggy back on that perspective, do you know of any potential concerns if I were to engage in interview process at the same company for a FTE role in a different group? This group doesn't have headcount but another (that I may be more interested in) has openings and I've flagged my interest to internal recruiters I worked with last year so it's possible (or also not) that those could be an option but I've seen that take months.
Topic Author
benaaye
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Re: Would you take this tech contractor position?

Post by benaaye »

ClevrChico wrote: Mon Jan 11, 2021 4:26 pm $300k salary to hourly is $300k/2080 = $144/hour

That's at least how I've always handled this calculation. It's seems pretty simple given both are W2 jobs. If it were W2 > 1099, it would be different.

Most staffing agencies low ball candidates, and I've had them significantly increase (a still terrible rate) simply by asking. As someone else said, if you're not working, anything is better than nothing. Part of going through a staffing agency is working for less than you're worth.
Thanks for your thoughts! How did you see the successful asks framed with the significant increases? Was it for a specific amount or by a certain percentage? Or just "what is the highest you're willing to go"?
Tracker968
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Re: Would you take this tech contractor position?

Post by Tracker968 »

This might be out in left field but what about accepting $90/hr with a $10/hr increase every 6 months? Eventually they might get to the point where they decide they would rather hire you than keep paying the increase.
oilrig
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Re: Would you take this tech contractor position?

Post by oilrig »

OP, can you clarify if you are currently working and what are/were you making at your last job? Would the $90/hour be a pay cut for you or an increase? I know you dont want to sell yourself short, but if getting this experience will get you a foot in the door at this tech company, I think it would be worth the "lower pay" for the experience and chance at higher pay whenever you get converted to a full time employee.

I was almost in the same situation a few years ago. I took a contract job at an oil super major (BP, Shell, Chevron, Exxon) that was paying less than what I was used to making, but I wanted that experience to put on my resume. Well it worked out because a few months later I ended up getting hired for a full time job making a lot more money, because they liked that super major experience.
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vitaflo
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Re: Would you take this tech contractor position?

Post by vitaflo »

oilrig wrote: Mon Jan 11, 2021 4:19 pm
bwalling wrote: Mon Jan 11, 2021 4:09 pm
oilrig wrote: Mon Jan 11, 2021 2:58 pm
bwalling wrote: Mon Jan 11, 2021 1:00 pm $90/hour is insanely low for a role that pays that salary.

$225k/year is around $225/hour on contract. Agency is going to take a 35% cut. You should see $146.25/hour for that contract. 1099 doesn't come with benefits, severance, or any guarantee of work. There's a price for that.
Im not sure your math is correct here. The easiest way to calculate annual salary equivalent is to multiply the hourly rate by 2080(these are the typical amount of hours worked per year) . For example someone making $50/hour will make $104,000 a year, $108/hour is $225k/year.

Remember you typically wont have benefits, retirement, paid time off, etc. I would add an additional 25% to your ask to compensate for the lack of benefits, but be sure and ask the contracting agency if they offer benefits or 401k match. Some do, most dont. But in my case, if Im used to making $100k/year, then I would ask for $125k/year(about $60/hour).

Hope this helps!
It's not math - it's what is normally seen. There's a significant value to benefits and regular income. To put someone on hourly contract necessarily drives up the rate. You should see double the hourly rate equivalent of the salary, if not higher.

I won't work for less.
Yea, I get that. Im just saying your math isnt correct on the $225k/year being the equivalent of $225/hour on contract. $225/hour is the equivalent of $468k/year (225 x 2080 = 468,000).

Also, most contracting agencies will pay you as a W2 employee, not 1099. Too many headaches for the contracting agency to have you as a 1099 contractor. So the agency cut is not being taken from your pay, the actual company pays that separately. If they quoted him at $90/hour, then he gets that full $90/hour minus normal payroll taxes.
bwalling is correct. An independent consultant would earn $225/hour if the salary for the same position was $225k/year. I've been contracting for over a decade and every contract is like that (salary/1000 = hourly rate). Anything much below that it's someone low balling you. I get that the "math" doesn't work out, but it's not about math. It's about the risk you take on being an independent consultant. Just like investments, risk must be compensated, and in my experience, it always is.

That said I agree with you that if you need to go through a body shop to get into a gig then it's going to be less than that. Where I live they normally take about 20% for themselves (which usually means 30-ish percent off your rate since they pay some of your taxes, etc). As such if I was the OP and being placed via W2 in that position, I'd be looking for $150/hr in that position. I fully agree with bwalling here. $90/hr is a slap in the face, imo.
oilrig
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Re: Would you take this tech contractor position?

Post by oilrig »

vitaflo wrote: Mon Jan 11, 2021 7:49 pm
oilrig wrote: Mon Jan 11, 2021 4:19 pm
bwalling wrote: Mon Jan 11, 2021 4:09 pm
oilrig wrote: Mon Jan 11, 2021 2:58 pm
bwalling wrote: Mon Jan 11, 2021 1:00 pm $90/hour is insanely low for a role that pays that salary.

$225k/year is around $225/hour on contract. Agency is going to take a 35% cut. You should see $146.25/hour for that contract. 1099 doesn't come with benefits, severance, or any guarantee of work. There's a price for that.
Im not sure your math is correct here. The easiest way to calculate annual salary equivalent is to multiply the hourly rate by 2080(these are the typical amount of hours worked per year) . For example someone making $50/hour will make $104,000 a year, $108/hour is $225k/year.

Remember you typically wont have benefits, retirement, paid time off, etc. I would add an additional 25% to your ask to compensate for the lack of benefits, but be sure and ask the contracting agency if they offer benefits or 401k match. Some do, most dont. But in my case, if Im used to making $100k/year, then I would ask for $125k/year(about $60/hour).

Hope this helps!
It's not math - it's what is normally seen. There's a significant value to benefits and regular income. To put someone on hourly contract necessarily drives up the rate. You should see double the hourly rate equivalent of the salary, if not higher.

I won't work for less.
Yea, I get that. Im just saying your math isnt correct on the $225k/year being the equivalent of $225/hour on contract. $225/hour is the equivalent of $468k/year (225 x 2080 = 468,000).

Also, most contracting agencies will pay you as a W2 employee, not 1099. Too many headaches for the contracting agency to have you as a 1099 contractor. So the agency cut is not being taken from your pay, the actual company pays that separately. If they quoted him at $90/hour, then he gets that full $90/hour minus normal payroll taxes.
bwalling is correct. An independent consultant would earn $225/hour if the salary for the same position was $225k/year. I've been contracting for over a decade and every contract is like that (salary/1000 = hourly rate). Anything much below that it's someone low balling you. I get that the "math" doesn't work out, but it's not about math. It's about the risk you take on being an independent consultant. Just like investments, risk must be compensated, and in my experience, it always is.

That said I agree with you that if you need to go through a body shop to get into a gig then it's going to be less than that. Where I live they normally take about 20% for themselves (which usually means 30-ish percent off your rate since they pay some of your taxes, etc). As such if I was the OP and being placed via W2 in that position, I'd be looking for $150/hr in that position. I fully agree with bwalling here. $90/hr is a slap in the face, imo.
With all due respect, this is incorrect. In your scenario of salary/1000 you are basically saying you work 1000 hours in a year and that is not correct. Ive worked in HR for 10 years and at every single company Ive worked for, salary/2080 is how we did it. I just did a simple google search to verify my info is correct, see below.

"To figure out how many hours are in a "work year," multiply the number of work hours in a week by the number of weeks in a year. In other words, multiply a typical 40 hour work week by 52 weeks. That makes 2,080 hours in a typical work year."

"To determine your hourly wage, divide your annual salary by 2,080. If you make $75,000 a year, your hourly wage is $75,000/2080, or $36.06."
RyeBourbon
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Re: Would you take this tech contractor position?

Post by RyeBourbon »

oilrig wrote: Mon Jan 11, 2021 8:24 pm
vitaflo wrote: Mon Jan 11, 2021 7:49 pm
oilrig wrote: Mon Jan 11, 2021 4:19 pm
bwalling wrote: Mon Jan 11, 2021 4:09 pm
oilrig wrote: Mon Jan 11, 2021 2:58 pm

Im not sure your math is correct here. The easiest way to calculate annual salary equivalent is to multiply the hourly rate by 2080(these are the typical amount of hours worked per year) . For example someone making $50/hour will make $104,000 a year, $108/hour is $225k/year.

Remember you typically wont have benefits, retirement, paid time off, etc. I would add an additional 25% to your ask to compensate for the lack of benefits, but be sure and ask the contracting agency if they offer benefits or 401k match. Some do, most dont. But in my case, if Im used to making $100k/year, then I would ask for $125k/year(about $60/hour).

Hope this helps!
It's not math - it's what is normally seen. There's a significant value to benefits and regular income. To put someone on hourly contract necessarily drives up the rate. You should see double the hourly rate equivalent of the salary, if not higher.

I won't work for less.
Yea, I get that. Im just saying your math isnt correct on the $225k/year being the equivalent of $225/hour on contract. $225/hour is the equivalent of $468k/year (225 x 2080 = 468,000).

Also, most contracting agencies will pay you as a W2 employee, not 1099. Too many headaches for the contracting agency to have you as a 1099 contractor. So the agency cut is not being taken from your pay, the actual company pays that separately. If they quoted him at $90/hour, then he gets that full $90/hour minus normal payroll taxes.
bwalling is correct. An independent consultant would earn $225/hour if the salary for the same position was $225k/year. I've been contracting for over a decade and every contract is like that (salary/1000 = hourly rate). Anything much below that it's someone low balling you. I get that the "math" doesn't work out, but it's not about math. It's about the risk you take on being an independent consultant. Just like investments, risk must be compensated, and in my experience, it always is.

That said I agree with you that if you need to go through a body shop to get into a gig then it's going to be less than that. Where I live they normally take about 20% for themselves (which usually means 30-ish percent off your rate since they pay some of your taxes, etc). As such if I was the OP and being placed via W2 in that position, I'd be looking for $150/hr in that position. I fully agree with bwalling here. $90/hr is a slap in the face, imo.
With all due respect, this is incorrect. In your scenario of salary/1000 you are basically saying you work 1000 hours in a year and that is not correct. Ive worked in HR for 10 years and at every single company Ive worked for, salary/2080 is how we did it. I just did a simple google search to verify my info is correct, see below.

"To figure out how many hours are in a "work year," multiply the number of work hours in a week by the number of weeks in a year. In other words, multiply a typical 40 hour work week by 52 weeks. That makes 2,080 hours in a typical work year."

"To determine your hourly wage, divide your annual salary by 2,080. If you make $75,000 a year, your hourly wage is $75,000/2080, or $36.06."
No, I consulted in IT for many years and that is the rule of thumb. Divide the salary by 1000 to get approximate hourly rate. You are forgetting that a salaried person gets vacation, benefits, job security, etc. A consultant also has to pay twice the FICA and medicare tax.

If the salaried position would be $180K, then a consultant would charge about $180/hr.
oilrig
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Re: Would you take this tech contractor position?

Post by oilrig »

RyeBourbon wrote: Mon Jan 11, 2021 10:08 pm
oilrig wrote: Mon Jan 11, 2021 8:24 pm
vitaflo wrote: Mon Jan 11, 2021 7:49 pm
oilrig wrote: Mon Jan 11, 2021 4:19 pm
bwalling wrote: Mon Jan 11, 2021 4:09 pm

It's not math - it's what is normally seen. There's a significant value to benefits and regular income. To put someone on hourly contract necessarily drives up the rate. You should see double the hourly rate equivalent of the salary, if not higher.

I won't work for less.
Yea, I get that. Im just saying your math isnt correct on the $225k/year being the equivalent of $225/hour on contract. $225/hour is the equivalent of $468k/year (225 x 2080 = 468,000).

Also, most contracting agencies will pay you as a W2 employee, not 1099. Too many headaches for the contracting agency to have you as a 1099 contractor. So the agency cut is not being taken from your pay, the actual company pays that separately. If they quoted him at $90/hour, then he gets that full $90/hour minus normal payroll taxes.
bwalling is correct. An independent consultant would earn $225/hour if the salary for the same position was $225k/year. I've been contracting for over a decade and every contract is like that (salary/1000 = hourly rate). Anything much below that it's someone low balling you. I get that the "math" doesn't work out, but it's not about math. It's about the risk you take on being an independent consultant. Just like investments, risk must be compensated, and in my experience, it always is.

That said I agree with you that if you need to go through a body shop to get into a gig then it's going to be less than that. Where I live they normally take about 20% for themselves (which usually means 30-ish percent off your rate since they pay some of your taxes, etc). As such if I was the OP and being placed via W2 in that position, I'd be looking for $150/hr in that position. I fully agree with bwalling here. $90/hr is a slap in the face, imo.
With all due respect, this is incorrect. In your scenario of salary/1000 you are basically saying you work 1000 hours in a year and that is not correct. Ive worked in HR for 10 years and at every single company Ive worked for, salary/2080 is how we did it. I just did a simple google search to verify my info is correct, see below.

"To figure out how many hours are in a "work year," multiply the number of work hours in a week by the number of weeks in a year. In other words, multiply a typical 40 hour work week by 52 weeks. That makes 2,080 hours in a typical work year."

"To determine your hourly wage, divide your annual salary by 2,080. If you make $75,000 a year, your hourly wage is $75,000/2080, or $36.06."
No, I consulted in IT for many years and that is the rule of thumb. Divide the salary by 1000 to get approximate hourly rate. You are forgetting that a salaried person gets vacation, benefits, job security, etc. A consultant also has to pay twice the FICA and medicare tax.

If the salaried position would be $180K, then a consultant would charge about $180/hr.
I see what you’re saying. But in the OP’s case he would be a W2 employee with the contracting agency, therefore he would not have to pay twice the FICA or Medicare tax. Normal payroll taxes would be taken out of his paycheck. He would be considered a contractor not a consultant.

I think we are arguing two different things here. If the OP were to make $180k/hour are you saying he would make $180k/year, assuming he works normal 40 hour work weeks for the entire year? Because that’s definitely not the case. If that were the case then he would only work 1000 hours per year, and that’s basically half the year for normal working hours.
Marseille07
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Re: Would you take this tech contractor position?

Post by Marseille07 »

$90 isn't bad at all in my opinion. Just take it, then continue the FTE quest and if you get it then just switch. My workplace had a contractor and he left after one month because he did just that. No one was mad or anything, understood why he did what he did.
aarondearu
Posts: 179
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Re: Would you take this tech contractor position?

Post by aarondearu »

I would argue that someone making $300k isn't working 40 hour weeks or taking alot of vacation.

60hr/week * $90/hr * 48 weeks/year (4 weeks off) = $259,200
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vitaflo
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Re: Would you take this tech contractor position?

Post by vitaflo »

oilrig wrote: Tue Jan 12, 2021 12:34 am I see what you’re saying. But in the OP’s case he would be a W2 employee with the contracting agency, therefore he would not have to pay twice the FICA or Medicare tax. Normal payroll taxes would be taken out of his paycheck. He would be considered a contractor not a consultant.

I think we are arguing two different things here. If the OP were to make $180k/hour are you saying he would make $180k/year, assuming he works normal 40 hour work weeks for the entire year? Because that’s definitely not the case. If that were the case then he would only work 1000 hours per year, and that’s basically half the year for normal working hours.
No we are saying he'd make $180/hour and make $360k/year (assuming it's a full time gig). I think this is the part you don't understand. Contractors always get paid more for equivalent time worked for the reasons listed above from other posters. As for the W2 part of this, we take that all that into account with the 30-ish % cut the contracting agency takes off the top. Take the going rate as an indie (typical salary/1000), cut off 30% and that's about the going rate for a contractor placed via an agency with a W2.

The W2 in this case doesn't matter, it's just legal BS so companies can get around the whole "they're not really an employee" thing that Microsoft got sued for years ago. End of day you're still just a contractor that you end up having to pay a middleman to skim off the top of your rate to get the gig. But the overall going rate doesn't change. The company still pays it in the end whether you're an indie or coming in via a contracting agency. I wouldn't confuse this with "hours worked" or whatever for real employees. That's not how the math works. Contractors are always paid more "per hour worked" than employees (salary). This is partly from loss of benefits and partly because of risk taken by the contractor. If that wasn't the case there would be zero reason to take the risk of being a contractor ever.
dowse
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Re: Would you take this tech contractor position?

Post by dowse »

I hadn't heard of the salary/1000 rule of thumb before, but it does seem to fit. A little over 2 years ago, my old company, desperate for someone with skills that I have, reached out to pull me out of retirement for a part-time contracting role (W2 through a 3rd party firm). Their first offer was laughable. My last salary converted to an hourly rate plus a 10% bump. I came back with a non-negotiable demand of about 2.5x my old salary. They accepted that. That rate turns out to be close to my old salary plus 10% divided by 1000. It ended up working out well for both sides. They got into a new market much quicker than they otherwise would have. I got a nice hunk of change. Work has now dwindled quite a lot, which I am fine with. I had a thread on this for those interested: viewtopic.php?f=2&t=260649.
humblecoder
Posts: 293
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Re: Would you take this tech contractor position?

Post by humblecoder »

oilrig wrote: Mon Jan 11, 2021 2:58 pm The easiest way to calculate annual salary equivalent is to multiply the hourly rate by 2080(these are the typical amount of hours worked per year) . For example someone making $50/hour will make $104,000 a year, $108/hour is $225k/year.

Remember you typically wont have benefits, retirement, paid time off, etc. I would add an additional 25% to your ask to compensate for the lack of benefits, but be sure and ask the contracting agency if they offer benefits or 401k match. Some do, most dont. But in my case, if Im used to making $100k/year, then I would ask for $125k/year(about $60/hour).

Hope this helps!
Dumb question. Using 2080 assumes 40 hrs/week for 52 weeks. Most consultants (at least the ones at my company) don't get paid for time off, holidays, etc. So wouldn't it make more sense to use a smaller number to account for that? Maybe something like 1920 (10 days holidays + 10 days vacation/sick days)?

Or are you assuming overtime such that the person will reach the 2080 hour/year level?
oilrig
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Re: Would you take this tech contractor position?

Post by oilrig »

vitaflo wrote: Tue Jan 12, 2021 2:48 pm
oilrig wrote: Tue Jan 12, 2021 12:34 am I see what you’re saying. But in the OP’s case he would be a W2 employee with the contracting agency, therefore he would not have to pay twice the FICA or Medicare tax. Normal payroll taxes would be taken out of his paycheck. He would be considered a contractor not a consultant.

I think we are arguing two different things here. If the OP were to make $180k/hour are you saying he would make $180k/year, assuming he works normal 40 hour work weeks for the entire year? Because that’s definitely not the case. If that were the case then he would only work 1000 hours per year, and that’s basically half the year for normal working hours.
No we are saying he'd make $180/hour and make $360k/year (assuming it's a full time gig). I think this is the part you don't understand. Contractors always get paid more for equivalent time worked for the reasons listed above from other posters. As for the W2 part of this, we take that all that into account with the 30-ish % cut the contracting agency takes off the top. Take the going rate as an indie (typical salary/1000), cut off 30% and that's about the going rate for a contractor placed via an agency with a W2.
I agree with you on your first sentence (hourly rate x 2080), however in your earlier post you said $225/hour would be the equivalent to $225k/year, which it isnt. Thats what Ive been saying all along but you and a few others have said that its salary/1000, not 2080. Yes, I agree that contractors get paid more because of the assumed risks.

By the way, the contracting agency doesnt typically take 30% off the top. How it works is the client tells the contracting agency they have a bill rate of lets say $150/hour for a contractor, the contracting agency then decides to pay you $100/hour, so the agency keeps the additional $50/hour while you work. That is what they make off you, they dont take any additional money from that $100/hour they pay you.
Or the client says they want to hire someone making $100/hour, and they will pay a 40-50% markup to the contracting agency. Again in this case, the agency doesnt take an additional 30% off the $100/hour they pay you, the markup is paid for by the client, not the contractor.

I think your situation is different than the OP's where you work as a consultant and typically get a 1099 for your services rendered? The OP will get a W2 at the end of the year for the type of employment he is talking about. Ive worked for several staffing agencies and now work in corporate talent acquisition, my above examples are how its done every single time.
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vitaflo
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Re: Would you take this tech contractor position?

Post by vitaflo »

oilrig wrote: Wed Jan 13, 2021 9:49 am
vitaflo wrote: Tue Jan 12, 2021 2:48 pm
oilrig wrote: Tue Jan 12, 2021 12:34 am I see what you’re saying. But in the OP’s case he would be a W2 employee with the contracting agency, therefore he would not have to pay twice the FICA or Medicare tax. Normal payroll taxes would be taken out of his paycheck. He would be considered a contractor not a consultant.

I think we are arguing two different things here. If the OP were to make $180k/hour are you saying he would make $180k/year, assuming he works normal 40 hour work weeks for the entire year? Because that’s definitely not the case. If that were the case then he would only work 1000 hours per year, and that’s basically half the year for normal working hours.
No we are saying he'd make $180/hour and make $360k/year (assuming it's a full time gig). I think this is the part you don't understand. Contractors always get paid more for equivalent time worked for the reasons listed above from other posters. As for the W2 part of this, we take that all that into account with the 30-ish % cut the contracting agency takes off the top. Take the going rate as an indie (typical salary/1000), cut off 30% and that's about the going rate for a contractor placed via an agency with a W2.
I agree with you on your first sentence (hourly rate x 2080), however in your earlier post you said $225/hour would be the equivalent to $225k/year, which it isnt. Thats what Ive been saying all along but you and a few others have said that its salary/1000, not 2080. Yes, I agree that contractors get paid more because of the assumed risks.

By the way, the contracting agency doesnt typically take 30% off the top. How it works is the client tells the contracting agency they have a bill rate of lets say $150/hour for a contractor, the contracting agency then decides to pay you $100/hour, so the agency keeps the additional $50/hour while you work. That is what they make off you, they dont take any additional money from that $100/hour they pay you.
Or the client says they want to hire someone making $100/hour, and they will pay a 40-50% markup to the contracting agency. Again in this case, the agency doesnt take an additional 30% off the $100/hour they pay you, the markup is paid for by the client, not the contractor.

I think your situation is different than the OP's where you work as a consultant and typically get a 1099 for your services rendered? The OP will get a W2 at the end of the year for the type of employment he is talking about. Ive worked for several staffing agencies and now work in corporate talent acquisition, my above examples are how its done every single time.
I work both, 1099 and W2. Depends on the client req. I've had dozens of clients with various contracts for well over a decade. I've been down this road many times dealing with many clients from small start ups to Fortune 50 companies. Everything I wrote is how it works. In fact you actually agree with me in some areas, you're just not seeing it for some reason. I think the problem is you're not seeing it from the contractor perspective and forgetting that money is fungible. In any case it doesn't really matter.
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