Doing consulting/contract work is very common in IT consulting allows for a wide range of technical exposure, a change of pace and perspective. Finding themselves in between jobs, many would consider this route; however IT candidates are often puzzled about how much they should be making as a contractor. Those who are used to thinking about their pay as a part of an annual compensation package, where dollars come with PTO (paid time off) benefits, get especially confused, when their recruiter brings up a pay rate for a contract assignment.
How can I determine what is fair?
The first one is pretty straightforward. Take a look at your last compensation package and translate your annual salary into an hourly rate. Special attention for corporate slaves (a.k.a. those who put in 45+ hours a week): don’t forget to calculate properly because as a contractor you would actually get paid for every hour. Now translate your PTO into dollars and re-calculate. The next step would be to compare your former healthcare costs with what your recruiting agency has to offer and calculate the difference into your rate.
This exercise brings you to your minimum pay rate and now you can go up depending on a risk factor. For example you may be willing to accept your minimum pay rate for an attractive “contract-for-hire” assignment that offers a future with a nice organization. However if you are discussing an assignment of 6 months or less, there is nothing wrong with increasing your pay rate requirements to accommodate for the shorter duration and therefore higher risk. Keep in mind that open-ended contracts often last a few years (and result in conversions) if your responsibilities are on-going as opposed to project-based. Don’t rely solely on your recruiter. Carefully assess your potential role, ask questions and make sure that it actually makes sense – why someone like you would be needed in a described capacity within a proposed time-frame.
It is very important to get your numbers as precise as possible and figure out what would be acceptable very early in the game. Many people waste their time talking with employers who aren’t prepared to meet their pay requirements to begin with.
How should I go about negotiating my pay rate?
Good news is your recruiter is your agent – therefore there is no need to feel uncomfortable or try to play a saint to whom money isn’t all that important. Being upfront from the start sets forward an honest productive relationship between both parties and, as a business partner, your recruiter will appreciate it.
When is a good time to bring it up? Right after the recruiter presents you with an opportunity asking you if you would like to be submitted to his/her client. Get all the details about the recruiting agency; don’t assume that all agencies function in the same way:
- Find out if they offer 1099 or W2 options, and when you discuss your pay rate make sure you are on the same page (1099 contractors can usually expect a higher pay rate but there are pros and cons to both options – you can discuss this with your recruiter).
- Find out about their healthcare options/out-of-pocket costs.
- Learn as much as possible about their client and the actual opportunity (role, responsibilities and potential for conversion).
Once you have all the information you can compare this opportunity to others on the table and decide what would make sense in terms of your pay rate… but don’t rush to tell your recruiter what you would be happy with. Try not to give away your minimum number: keep in mind that the recruiting agency’s profit is the difference between your pay rate and their bill rate. Knowing your bottom line may enable your recruiter to use it towards maximizing their profit. On the other hand because the bill rate is always the “unknown” you must be careful to not out-price yourself by asking for too much.
The best approach is to refrain from throwing out numbers first; instead you should ask them for a pay range on the position in question. Once they disclose the range, it is good to act disappointed and say that to consider this opportunity, you would have to be at the top of that range. Pushing for the higher end of their range is safe – without your demand they wouldn’t give you this pay rate; while being at the lower end of their range most likely means leaving money on the table – for yourself. WARNING: If the role requires a stronger skill level than you bring to the table, being a “cheaper option” might get you in the door allowing for a priceless opportunity to learn! Therefore always assess the situation and negotiate with all factors in mind.
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