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Finding rates for contracting work

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by onbliss 1 view

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I have been an employee in a consulting firm for some years now. I would like to explore corp-corp kind of contracting work. As an employee I was not privy to what my consulting firm was charging its client, and I did not care either.

With a change in my plans, now I would like to find out the current contractor rates in my city for my skill sets (.Net). can not walk to a co-worker or a person who I know does contracting work to ask "Hey how much do you charge?".

Are there any websites that track the ongoing rates for a .net developer? Googling led me to a UK website. And Salary.com did not seem to give me what I wanted.

Any ideas how to glean this info.? And since our interaction at TR is anonymous, probably I can ask you "Hey how much do you charge for C# programming (or .net work)?" :-)

Thanks a bunch.

29 replies

by john.a.wills

When I was getting paid $40/hr plus my expenses my consulting firm was charging the client $150/hr plus my expenses.

by meesha

Having been on both sides of the fence, I feel qualified to say that the response you received from john.a.wills whose agency is charging $150 but only paying him $40 is gouging for sure - almost 400%? Incredible. How is it that his value is so low but the agency can justify to anyone that the agency is worth an additional $110.00? Again, incredible. Why haven't they shared the wealth with John? If I knew this about the agency I worked with or hired, I would be making demands or quitting.

As an employer, I rarely pay over $70 for a developer. The costs escalate with the type of services required, i.e. architect approx. $125, DB or DBA approx.$60 to $100, Network Analyst depending on level $40 to $80. Often the requirements are mixed which depends on the consultant/contractor's value added abilities and this would be in the realm of $100. What I've outlined is given either directly to the consultant/contractor or to the agency.

If you plan to work contract/consulting in a virtual manner, the prices again may make a difference. If your plans are to stick to your local area, then your best bet is to research what the market will bear. An agency, if it's a good one will consider the value of your services and the value of the objective and only tack on the cost of doing business; for example, 10% for the overheads such as office space, phone, and depending on your jurisdiction - vacation pay, etc. and approx. an additional 10% to 20% for their own margin. So if you're the consultant and your services to the agency is valued at $50.00 then the total to a client would be around $60 to $70 and don't forget to tack any incidental expenses if they are incurred such as travel. Sometimes the agency may even go as high as 50% total markup. Being greedy can only work against your best interests - continuous work hence good compensation.

I recently had one consultant (database developer) acquired directly from a very large database vendor organization; they charged me $135.00 per hour plus travel. Although I had to use this consultant for 2 weeks, I quickly replaced him with another at $60 per hour no expenses and who hand a better hand on understanding the development environment.

I guess at the end of the day, if you're good at what you do, you can ask whatever you want - but will the market go for it? Sometimes flexibility in costing will keep you working far longer and with better results than asking for the whole nut. Price yourself according to the requirement. For example, if it's a short term contract (< 3 months) you may want to charge more than say a long term contract (> 6 months). If it's a simple coding project - less or if it's developing an enterprise architecture framework - lot's more. This is business, your business. And if you want to stay in it and earn a good living then pay attention to all the variables mentioned here. Good Luck!

by onbliss

I liked this comment of yours particularly:

[i]Being greedy can only work against your best interests - [b]continuous work hence good compensation.[/b][/i]

As I had implied in my original post, how does one determine what the market bears for one particular kind of development? Do .net, java, abap, etl, BI reporting... programmers all draw the same rate? I don't think so.

Your percentages on overheads and their margins fits in perfectly with what I have been hearing about the 80-20 or 70-30 rule. The latter number being the percentage the agency takes for providing the job and overheads.

On a whole a great post that was informative and wise. Thanks

by poodoo999

You might want to try the Dept. of Labor's Bureau of Labor Statistics website. They publish an occupational outlook handbook at http://www.bls.gov/oco/home.htm that might give you an idea of what the national market pays on average, and then you would have to adjust for your area (higher in big cities, lower elsewhere). I'm not sure if it will give you what you're looking for, but it might be a place to start. Maybe your local chamber of commerce, economic development office or employment security commission has access to some info that would help. Government agencies like to track that kind of thing, partly because businesses that are looking at relocating want to know what they would have to pay their employees.

I don't see why you couldn't ask other consultants what they make, as long as it's done tactfully. I wouldn't just blurt out "How much do you make?" - I would lead off by saying that I'm thinking of going into business for myself (or go to work for a consulting firm), do you have any advice you can give me, etc., and lead up to the "If you don't mind me asking, what could I expect to charge per hour?" That way, you're not asking them directly what THEY make, but they might tell you anyway.

by meesha

Glad I could shed some light on the subject. As for the market delineation for each discipline, there's no right or wrong as it's market forces at work. For example, as an employer, I know that a DOT Net developer with C# will demand a bit more than a VB programmer; something like $65 to $70 compared to $50 to $65. (this is total, agency notwithstanding). Only when there is scarcity can the prices really fluctuate.

However, in the Java framework world, the same level of developer would be in the $65 to $90. The level of expertise is often greater. That's not to say that DOT Net/C# aren't good tools just more prevalent and developers tend to work on shorter term contracts and the objectives are often not enterprise in nature.

In the Java world more projects are of enterprise nature and use JNDI, JCA, open source tools such as Eclipse, Hibernate, Spring, Struts, iBatis, Ant, etc. while defining and using design patterns, UML/RUP, etc. This all leads to a more learned level of developer who technically is a software engineer not to mention very good at security in development as well.

When agencies contact me, which they do all to often, with a list of available consultants, the trend has almost always been on the lower side of the dollar scale for DOT Net developers as opposed to Java developers, et al. If a developer's expertise is in the former than very likely will have more contracts of shorter duration for less cost. The later will tend to be projects of longer nature with higher costs but the availability may be less.

By the way, these statements are not meant to evoke debate on one architecture over another but to help show some clear differences in contractor/consultant expertise that's employed by perspective employers.

by pmpsicle

Sorry to disagree with you ... especially in your own market.... Now agreed I don't do programming but ...

Standard rates in T.O. for a headhunter/contracting company is $130-150/hr with the sub getting between $40 & $70 of that depending on how bad they want you. (More if they realize you know the calculations).

20 years ago I would have said the markups you suggest are about right but about 15 years ago the market changed here ... the big boys want more of the rate and are taking it.

The key bit in your discussion is that you need to know the market. And recognize that there may be multiple markets at work. There are "sweet spots" or markets where you can maximize your income (as an independent) as well as markets where the entrance cost is beyond your means.

The rates you are quoting are for direct to subs (meaning you are dealing with people who are used to working as subs) and with 2nd stringers (small shops who don't know their costs/market).

In short they represent your hiring practices rather than the market. (Gee -- a manager who does their job despite HR -- how refreshing).

Interesting that there are some standard calculations that every other service industry uses but IT seems blissfully unaware of.

Looking at it from a cost standpoint, you can calculate your billable cost easily. Take the yearly salary you feel is fair for the job and divide by 1000. So $40K/year gives $40/hr. To calculate what you would expect to be billing for that (if you were reselling) take the yearly salary ($40K) and divide by 2000 then multiply by 3
($60) and then add salesman's commission (10-20%). The result is $72/hr for a junior earning $40K/year. Below that it probably isn't worth your while to be a contractor.

Note that $40/hr represents the cost per billable hour including employment taxes and basic benefits (i.e. Corp-to-Corp sub-contract in US parlance). NOT what you are paying an employee per hour (equivalent is $20/hr wage).

However, in this market you're not going to get a fully qualified programmer for $40K.

There are several ways to check the market. www.realrates.com is a good way to start. But the best method is to check everyone you know in the industry. Be part of the local associations .... ask managers what they pay and what they are willing to pay. If worse comes to worse -- call around. Make up a (typical) project then call around. Say that you are just at the budgeting stage, you know that you are going to use contractors but aren't in a position of making it official. Ask them what they charge for that type of work -- just for budgeting purposes.

Best of luck.

by onbliss

Thanks for your thoughts.

[i]Take the yearly salary you feel is fair for the job [/i]
Given the fact that I would like to earn more, how do I decide what is fair? Fair = What market will bear, right?

by why me worry?

What kind of bullcrap justification is that? The market doesn't set my hourly rate, I do, and if my clients have an issue with my hourly rate, then perhaps they should look elsewhere for cheap labor. Yes, one must be realistic about one's hourly rate based upon the cost of living and other factors within their geographoc area, but working as an independent consultant, I will not settle for anything under $100/hr for my services, no matter how much people like you or other manager type paper pushers think I may be worth less. The shorter the project duration, the higher my rate, because I will not waste my time and effort on a 3 month assignment to only make a few thousand dollars from it. This is my bread and butter and this is how I make a living, so why should you expect me to sell myself short for providing you my professional services and expertise? Would you work for peanuts doing what you do? I didn't think so!

by pmpsicle

Unfortunately, the laws of supply and demand are always at play.

Toronto being a good example.

Let's assume that $100 is a fair price (which it is) ... what happens when the market is only willing to pay you $40?

You can refuse to work for that ... but for how long?

You can keep your price at $100 and take only what you get (which won't be much). Or you can take the $40 and bitch. Or you can take the $40 and keep looking. Or you can plan an exit strategy.

Eventually, the supply will decrease -- people just won't be available. Some time after that the client will realize that they can't get anyone and the price will increase.

How quickly the market realizes the conditions have changed defines how effective the market place is (ForEx vs Sachs/Eatons/Sears).

Unfortunately, IT contracting tends to be very inefficient -- I have my own opinion as to why that is -- and is slow to react. Which means we get to hear lots of bitching about "no people available" when the swing gets so far out of line that people begin noticing.

This is made worse by the fact that IT is the only service industry I know of that has no clue as to its real costs or the makeup of those costs. If you know your costs then you can guess at what's fair (and hopefully deal on the square).

Pay today ... Pay tomorrow ... you'll always pay. Unfortunately, the modern attitude seems to be "I want it for free!".

by russw

They have a searchable database of self-reported contract rates. You can search by geographic area, type of contract, programming language, etc. I've used it and found it helpful, especially when bidding a job in a different market or a type of work that's outside my usual specialties.

by binarypc

Having a general idea of what providers (job shops, independents and the big three ) in my area are charging, I went out to Real Rates and found no information, I finally widened the search to 2006 for just Michigan; 3 whole people reported, maybe only 2, with one that appeared to report twice.

However it is an interesting site ;-)

by pmpsicle

Unfortunately, realrates is a product of the dot-com era.

If people add their rates it'll work but most people a) don't know about it and b) don't use it regularly.

The fact that most of us work long projects (+6 months) makes it more difficult.

by onbliss

...your comments have been very helpful, and provides an insight on some aspects of hiring contractors. Thanks.

by tig2

If you are thinking of going Corp-Corp you will have to consider a few points.

First, you will be responsible for your taxes on a quarterly basis. You, not your contracting firm are going to be responsible for calculating them and withholding as needed.

Are you getting any level of benefits today? If so, you will need to calculate the cost of those benefits and factor that into your rate.

All that said, I know where you live and what the averages look like. $100-$150 is not outside the reasonable realm. That figure is based on what I know a firm was charging another for a senior developer/architect.

Hope this is helpful!

by jtakiwi

We have one who went out on his own, he came back pretty fast (he was quite good, so we had no problem with bringing him back). We bill $125 - $175 for dev work, depending on the type. He found out our rate and thought he could make a killing doing it for the same rate. The problem with that is that you also have to be the salesman, accountant, project manager, collections agent, etc.. in addition to the occasional coding that you get paid for. Realistically, you should bill at least $150/hr. you might go less for recurring customers that consistently bring you $$$'s over the years to encourage them not to hire someone to do what you do for them. You also have to be realistic about how much paying work you will get, $150 an hour sounds like a lot, but if you're only billable 25% of the time, then you have to cover your own benefits, taxes, etc... it suddenly isn't that great of a deal. As you start out, ensure you get a percentage of your money up front, or at least as you hit certain milestones to cover yourself if you happen upon a cusomter who is a slow or no pay type of guy.

by onbliss

To begin with, working as a "W2" seems to be appropriate for me. Those numbers appear plausible for architects.

by mrlaw10

Lots of good input here from the programmer side of the equation. I sit in the opposite dilemma from you. I have a program to be written and I don't come from the programmers/coders side of the market. How does this apply to you? Here is my tip, go to rentacoder.com, elance.com, or scriptlance.com and see what you could pick up for side work there and build your business slowly. I had a program written years ago in the DOS days and now want to redo it for the windows OS. I can't afford to start out paying some middle man $150 an hour. Since this progam will be retailed the coder will be needed for many years to come. See my side of it...what is the best method of finding a good coder for a project?

by tig2

And add from there.

The estimated value of your existing benefits is approximately $10,000 to $12,000/yr. If you have an employer contributing 401(k), add in the percentage of contribution. Add in the additional administrative time (I have heard this estimated at $5,000/yr). That is the minimum that you can require at Corp to Corp.

Some great input from our Canadian friends but you have to remember that you are looking at the US Midwest market. Prices are different in Canada.

by pmpsicle

As a business owner, you are taking OFF your worker hat and putting ON your employer hat.

Basically, what you are doing is trying to figure out what you would have to pay someone else to do the same job and then figuring out what you need to charge from there (need to charge = +overheads+taxes+profits).

Then you need to take into account the market for reselling labour in your location. If you can't sell for at least a fair price ... then you need to decide if you want to be in business for yourself or not.

Actually, the costs in Canada and the U.S. are about the same (but in Canadian Dollars) and the (/1000)(3/2000+) rule works in both locations. We pay the government and you pay independent insurance companies - our market size just doesn't encourage competitive price otherwise. The only real difference is terminology and emphasis (Corp-Corp is normal up here, W2 (aka hourly) is unusual -- at least in IT).

In fact, the numbers the Torontonians have been tossing around and the numbers you Yanks have been tossing around are a good illustration of the effect of the market.

Bluntly, the market in Toronto is f****d. When was the last time you could hire a permanent/salary experienced programmer for $40K/yr? Going price up here is between $60k and $90K. (= fair retail of $108 to $162).

And yet as my fellow Torontonian stated they are paying around $40/hr (=$40k/yr salary) to the contractor. Because we have at least two levels of headhunter involved each taking the major portion of the $135-150/hr there isn't much left for the person who's actually doing the work.

Which means if you are careful who you are dealing with (or stay away from headhunters entirely) you can get some great deals.

It also means that more and more people are leaving IT up here.

And it means that contractors up here are known to routinely skip jobs.

What goes around comes around ...

by onbliss

[i]Going price up here is between $60k and $90K. (= fair retail of $108 to $162).[/i]

For FTEs (full time employees) that is what I have heard for software developers. But again there are different "bands". And developers get paid as per their "band". Some very senior developers and designers are known to get $110K.

For contractors, the rate seems to be $60 to $70. I guess it could be because of multiple vendors between the actual client and the contractor taking up their share of the pie.

by mdv3441

I have looked over rentacoder.com and there may be many very good coders but the rates/fixed price they bid seems ridiculously low in many cases. Either they don't have a clue to the amount of work involved or I wouldn't care to try to compete.

by luana.ranon

I am sure that many work practically for free; but in some areas where jobs are hard to come by, this is a way for a person in the IT industry to keep their skills honed as well as add some projects to their resume.

by sara stanford

I've been consulting as corp to corp for about 10 years, and my health insurance costs are increasing every year. Make sure you check what your health insurance will cost before you make any changes. Especially if you have any pre existing conditions, if you are looking at an individual plan instead of group, you will not get coverage.

I'm currently paying $1,500 a month for my husband and I. We have group insurance, which you can get in Texas if you have at least two people in your company, and with group insurance they have to insure you, however you can be rated up 60%, as in our case. (And yes, I have shopped this extensively!)

by ffg1

I have been a mainframe independent consultant (billing corp to corp) since prior to Y2K and there are some costs you are leaving out.

These may or may not be required by the agency or company placing you but IMHO are required to protect yourself and your company.

Errors and Omissions insurance is necessary to protect you from law suits or judgements arising from any real or imagined 'mistake' you might make that could potentially cost your client money.

General liability insurance is often required by the agency or company for whom you are consulting.

Both of these policies should have minimum coverage of $1,000,000/2,000,000 to sufficiently cover you and your company.

The best place to check out these policies, the coverages and why you should carry them is http://www.techinsurance.com. They specialize in insurance coverage for technical consultants.

by onbliss

Getting health insurance that would cover pre-existing conditions in my family. Thinking about that makes me think more on rocking the boat.

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