Outsourcing

Negotiating with clients who use bait and switch

A newbie consultant is in a jam with a client negotiation. He agreed to a lower than desired hourly consulting fee because of the client's use of bait and switch. What would you do in this situation?

 I received the following email from a TechRepublic member:

Hi Chip

I have a question regarding IT consulting. I've never done any consulting so this might be a bone-headed question.

Background:

I was laid off last week, where I was the Network admin for a small company. I got a call from the owner asking me to come-back on as a consultant to take care of the IT needs of the office.

I was told to submit my rate ... after googling for a few hours I found a resource to help me calculate my fee .. it came out to $63/hour.

I emailed the client with my rate ... he told me that he has 10 hours a week for me and would I consider $50.

I agreed because it was more hours than I expected to get.

Yesterday we had a meeting to outline my duties and responsibilities and the 10 hours ... become 5 hours.

In your opinion do I have a case for reneging on the agreed $50/hour and asking for the original $63 because he changed the agreed upon hours?

How about a sliding scale of .. anything less than 10 hours $63, anything above $50?

I would greatly appreciate your opinion on this .. or even a resource that might give me an insight into this kind of situation.

The client employed a sales tactic known as bait and switch; this led the consultant to commit to a value proposition and then the client changed that proposition after he agreed to it. The lower rate of $50 was predicated on having 10 hours of work available per week, but after the consultant agreed to the rate, the number of hours dropped to five. Of course, none of this was in writing.

Our would-be consultant started the negotiations on the wrong foot by asking for the amount he thought he deserved. Most consultants undervalue themselves, but even if your number is spot-on, you want to ask for a higher amount so you can negotiate downwards. Furthermore, the $63 rate is telling; most consultants round their rate to the nearest $5 or $10. A number ending in 3 immediately evokes the question: Where did you come up with that figure? Why $63 instead of $65? If the prospect correctly guesses that the consultant employed a rate calculator of some sort, then he can use the consultant's uncertainty about rates against him and argue for a lesser amount. You need to present your asking rate confidently and that 3 communicates a lack of confidence.

But now that the consultant has dug himself into this hole, here are some options for how he can handle the situation:

Run. If the prospect deals that dishonestly when trying to sell you on the engagement, you'll never be able to trust him. If you stick around, expect excuses for late payment and incessant insinuations that you should work for free. Insist on your original rate. Clearly reiterate that you only accepted the $50 rate based on a volume of 10 hours a week. Now that it's no longer part of the bargain, neither is the lower rate. Offer to compromise. Remind the prospect why you accepted the lower rate, but offer to work with them if they can't keep their part of the verbal agreement. The consultant's "sliding scale" idea mentioned in his email might have some merit -- it keeps the incentive for more hours in play while accommodating slow periods. Or perhaps you could offer to meet in the middle -- offer $60, but be silently willing to take $55. Accept it. You're out of work, and it's income. Besides, they'll need your help a lot more than they realize. You'll be up to ten hours a week (maybe more) in no time. And since it's only a part-time gig, you'll be free to look around for better opportunities. (I don't like this option myself.)

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About

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...

127 comments
RedDawg
RedDawg

I NEVER negotiate. From the start I offer an hourly rate or a packaged number of hours at a reduced rate (with a time limit of usage Ex: 15 hrs = 2-3 weeks, 25 hours = 5 weeks, 40 hours = 8 weeks) My rates are carved in stone. I also offer home services at lower rates, and I rarely am without income. I put everything into un-earned income and draw it like a weekly pay check.

kgc
kgc

Be prepared to compromise, in your position a small even income is a godsend. Do not commit to a duration of contract; allow yourself a position where you can get out within a week if something better comes up. And then work yourself into a position where he depends on you and stick him for a rate rise. Two can play at that game.

logisticscanada
logisticscanada

Offer your basic services at $50/hr as the client has requested. But, offer your premium services, such as after-hours & emergency services at your original $63/hr. Also, ensure you are paid weekly, as Mr. Sleezy may wish to take further advantage of you.

Oz_Media
Oz_Media

In fact it's not even CLOSE to being bait and switch as bait and switch applies specifically to "retail advertising". Bob's Electronic's Emporium advertises a DVD player for $39.99, they have no working units in the store, just one damaged one, and cannot provide a unit a advertised, they are then seen as using the false ad to attract clients that are upsold to other, higher magin products. Even if they HAD a single working unit and mentioned 'while stocks last' in their advertisement, it is not deemed bait and switch. Bait and switch is simply a form of false advertisement, where the product and advertisement is geniune, however unavailable for a number of reasons. That aside: This is a result of an oral contract (not to be confused with verbal contract). Certainly the client has breached an "oral contract" and it is 100% up to the contractor to decide whether to fulfill the oral agreement or not and has no obligation to do so at a lower rate than discussed. If you want to work for the lower rate, go do so, if not move on. It's not exactly a headwrecker, a client tried to screw you for a lower rate? Welcome to the business world, sheeeesh! It happens on all levels from the most rudimentary deal, as described here, to milti-billion dollar trades. Buyers are liars, understand that and you'll be able to accept these TEENY little issues of conducting business. I go through much mroe cunnign than this on a daily bases, workign business to business I have to battle wits with buyers for some of North America's largest companies, they will use that weight to try and pull off all kind sof swidnels. In this case, I'd simply say "No, sorry. We agreed on a price based on a predetermined number of hours. If those hours change, so does the price." Chances are, in fact I'll almost promise you, that the client is just playing a game with you because he is more rehearsed in business and knows to push the envelope. He'll still use you, even at the higher price, because he can't really do better. Those with a stiff upper lip will say no way, and he'll most likely have no issue paying the higher rate. Those who get preyed on are those who would rather start an internet topic on the issue and question the motives of the client than stick to their guns and post about circumventing the price game. Oviously the client has taken the upper hand in this case and the tech is just scared to stick to his guns and hold his head high, resulting in lost revenue. Again such folks are just prey and easy pickins for someone used to conducting business for a living. I've seen it with young or untrained sales staff a thousand times where they feel the customer is geniune, has invited them to spend a weekend at the lake with him and, as soon as he gets his price, buh-bye C-ya, never to be heard of again. or When you get a customer negotiate a low price, then asks you to put it on your business card and he'll be back after picking up the wife. The rep writes down the figure and eagerly awaits the customer's return (he did PROMISE to come back afterall). In actuality the client went to the competitor with your hard work and low price, to which the competitor didn't blink an eye and just said, I'll give you another $50 off if you take it right now. SOLD or Where the client says that ABC company is going to do it for $50/hr and you need to meet their rates, so you just go along with what the client says and offer a lower price, which ABC company never offered him to begin with. Face it, buyers are liars. Trust NOBODY that you conduct business with, period. You can be kind and courteous, but as soon as the ball is in the client's court, as it is in the OP's situation, you may as well collect you toys and go home. You can make the client FEEL like he's got the upper hand, just never let him actually have it.

gary
gary

Clients like the one described in the blog are not uncommon but you have to ask yourself whether it is a good idea to work for someone who just terminated your "salaried" employment. That is a hard question to answer. You know the client. You can do the job. You definitely need the money. You always wanted to be your own boss. Still, the client's behavior poses a lot of annoying questions. It is hard to decide what to do. The answer is to stop trying to come to some emotional or overly complex conclusion. Just let the economics do the talking. You take your standard rate and double it. Then you insist on a 50% up front payment. Sure, you are over the market rate. Sure, the client is going to fall over from sticker shock. But, it works. The client is a bum and is not interested in productive business relationship. If he accepts, you will get an excellent fee for a unpleasant mission. If he refuses, then you avoided an unpleasant mission. You can't lose either way.

wayne
wayne

$50 for 5 hours gives you enough money to look for a better client and since you have no contract you can drop your old boss on his rear. $50 per hour is a low wage for IT Admin work if you ask me. $75 is the going "affordable rate" remember that you have to pay taxes and fill out a lot more paperwork as an independent consultant.

grace.ang
grace.ang

I would offer a higher price of maybe S$55-58 per hour, and I will be the one to determine the working hours eg, early morning, late afternoon. That way, I have something in hand for the time being and I have the luxury of offering my service to other companies. Put this client as a 2nd choice, ie, other clients who pay you much higher get preferential treatment eg, faster response rate. Hope this helps.

xtera
xtera

If a client is attempting to pass something like this from the start, what rate will they expect if the amount of work goes up to say 15hrs a week? My gut feeling is they'll try and lower the $50/hr rate. I would stick to the original rate you quoed them. Remmber, 5hrs is not all that much fo a week, and if this is not all in one day, and you need to travel back and forth, you'll soon find out that you're losing valuable time just in travel.

Sam01
Sam01

As an independent IT Consultant with over 20 years experience, I would suggest to take the current rate and use it to build your client base with. In this situation, your former boss holds all the cards, except one - and that one is your ability to find other work outside of the comitted 5 hours per week. Once you have gotten other clients on board, then you can renegotiate your current rate from a position of strength, or even walk away as you want your long term clients to be a bit more trustworthy than that. Also ... using rate calculators to determine your hourly rate is not helping you. Look at what the industry standard is and charge accordingly, because if your rate is too low, you are telling people your aren't that good.

allendillman
allendillman

Walk out the door. if he really needs you, he will call you back. It's an old salesman trick, the first person to speak loses the negotiation. Use his own game against him.

izzy_again
izzy_again

I know your concentrating on negotiating consultanting fee. But the same company that laid him off wants to hire him as a consultant and then chisels the rate down. Hmm, smells fishy! Sound like the company already knows they need him.

wsargent
wsargent

My understanding of your initial agreement is "$500 for 10 hours of work - as an option to be exercised within a one week period." Under the circumstances, I would treat an offer to work for less than 10 hours as a new agreement.

sfeatherston
sfeatherston

I would take his 50 if he agrees to prepay the 5 hours per week one year in advance. If he does not want to that is a clear indication that it probably won't even be 5 hours per week and at that point he should insist on his original price. Be careful about maybe having to make 5 trips a week instead of one 5 hour day as well and a trip charge might be in order.

MFB
MFB

Not really a problem Since I normally discount my rate based on the number of hours anyway it would be OK. The difference I see is that you didn't get the money up front. If I give a customer a rate based on 10 hrs/ month and he only need me for five I've already been paid for 10. True, I will have worked 5 hrs at a lower rate but I would then have 5 hrs pleasantly doing nothing that I'm getting paid for.

sheldon
sheldon

I have always subcontracted for large companies who did the negotiations. I started out on my own charging $15 - $20 less than other consultant in the area doing the same work. I took me a few bad situations to learn how things work. My clients who understand my value and the deal they are getting pay me within days of getting a bill. I get compliments on my work and am told they feell they got good value. The customers that bargin hard, don't give you all the information, refuse to sign an engagement letter are also the ones who tell me: you took too long on that task; the hardware (which I didn't sell them) was under warranty and I should charge to diagnose the problem; you were just here last week for something else and now we have another problem, you should charge for this. I don't like working in a tense environment with constant negotiation. I run and spend my time getting customers that work well with me. If you are new, you probably can't afford E&O insurance yet and these will also be the customers that sue you.

jkarch
jkarch

being laid off (or working part time), you'll need the reference and some cash. I wouldn't burn any bridges right now.

The Admiral
The Admiral

First of all, if he promised you 10 hours, or gave you the idea that you will get 10 hours a week, and he talked you down - the answer is no. Your time is worth the $63 per hour. The next breath he claims that you would only get 5 hours. Your rate should never drop in any kind of special situation, it should go up! If it were me and he brought me into the office and claimed that it would only be 5 hours per week or day - guess what? The rate has gone to $75 to $80 per hour instead of the $50. The more they whine - the higher it goes. Because I can see that they want me more than just 5 hours per week, and that they have a mess that will take longer to clean up than thought.

BobR
BobR

When a change is made that changes the original agreement (in this case the number of hours) everything stops. The original agreement is no longer in effect. A new agreement must be negotiated. Echoing some of the other posters, I would simply state that the $50 rate was for 10 hours a week, and if there is only 5 hours of work, the original quote of $63 would be the rate. The consultant is in a position of strength here, and does not need to cave in. However, there are a lot of factors other than rate when negotiating with a client. To me, the biggest is schedule. Do I have to jump and drive in every time they call? That trips all kinds of minimum billings and high rates. At the other end of the spectrum, can I do the work at my convenience, when I want, and where I want (such as my home office)? The project itself sometimes dictates the answer, but often the client has some discretion, and if they want to negotiate lower rates, then I get agreement to something in return. But bottom line, if the client changes something that is not acceptable to me, like I first said, everything stops, and I make a big deal out of the change to the original agreement that they are trying to make. Nothing moves forward until we have a new agreement in place (which may be the old agreement) and both parties are satisfied with it. A word of encouragement to this new consultant: Negotiation must be done with confidence, and confidence comes with experience. If you find consulting to your liking, keep at it! If you find yourself in a situation wishing you had charged a higher rate, it can be changed. Be professional about it and notify the client at least 30 to 60 days in advance that the rate will be increasing to x as of a certain date. But be aware that you are giving the client a choice, and they may decide not to continue your services.

Beoweolf
Beoweolf

well, you could look at it as "bait 'n switch" or you could look at it as round 2 of negotiations. As you mentionedm this former employee is inexperienced in working for himself instead of working for someone else. Although he didn't mention his location, I am assuming he is in the USA. Go back to the negotiation - but this time with amunition. Explain that it isn't worth your time to deal with anything less than 10 hr. of reserved time - unless he is willing to offer the money as a retainer. Then negotiate response time, travel time, mileage and round-up in 1/2 hour increments a minimum of 2 hours once you enter the primises. finally, suggest that it would be to his benefit to return to the previous agreement. Based on your prior expereince with the system, needs of the user you fully expect that amount of time will be needed. If you are lucky, he'll say no - and he, rather than you will end the contract. "it's not you, it me" - guys intuitively know its the best way to get out of bad relationship. You could also suggest that for $50/hr and only 5 hours a week, you could realistically offer phone support only instead of on-site - it would save him money in both travel time and mileage costs.

Al_nyc
Al_nyc

Was this really bait and switch? B&S implies deception on the part of the potential client. Maybe they thought the job would take 10 hours and after a discussion it was mutually agreed that the job could be done is 5 hours. In either case I think the rate should be re-negotiated because the initial rate was based on different information.

sauerbach
sauerbach

Get an advance before starting work

i.t
i.t

I run my own web design business, the way I do it is I calculate the lowest price and the highest price I can go for and then depending on the client quote on a sliding scale, generally I try to agree an estimated amount if its hourly, but anyhow if I've given a client a low price I stick to my guns, I know he/she won't find cheaper, if he does it will be his problem when what he gets sucks big time.

reisen55
reisen55

An idiot friend of ours who was an accountant - was the operative word - had a brilliant marketing rate. He told his clients to, god help me, "pay me what you think I am worth." No kidding.

bendow
bendow

have been there, have done that, since he has no obligation and respect for whatsoever, u do the same, give him the 5 hours, and when he needs more, and he definetely will-let him sign a purchase order for the extra hours for 100$ an hour, this way-he knows u have self respect and other customers. u need to use his tactics against him, letting him know that he left u no choice but to get other customers who pay $100 an hour for your services.

pravesh
pravesh

Say 'I am Sorry'. 'I was being nice when I said 63, the rate is really 85. I think IT folks undervalue themselves, myself included.

reisen55
reisen55

Your rate is very low to start with - you ex-employer is getting a bargain and since you were laid off, your appreciativeness for your skills is ironic indeed. If you need money - take it and smile a bit. If you have room to breathe - negotiate for your original rate and smile even more. If you were fired with no cause whatsoever and you have a Bangalore replacement - tell them to take their offer and put it where the sun don't shine. After I was outsourced out of a 7 year job in 2005, several high level executives called me back in for work at my rate and said, nicely, BOY DO WE NEED TO GET YOU BACK HERE. Oh joy, that was warm words for a bruised soul indeed and their checks were best revenge money in the game. Always remember your value. And since you are new at the consulting gig, seek advice from this board. It is a tough go if a full-time gig. I am in the second year and it has been damn hard, actually have a second part-time job that is money fill only. I hate it but there it is. When you get good clients, always remember they are your business and they are referrals for new business. Join networking groups and local associations as you can. SCORE - find them and schedule a free session. Find out what your two best marketable skill sets are and THAT is your niche.

angelo.quinlan
angelo.quinlan

Explain the rate normally goes up as number of hours goes down. Ask for your original rate but round it up to 65. If he guaranties 10 hours minimum then accept 50. With no guranties then 65 will have to rmain your rate. The make sure you get everything else sorted like payment terms and call out times all on paper before starting work. Getting it wrong at time of sale makes it difficult or impossible to change later on. Finally if the prospect does not like your fair approach walk away..he will resent you everytime he gets an invoice from you. At no time should you accept or give the idea that you are desperate as you are out of work...Doing so can bring more trouble and further unreasonable demands from the prospect.

technologytek
technologytek

It depends how the follow up went. If the employer said, sorry it looks like we can only do 5 hours a week and gave room to decide, then possibly negoitate. If the employer just dropped it on the consultant with no negotiation invovled, sounds like the employer is a scam artist. If thats the case, then that can be more trouble and problems then its worth. The consultant would be dealing with a predator.

NemesisTWarlock
NemesisTWarlock

The thing here is that the owner never valued him in the first place. He is being asked to work at the company that laid him off and the owner would have no small part to play in that decision. The owner believed IT was a low priority and that this guy was not worth the money. These tactics show that nothing has changed and that there is probably the feeling that the job could have been done in a fraction of the time for far less money. I think this is just a short step away from being asked to do more work for no more money as the guy will be expected to work as though he is a full-time employee. I've been in consulting for over 10 years and it is very rare for someone to be willing to pay more for someone that they used to employ full-time unless they realise they are unique. How much was this guy paid before and how close was he getting to the weekly wage with his quoted rate? The boss probably looked at the fact he would be paying far more per hour than the guy was 'worth' before.

hubblecat
hubblecat

Since this is the company that laid you off, the owner appears to be attempting to shift all administrative costs and taxes to you. Tell the owner now that he has changed the number of hours expected, you'll work for the $50.00 per hour, 5 hour minimum guaranteed, as long as you are on HIS payroll. This way, you're better protected financially as an employee than as a vendor. Plus you don't have the hassles of dealing with payroll taxes and estimated income taxes. If he balks, don't walk, RUN!!!!!

melekali
melekali

You'll never be able to trust a dishonest company like that. Set the ground rules by demanding $75 and accepting nothing less. If they don't bite, tell em you'll respectfully decline and look for something else. Do not insult them - they actually might respond to a respectful business disagreement and your willingness to walk away from their less than honorable offer, which really isn't much of an offer.

rdaniel
rdaniel

The client is betting on the fact the consultant is desperate for work and that they are in a buyers market. The consultant should be betting on the fact that the client needs his experience and knowledge to do the work. The consultant should explain the fact that he knows that he has been baited and swtiched yet may still be prepared to work on his old stuff. Fix the term of the rate immediately at 20 hours, at the original rate and do the twenty hours regardless of time frame. Then re-assess all of the above. inlcuding the real amount of the work and recalculating and re-negotiating the amount. Bill the client for all accurate time including the time the client wastes in meetings, discussions etc. Bill the client in tenths of an hour. Just like he probably already does for his accounting and legal consultants.

mrAverage
mrAverage

Tread carefully. Your unemployment & benefits may end. His negotiating tactics are suspicious. Surely he needs the help and should have kept you on with reduced hours or some arrangement to benift you and ease his transition (win-win). If possible pass on this position and use this chance to seek a position elsewhere. Good luck

Charles Bundy
Charles Bundy

Am I to understand that the same company that laid him off, called him up to work as a consultant? Then to further rub salt in the wound they changed an agreed upon dollar figure for work? While times are tough, I think it might be best to move on, but be polite in doing so. Are five hours worth the stigma of being treated like a beggar by this company? It's not so much a matter of trusting or not trusting them as it is a question of one's own morale and spending the five hours more productively (like finding better working partnerships.)

ToR24
ToR24

I would avoid this situation, because unless you're careful and have other clients in wait, it may impair or limit your availabilty for other work. It might be wiser to take the unemployment benefits if they're available to you. When working as a contractor, you need to consider costs associated with contracts, communications, benefits, resourcing and accounting which become significant overhead costs. When I performed this work, I typically factored in an overhead of around 40%. It's bad form to charge for contract negotiations, preparation, accounting and other little things that often consume weeks of work. Clients ask little questions which are difficult to charge back on, but will eat into your time. You need to contribute an additional half of Social Security and Medicare that your employer once paid. If you want to keep your COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) medical benefits for a while, you'll need to find a way to keep that funded. Then there's liability insurance if you're in a situation where you are responsible for the outcome if you can't contractually negotiate it out. I typically charged $125-$175/hour for myself and each sub, and paid out about 50% of the charge, depending on the scope, timeline and size of the project. I had to hire help with the receivables, accounting and taxes, because it would have otherwise consumed every available sleep hour. Everyone's time is/was valuable, and when they wanted me, with the money they pay, they had to know that someone would show up post haste to get the job done fast. The more you charge, the more the client expects. The less hours you are expected to get the job done, the more it should cost. Trust on both sides is vitally important, and everyone should feel confident that the compensated work is a fair exchange. 5 hours/week down from 10 hours/week may not balance out unless it's one day a week, or one day every two weeks, because travel/commute time and costs will eat all of it up at $50 or even $60/hour. Unless you're walking or cycling, you need to keep insurance and gas in that vehicle or pay for public transit. Then you should consider continuity, where you'll forget details in the downtime. Thankfully, I've given up that harried work for the relative stability of a salary.

jemorris
jemorris

Seriously though it would depend on my need. If my need was great I would remind the owner the deal was for anything over 10 hours or he pays the original price. Make the invoices "Due upon receipt" and be very prompt with them. I have done work for people like that and everytime I did I saw varying degrees of dishonesty in those type of deal breakers. One tried to get me to go to work for him as a regular employee in a new business startup. I didn't know the extent of his sneakyness and dishonesty until I started making some inquiries with some associates and heard some real horror stories to how he treated his employees in his other businesses. Needless to say I politely declined. I later learned that business failed miserably and he maligned the IT guy he had gotten to work for him so badly the guy had to move to a neighboring town to get work. On one hand this guy should know or have some idea how his former employer does business and keep his eyes open. Also if ever making a deal with a prospective client "get it" or "put it" in writing worked out in detail! Don't let current or prospective clients intimidate you, one can still be civil and non-confrontational when dealing with jerks (a.k.a - AH).

scott.mahoney
scott.mahoney

This is how I handled being a consultant/contractor. I would accept a lower pay rate for a certain amount of time or for a particular project. I would excel with that job/project and do better then my best. The company acknowleged this and would request me back for additional time or other project functions. This would allow me to negotiate a higher rate because my time would quickly became in demand. I did this for about two years. Within six months I was earning the most for the consulting firm. Finally, one company decided that they wanted my services all the time and hired me full time. I followed the same rule with them, started with a lower pay rate, became irreplaceable, asked for a very nice raise and got it (plus a promotion all within one year). No one starts at the top. You have to earn it. When I refer to doing better then my best. I would stay until problems were resolved, always ready to fix or help in anyway I could, 24/7 (drove my Wife nuts!.) Most important I never left anything unsolved or unanswered.

Sterling chip Camden
Sterling chip Camden

Keeping the emotions out of it can be very hard for a new consultant. You've got all kinds of questions about your worth and doubts about doing something stupid. Gary's advice here is spot on.

Sterling chip Camden
Sterling chip Camden

be careful not to get anchored to that first client. Shed no tears when you tell them goodbye, if you have other clients paying you double the rate and they aren't willing to come up.

Sterling chip Camden
Sterling chip Camden

Well said -- especially the part about non-rate terms. Many consultants do not like to negotiate -- that's why they went into a technical field instead of sales. When you become a consultant, though, you have to take on the sales hat, too.

Sterling chip Camden
Sterling chip Camden

It's a good idea to figure out the minimum you need to make on a job, but never ever use that as a quote for your client. Any unexpected bump in the road, you'll lose.

Sterling chip Camden
Sterling chip Camden

I wonder what his track record of payments looked like? Some decent clients probably paid him decently, but not handsomely. Everyone else probably went as low as their conscience would let them.

Sterling chip Camden
Sterling chip Camden

That the consultant still views the employer as an authority figure. He needs to shift that perception to that of a business equal.

Sterling chip Camden
Sterling chip Camden

I've been in consulting for over 10 years and it is very rare for someone to be willing to pay more for someone that they used to employ full-time unless they realise they are unique I've seen it many times -- when the company let someone go only to realize that they really did need them. Besides, for consultants they don't have to pay benefits, workers comp, or unemployment -- so they can easily afford a higher rate. But your questions are good about how does this compare to what he was paid before. If it isn't three times the employee rate, he's getting screwed.

Sterling chip Camden
Sterling chip Camden

The boss might even feel a bit insecure over a lowly former employee (one whom he has figuratively pissed on) telling him politely to get lost. it could be just the ticket to getting more respect from this weasel -- but watch out for his vengeful bite in the future!

buyer
buyer

Very sound advice - there are many, many companies out there that will dismiss employees, then work to deny them unemployment claims. If this is such a case, our new consultant needs to know that if the employer offers to engage him as a consultant (1099 with no W4/W2), they have not made him and offer of employment. If the consultant walks away from this and the company denies his benefits, he should appeal to his state's labor department. Walking away from an offer to sell your time as a service is not the same as turning down a legitimate employment offer. Likewise, if he accepts this work and remains taxed as a self-proprietor (does not file form 8832 and 2553 with the IRS), then he has not become emplolyed and does not automatically lose his benefits. If the true motivation for the company is to deny his unemployment, then he should run from this company and be glad he no longer works for them.

cjbryan
cjbryan

I've been a consultant for about 20 years and I'm sure I've fallen foul of just about every trick in the book. The thing I've learnt is that a consultant is in the game to make a living and so is the client. One could argue that despite consultants telling the client that "we're here to help", that is rarely completely true. Clients are trying to get the best value they can and so are we. Consequently these types of gambits should be treated as a game. You have calculated a rate based on specific assumptions. If the assumptions change or are wrong, you have to say so and set your rate accordingly. If you don't, the client will likely not trust your judgement and that will limit your earning ability. Based on bitter experience I take this approach: 1/ Do a credit check first, before you give a quote. If their credit is not good charge 50% upfront and stop working the moment they don't pay. Don't let it drag on. 2/ Be clear about rates and why you have set it where you have. Negotiation is give and take. They have to offer something you want in order to change your price or hours. 3/ Never be afraid to say no. 4/ At the end of every conversation, drop all parties an email setting out what was agreed, and your response as a result. Don't expect the client to put anything in writing, you need to take control. Item 1 protects you against dishonesty. If they have poor credit, don't work for them or get money up front. The rest is legitimate business. You are perfectly entitled to determine a rate and are under no obligation to change it.

izzy_again
izzy_again

It seems this company has decided its in their interest to move from employee to consultant for their it work. This consultant should truely show them the cost of hiring a consultant. The company may decided to hire him back as an employee.