Contractor Rate from referral

By jsresume ·
I am an independent database developer who charges a certain hourly rate for my services.
I get my clients from two sources, from CL and from a development company that advertises on CL with a lower hourly rate than mine( 3X lower).

My question is, when I receive a client from the development company, am I obligated to provide my services to the client at the company's lower advertised rate? The development company said I can simply multiply the project's hours by 3 and charge the client for , but it's difficult to pass off a 20 hour task as a 60 hour one.

I think it's more ethical to be upfront about my hourly rate to the client, but I don't want to be the one to tell the client that he's not getting the low rate.

I pay a commission to the dev company of a percentage of the initial project. After that, the client is mine, so to speak, and the company is out of the picture for subsequent projects.

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This is a real cleft stick

by Deadly Ernest In reply to Contractor Rate from refe ...

You're right not to do the multiply the hours trick as sooner or later someone with knowledge will pick up on it and your name will be mud.

If it's a normal referral like:

Client: Who can I get to do this?

Development company: We've used this guy in the past and he's very good, here's the card for JS.

Then open discussions with your normal rate.

If it's more a case of:

Client: Who can I talk to about this?

Development company: We'll have JS call you.

Then you got troubles as this implies you're working for of through the development company.


Essentially, if the client knows up front you're freelance and the development company rates don't apply to you, you're OK. If the company implies you work through them there could be issues.


Does the development company hand out your card or your web site URL or just the phone number as ways of contacting you?

If it's your business card, try printing your rates on the back of the card with a note on the front - rates on reverse - most people will know then what the real situation is.

Have your rates on your web site and try to encourage referrals through that, so they'll see the rates up front too.

Otherwise, just make it clear on your answering machine and how you answer the phone that you're an independent contractor and have your own rates.


What you say implies you bill the client direct and not through the development company. That makes your contract with them yours and nothing to do with the development company. If the client insists on the development company rate you can take the risk of loosing them by pointing out they're employing you and NOT the development company as the company only referred you on. Or you can bite the bullet and charge the lower rate, but that has the problem of explaining the higher rate later.

As a general legal point of view, you need to inform the client of YOUR rates in the first discussions. This is your work not the company's work. I'd suggest offering a mild 'new client' discount as a get them in the door thing and make it clear it's a discount only on the first job.

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Well at a guess as I don't know the Consumer Law where you are

by OH Smeg Moderator In reply to Contractor Rate from refe ...

I would say yes you have to charge the Advertised Rate for work but as I say I don't know Consumer Law where you are.

Generally speaking if a company mis prices a product below it's cost they have to sell it for that price. To get around this they simply remove it from the shelves till the Sale has expired to prevent loosing money.

I would never advise charging more than the time taken as that borders on Criminal in my opinion.

I suppose the bottom line here is if the crowd who advertises the much cheaper rate is happy with their charges you should cease to be referred through them.


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Col, I think you may not have understood what he said or I did

by Deadly Ernest In reply to Well at a guess as I don' ...


I got the impression the development company advertises a price for their services. BUT, they also refer clients to him for things beyond their skills and he has a different rate.

I take it to mean the development company have a product they sell and support. But when someone wants it modified beyond a certain level they refer the client on to him. In this case it is NOT his rates that are being advertised by the development company.

He feels people may be concerned due to the difference between his rates and the company's - ho does need to explain the company maintains their system as is, while he does more advanced work on and charges more.

I feel this is the way it is otherwise he'd be billing the development company for his time and they'd bill the client.

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DE I read it slightly differently

by OH Smeg Moderator In reply to Col, I think you may not ...

This Development Company is a Outsourcing place who farms the work out to people who pay them to Advertise there.

But maybe I'm wrong too.

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The Development Company is basically an outsource farm

by jsresume In reply to DE I read it slightly dif ...

Yes, the company/person with the low advertised rate farms out the work to one of us 5-6 independent programmers. The company( he's actually one person, I'll call him Dave ) is located in the US. I am located in the US, also.

Once I've accepted a project from Dave, I then deal directly with the client and give the client an estimate for the project before the services are performed.

The client pays me directly, and I pay Dave a commission of the total project amount.
Any other thoughts?

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In your original question....

by ThumbsUp2 In reply to The Development Company ...

... you said: "I think it's more ethical to be upfront about my hourly rate to the client, but I don't want to be the one to tell the client that he's not getting the low rate."

If you are dealing directly with the client after getting the referral from "Dave", it's up to YOU to quote YOUR prices before services are performed. The client can then decide if they want to contract your services, or not.

It's not up to "Dave" to to tell the client anything at all, other than they're being referred to someone else because "Dave" can't do what they want.

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You are right. It's up to me.

by jsresume In reply to In your original question ...

Yes, I need to be upfront to the client about MY rate as early as possible in our discussion. The client can then decide to use my services or not. That way we don't waste each other's time as I've spent days analyzing a client's requirements only to provide a quote based on my rate that the client thought was too high.

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You could also charge for the Quote

by OH Smeg Moderator In reply to You are right. It's up to ...

Many Companies do this when it is Complicated and when the problem is finally found they have effectively done the job already.

This is part of the reason why I got out of Software Design. You can take 2 years to perform a 1 minute fix. The Fix isn't the hard part it's finding the problem in the first place, but that is not how the customer sees things.


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Col, under NSW and Aust Federal consumer law you have two

by Deadly Ernest In reply to DE I read it slightly dif ...

possible situations for this:

1. JS is working for the company and he charges them his rate while they bill the client at their rate.


2. JS is working for the client and charges them direct at his rate.

I gather the company is a contact point and the rate they advertise for their work is their business not JS'.

What he should do is point out the company has referred the client to him as it's beyond the capabilities of their in house staff and that he has no contractual obligation to work at the company's rates. He needs to show them his normal rates and check if they're happy with them. He can then enter in some sort of negotiation if he wishes.

The thing is the company has REFERRED the client to him, not ASSIGNED the client so the person will be his client and not the company's client - that changes the situation as the rate advertised by the company is for their staff doing the work.

Should there be a complaint laid it would have to be against the company and not JS, but to ensure he's safe JS should make it clear he is NOT an employee of the company and the work contract is between the client and him.

The above would apply in MOST legal jurisdiction too.

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