Consultant Rates
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Chris Meech wrote:
The percentage could be as low as 30 to 40% to as high as 80 to 90%. It will all depend upon the circumstances of your employment agreement with the company that has contracted you out.
Well, we're just getting started--there is no agreement. I'm W2 and currently seeing 42% of my billable, which I'm unhappy with (obviously). I just wanted to see--since we're negotiation still--what other people would expect in this position.
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
What is the root of your unhappiness? the percentage? or your take home? Would you be happier if the take home was less, but the percentage was higher?
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Chris Meech wrote:
The percentage could be as low as 30 to 40% to as high as 80 to 90%. It will all depend upon the circumstances of your employment agreement with the company that has contracted you out.
Well, we're just getting started--there is no agreement. I'm W2 and currently seeing 42% of my billable, which I'm unhappy with (obviously). I just wanted to see--since we're negotiation still--what other people would expect in this position.
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
I'd would look into establishing a bonus payable every quarter or six months based upon your billable hours. I get about 55% and receive an annual bonus that has been as small as about 5% to as much as 25%.
Chris Meech I am Canadian. [heard in a local bar] Nobody likes jerks. [espeir] The zen of the soapbox is hard to attain...[Jörgen Sigvardsson] I wish I could remember what it was like to only have a short term memory.[David Kentley]
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I have a question: if I'm being contracted out to another company, what percentage of my billable rate should I be getting paid?
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
My bro-in-law is on W2. He gets 75% of his billable rate I believe - but he also has a minimum annual salary. So if he works 0 hours he gets that minimum pay (hasn't happened yet). The whole thing about an hourly rate is that it encourages him to work more hours a week - so you might see a 50 hour week or even a 60 hour week :-)
Regards, Nish
Nish’s thoughts on MFC, C++/CLI and .NET (my blog)
Currently working on C++/CLI in Action for Manning Publications. Also visit the Ultimate Toolbox blog -
I have a question: if I'm being contracted out to another company, what percentage of my billable rate should I be getting paid?
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
I get 65% of the contracting rate, which still comes out to more than I make per-hour at my full time job.
Tech, life, family, faith: Give me a visit. I'm currently blogging about: For Christians: The Significance of Yom Teruah The apostle Paul, modernly speaking: Epistles of Paul Judah Himango
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Chris Meech wrote:
The percentage could be as low as 30 to 40% to as high as 80 to 90%. It will all depend upon the circumstances of your employment agreement with the company that has contracted you out.
Well, we're just getting started--there is no agreement. I'm W2 and currently seeing 42% of my billable, which I'm unhappy with (obviously). I just wanted to see--since we're negotiation still--what other people would expect in this position.
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
It depends on your situation - if you are under a group who are providing overhead, resources, contact with other consultants, steady work, any real return etc that would be reasonable. If it's just parasitic recruiters-types trying to make a buck off of you - you are right to be upset and I wouldn't give them more than 10% on a short term. Remember you can always cut them loose and try to renogotiate directly. It's sometimes frowned upon, but if they are parasites you have a better hand for such action. (Unless you signed a contract saying you can't).
A cynic is a man who, when he smells flowers, looks around for a coffin.
-H.L. Mencken -
My bro-in-law is on W2. He gets 75% of his billable rate I believe - but he also has a minimum annual salary. So if he works 0 hours he gets that minimum pay (hasn't happened yet). The whole thing about an hourly rate is that it encourages him to work more hours a week - so you might see a 50 hour week or even a 60 hour week :-)
Regards, Nish
Nish’s thoughts on MFC, C++/CLI and .NET (my blog)
Currently working on C++/CLI in Action for Manning Publications. Also visit the Ultimate Toolbox blogI'm astonished every time I hear about customers who believe that they get more value from a consultant (software developer) who works 60 hours than from one who works 50 hours. I'd say that those last 10 hours are nothing but bad, bad, bad, bad to the quantity and quality of the deliverables. And did I say it was bad?
-- The Blog: Bits and Pieces
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Red Stateler wrote:
W2 or 1099?
W2 I guess; there's a big difference I'm guessing?
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
Actually, your original question was clear enough. Consulting is always W2. 1099 is independent Contractor. The short answer (and I am sure this changes from region to region): Turns out I was getting about 64% of what my consulting firm was charging. The long answer: W2: You work for someone who cuts you a check, withholds taxes, probably pays for health benefits, gives you paid vacation and paid holidays, etc. Consulting companies hire you out to 'their' customers. 1099: You submit an invoice to your client billing them for your time. They pay you the amount on the invoice. Done. You pay your own taxes (4 times a year), you pay for your own health care, if you take a day off you don't get paid for that day (including holidays!). Consulting companies charge their clients $x and you get $x-something. Contractors charge their clients $x and they get $x. The amount a consulting company charges their client is a closely guarded secret. Neither party wants YOU to know who is paying what. A lot of consulting companies are "head hunters", where they place you in their clients company on a temp-to-perm basis. If, after a break in period (typically 3-6 months), their client likes you, they will make you a permanent offer which should be a lot more than what your consulting firm is paying you but nowhere near what they are charging their client (your future employer, if you accept their offer). Head hunters charge a finders fee to your new employer, usually 6 months of your salary (I'm in the wrong business!). The other type of consulting company farms you out to their client for a short project (typically 3 - 9 months) and when that project is done, they find you some more work. If it takes them a while to find you some work, this is called "bench time" but you still get paid (after all, you are their full time employee). But bench time isn't free money, they can call you in and ask you to paint the office if they want to. If it takes them to long to find you another job and they get to that point of diminishing return, ADIOS! I am a 1099 Independent Contractor (Senior Software Engineer) and I got lucky. Real lucky. I "discovered" what my consulting firm was charging their client. When that client made me a full time offer (WAYYYYY less than what they were paying the consulting firm) I declined and negotiated a 1099 Contractor position at a wee bit less than what my consulting firm was charging them. They accepted. Why? It is a lot cheaper for them to pay me, say, $175,000.00 cash than it is to
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Chris Meech wrote:
The percentage could be as low as 30 to 40% to as high as 80 to 90%. It will all depend upon the circumstances of your employment agreement with the company that has contracted you out.
Well, we're just getting started--there is no agreement. I'm W2 and currently seeing 42% of my billable, which I'm unhappy with (obviously). I just wanted to see--since we're negotiation still--what other people would expect in this position.
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
42%! That sucks. They have the ratio backwards. And if you are temp to perm, don't forget they are also getting that huge finders fee. If you are not temp to perm, I don't see how they can expect you to work at 42% of what you are capable of on your own. Also, the guy/gal handling you is probably getting a comission. So the less he/she gets for you, the more they get for themselves... :mad:
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I'm astonished every time I hear about customers who believe that they get more value from a consultant (software developer) who works 60 hours than from one who works 50 hours. I'd say that those last 10 hours are nothing but bad, bad, bad, bad to the quantity and quality of the deliverables. And did I say it was bad?
-- The Blog: Bits and Pieces
I have to agree. I am pretty burnt out by the end of the week. My client understands that and won't let me bill for more than 40 hours a week. Of course I am still welcome to work more than 40 but I eat the difference. Occasionally, I do that and they appreciate the extra effort (of course). So what is the payoff? Happy client keeps renewing my contract! 4 years now on the same project as a 1099. Very rare in this industry.
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I have a question: if I'm being contracted out to another company, what percentage of my billable rate should I be getting paid?
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
Why does it matter how much the firm is charging? If you are happy with the money you are making then don't worry about it. Remember, they're the ones that do the marketing. They're the ones that find the contracts. They're the ones that negotiate the rates. They're the ones that do the monthly billing and collections and assume the risk that the client may not pay. If you want to earn more money than you currently make, then you need to do all those things and discover for yourself (1) what rate the market will bare and (2) how much more you need to bill to make doing all those things worth your while. That's how our economy works. Whatever salary or rate you are currently making is at precisely the amount you decided was good for you. You had the opportunity to negotiate when you interviewed and based on the market as you saw it, you negotiated for a fair rate. I've contracted for over 10 years and have worked in both W2 and 1099 positions. The trick to earning the rate you want is having the confidence in your skills and the reputation you bring to the table. But you need to be willing to sit on the sidelines for a while if you want to negotiate for the highest rates. The moral is: Negotiate for the rate you think is fair for the service you are providing and be happy knowing you're making the money you want.
Matt Janofsky
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I have a question: if I'm being contracted out to another company, what percentage of my billable rate should I be getting paid?
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
Its going to vary from state to state and corp to corp. MS pays the agency about 65% more then the contractor is getting. At one point in time, here in the state of washington, we tried to get a bill passed that forced agencies to reveal there rates. It was squashed by the Washington Software Alliance. The organization is made up of consulting firms and companies with large IT departments. It was pathetic. In the state of Washington it is also fairly dificult to go 1099. It is a matter of trust. The more we as profesionals talk about the rates and the rediculousness of what agencies make, maybe we can get more of the percentage and force the butt heads to actually earn the rates. I know one guy, he is a bonified load and perf tester, that demands 75% of the total bilible rate. He can do that becuase there aren't that many folks that can do what he does.
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I have a question: if I'm being contracted out to another company, what percentage of my billable rate should I be getting paid?
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
As an independent contractor (actually working for my own company, but same as 1099), I have recevied between 50 and 67% in my market and as a full-time W2 employee between 25 and 30%. That's a pretty good example of the difference.
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I have a question: if I'm being contracted out to another company, what percentage of my billable rate should I be getting paid?
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
10% if you found the work and they are just doing the billing. 30-50% if they found the work. David (dshaw@kontentsu.com)
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It depends on your situation - if you are under a group who are providing overhead, resources, contact with other consultants, steady work, any real return etc that would be reasonable. If it's just parasitic recruiters-types trying to make a buck off of you - you are right to be upset and I wouldn't give them more than 10% on a short term. Remember you can always cut them loose and try to renogotiate directly. It's sometimes frowned upon, but if they are parasites you have a better hand for such action. (Unless you signed a contract saying you can't).
A cynic is a man who, when he smells flowers, looks around for a coffin.
-H.L. MenckenI've played this game before... The consulting firm will always try to get as much as they can and give you anywhere from 40% to 70% of the pie. The trick is to know what you are worth in the market and then: Nail the interview and create NEED at the client for your talents. Don't let the firm lock you into a rate of say $30 or $40 an hour when you know they are going to get $60 to $100 for you (remember, do your research.) Let them know that you are willing to take say 25% to 35% less but that's it and stand on it. Remember, they need you and you can usually up your rate somewhat with them, however, most firms have guidelines that specify that the recruiter can only cut it to say 60% or 70% and that's it. Also, depending on the needs and saturation of the market some firms may just as soon say ADIOS and find someone else as go through taking a reduction in their cut. However, if you know that you are meeting a unique and rare need you can negotiate from strength and maximize your take of the pie. Do your research on both the client and the firm, know what the firm is generally getting and the client is paying but don't throw it in their face, be subtle about it when negotiating but set a bottom rate that you will not come off of. If their not willing to meet your expectations, find another firm. Remember this fact: Consulting firms do not exist without consultants. If you decide to go the 1099 route keep ALL of your expenses and file your TAXES! Don't miss quaterly filings. The penalties can really add up if you don't have enough money to pay so, pay the IRS, STATE and whatever else you have to WHEN YOU HAVE TO. Regards,
Regards, John McPherson "Sufficiently advanced technology is indistinguishable from magic." Arthur C. Clark, inventor of the telecommunications satellite
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I have a question: if I'm being contracted out to another company, what percentage of my billable rate should I be getting paid?
-- "stop thoughting; start thinking, and quit trying to predict unpredictable thinking" - dMoney (2005)
Around 2002 I was doing a programme manager role for consulting engagements as an employee of a big 5 consultancy. I got about $140,000 per year. The company was charging me out at $7,000 per day (approx. $1,520,000 per year). That works out as less than 10%. Needless to say I rapidly moved from employed to contracting after I worked that one out.
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Actually, your original question was clear enough. Consulting is always W2. 1099 is independent Contractor. The short answer (and I am sure this changes from region to region): Turns out I was getting about 64% of what my consulting firm was charging. The long answer: W2: You work for someone who cuts you a check, withholds taxes, probably pays for health benefits, gives you paid vacation and paid holidays, etc. Consulting companies hire you out to 'their' customers. 1099: You submit an invoice to your client billing them for your time. They pay you the amount on the invoice. Done. You pay your own taxes (4 times a year), you pay for your own health care, if you take a day off you don't get paid for that day (including holidays!). Consulting companies charge their clients $x and you get $x-something. Contractors charge their clients $x and they get $x. The amount a consulting company charges their client is a closely guarded secret. Neither party wants YOU to know who is paying what. A lot of consulting companies are "head hunters", where they place you in their clients company on a temp-to-perm basis. If, after a break in period (typically 3-6 months), their client likes you, they will make you a permanent offer which should be a lot more than what your consulting firm is paying you but nowhere near what they are charging their client (your future employer, if you accept their offer). Head hunters charge a finders fee to your new employer, usually 6 months of your salary (I'm in the wrong business!). The other type of consulting company farms you out to their client for a short project (typically 3 - 9 months) and when that project is done, they find you some more work. If it takes them a while to find you some work, this is called "bench time" but you still get paid (after all, you are their full time employee). But bench time isn't free money, they can call you in and ask you to paint the office if they want to. If it takes them to long to find you another job and they get to that point of diminishing return, ADIOS! I am a 1099 Independent Contractor (Senior Software Engineer) and I got lucky. Real lucky. I "discovered" what my consulting firm was charging their client. When that client made me a full time offer (WAYYYYY less than what they were paying the consulting firm) I declined and negotiated a 1099 Contractor position at a wee bit less than what my consulting firm was charging them. They accepted. Why? It is a lot cheaper for them to pay me, say, $175,000.00 cash than it is to
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Thanks for posting all of this good info. I just graduated and I've asked a lot of questions about this subject but in depth answers like yours are hard to come by.
Stay Focused Dan
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42%! That sucks. They have the ratio backwards. And if you are temp to perm, don't forget they are also getting that huge finders fee. If you are not temp to perm, I don't see how they can expect you to work at 42% of what you are capable of on your own. Also, the guy/gal handling you is probably getting a comission. So the less he/she gets for you, the more they get for themselves... :mad:
Compared to computer repair 42% is great. My brother used to work for a computer repair shop and they paid him $8 - $12 an hour while charging the client $50 - $75 an hour. That's an outrageously low 16%. (Auto repair shops operate on a similar rate structure.) He's now doing freelance work for around $30 an hour. It's a win-win for him and the client. And, in retail or restaurant, 25% of gross profit is considered high. I'm not saying our industry is fair, but others are FAR WORSE!
Andrew C. Eisenberg Nashville, TN, USA (a.k.a. Music City USA) (Yes Virginia, there are rock and roll stations in Nashville! :laugh:)