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What were you doing before??
I don't see where the math adds up. Presumably, the consultant is making a higher rate than when he was a full time employee (or why would he want to make the change). If he leaves and still provides the same level of service at a lower cost, then he's obviously proposing to do the same work in much less time as a consultant than he did as an employee. That begs the question - what in the world were you doing when you were an employee??? Sounds to me like he had a lot of loafing time as an employee. I wouldn't want to hire him back.