IT Employment

Ask something
Discussion Locked

To Fulltime

0 helpful
35 replies

by cfxavier

Closed to new repliesThis discussion is closed. It stays readable, but it takes no new replies.

I am a young consultant that has been offered a fulltime position. I understand the pros & cons from both sides and decided to take a look at the offer. I was told the standard was to take the amount of money the consultant makes in a year and subtract 20% and that is the gross salary. I realize that the type of job and state/province become factors in the calculation but I just wanted to see if there was any input from the group...

Cheers
Raistlin

35 replies

by wordworker

Never settle for less money if you don't have to. First, are you an independent consultant, billing the client directly? If so, you're being led (astray) to believe that you'll have to take 20% less because it will cost the company 20% more (at least) to pay taxes on your salary and provide you with benefits. If you can afford the hit in your checks and you WANT/NEED the FTE status, maybe you take the hit, but don't just roll over. Negotiate for your take-home pay to remain the same. If the company wants you, they'll pony up the 20% for your taxes and bennies.

If you're a contractor put on site via a TEKSystems or New Age Technologies or Pomeroy or the like, the client is paying that firm at LEAST 20% more than what you're getting per hour. So the client gets a "push" if they convert you to FTE and pay you the same hourly wage. You get the same dollars, they pay the same dollars, but the 20% goes to taxes/bennies instead of in the pockets of the vendor who placed you.

Never take less if you don't absolutely, positively have to have the job and there's no other alternative. At the very least, when you're discussing the possible FTE with the employer, make sure you say, "I would be happy to consider the position, as long as my pay remains the same."

Don't just roll over and let 'em take advantage of you.

by jamesrl

In many companies, benefits can equal or exceed 30% of your salary, but of course not all places provide the same level of benefits. And not all benefits kick in right away - employer comntributions to pension usually take 2 years to be "vested".

You also have to look at the fact that when you convert you will lose a number of tax breaks.

Much depends on where you are in your life. The advantage of being a consultant is the ability to move easily from company to company, learning new things along the way. If you need stability then a full time job isn't totally secure, but more secure than a consulting gig. To me alot would depend on whether you really enjoy the environment and whether there will be opportunities to learn and grow.

James

by oz_media

I have heard that same crap from another 'potential employer' with no pottential.

apparently, they expect BENEFITS to supercede a lower paychech, if you take a pay cut they are no longer BENEFITS are they?

If you GAIN something yuo never had before and it doesn't effect you financially, THAT is a benefit.

In order to have my 'benefits' equal a 20=30% pay cut, I'd have to be earning a couple of hundred dollars a month.

Medical Plan $35.00/mo (avg.)
Dental Plan $28.00/mo (avg.)
Extended Disability $30.00/mo (avg.)
RRSP contributions personally I have NO faith in Canadian RRSP's as they simply CANNOT payout as they propose to. Many copmpanies will offer a bi-weekly RRSP contirbution as a benefit. Again a measly $40-$50 month from your check, often equalled by the employer. SO they cough up %40 /month and consider it a BENEFIT?

The only way I would consider working F/T again is if someone was to increase my current income, offer me benfits iN ADDITION to my salary and still let me work at home.

That's why I have contracte now instead of employers, employers cannot provide what I receive by myself.
And that;s suppsed to be 30%

Now a car allowance doesn't count as a benefit because travel time should always be covered by the customer, even in companies that pay you an allowance, the customer pays the company for the travel time so they are giving you NOTHING.

I see SO many people saying they will take less pay for greater benefits, what a farce! Less pay is NOT a benefit, equalling your previous pay by offering benefits, still doesn't mean your are GAINING anything and therefore there is no benefit.

by jamesrl

First off, the 30% number has held with me with a number of companies I have worked for from a Fortune 100 to much smaller companies. Some have used 35%. When I managed 30 people, it was dead on 35%(excluding pension which came from a different budget, so its actually higher).

And its an average - managers often get more than 30% if they take full advantage of stock plans. It is often calculated that way to incent people to become managers, when they are faced with losing their overtime and making less money.

As for your calculations on medical and dental, where did you get those numbers?? Contractor friends of mine pay alot more than that for medical and dental, even here in Canada. One mentioned it was over $300 per month for a comprehensive medical and dental plan for his family(wife not working) which was similar to what I get as part of my package.

If your employer contributes to your RRSP, that is indeed a benefit. Thats real money. Not sure what your issue with RRSPs are - its not a government sponsored pension - its yours to invest. (RRSP is similar to 401k in US). Over the years I have earned many thousands from employers in matching contributions - as much as 5% of my pay at some places

Bottom line - if they are offering 20% less wages in return for 30% benefits, it would be a net gain for many people. But as I said, the devil is in the details - if the company is not big on benefits it might not make sense.

If you think benefits are free or worthless, then I have to disagree strongly.

James

by jimhm

Sounds pretty capitalistic there Ozzie - hum are you taking a stand? or just jumped off the deep end again - because going off like that on Jim's comments is nuts.

by jamesrl

In many companies, benefits can equal or exceed 30% of your salary, but of course not all places provide the same level of benefits. And not all benefits kick in right away - employer comntributions to pension usually take 2 years to be "vested".

You also have to look at the fact that when you convert you will lose a number of tax breaks.

Much depends on where you are in your life. The advantage of being a consultant is the ability to move easily from company to company, learning new things along the way. If you need stability then a full time job isn't totally secure, but more secure than a consulting gig. To me alot would depend on whether you really enjoy the environment and whether there will be opportunities to learn and grow.

James

by cfxavier

First, I need all benifit information that they are offering. I accepted a job from a company 2 yrs ago that told me AB health insurance was paid for and 3 months later found out that wasn't true.

Secondly I need to calculate the difference between the "worth" of the benifits and the current contracting income I am making.

I do pay a lot of money for crappy health benifits through my consulting company, but on the otherside I like the tax breaks it offers me.

I am pretty young(23) but have a great handle on the skills that I am experenced in. I hear nothing but good things about my work. I wanted to know what others think on this topic to make sure the offering company are not screwing me because I am an uninformed smuck.

CFXavier

by bpday

My take on the FTE thing is DON'T DO IT!

For me, having to find a new job every 3 - 12 months keeps me REALLY motivated to keep my skills sharp. Keeping my skills sharp also helps me to pick the work I do. If you're an FTE you have NO say about what kind of work you do because you're a slave to The Man and they own your soul.

It seems like every consultant I talk to who goes FTE go from being a fantastic tech genius working on the hottest, most interesting projects to getting stuck doing mindless dead-end projects in dreadful legacy technologies. "Here...you're a EJB guru: Go maintain the interface between the mainframe and the ERP system that's written entirely in pascal and Qbasic."

Forget having anyone give a rat's a$$ about what you think, too.

And the cut in pay?! Oye!

Better stability? Yah...whatever. They'll drop kick you just as fast as an FTE as they will as a consultant.

FTE = evil, soul sucking.

As Nancy Reagan said: "Just say no."

Can you tell that I have an opinion? Can you tell that I had a horrible experience when I tried going FTE?

-Ben

ps...I usually don't get this worked up. :)

by dc_guy

In general, the tried and true formula for comparing a contract rate to a salary is 2:1. If you're billing your time at $500 a day as a self-employed contractor, you have to earn a salary of $250 a day -- $65,000 per year -- to maintain the same lifestyle. The reasons:

Vacation, sick leave, holidays. Your employer pays you for them. They're called "AWOP" when you're self employed.

Training, professional conferences. Your employer pays your salary, fees, and travel expenses. As an independent you pay for everything and you're not earning income while you're there.

Pension. Your employer has a pension plan and probably contributes to a 401(k). As an independent you are 100% responsible for having enough money to retire when the time comes.

Insurance. Employers are getting stingy but they still provide group plans. Independents have to buy their own life and medical insurance, and they don't get group rates. As for vision, dental, AD&D, or long-term disability, forget it.

Social Security. Your employer pays half. As an independent you pay all of it.

Expenses. Your employer gives you a phone, workstation, and pencils. An independent provides his own. You can bill some of it to your clients and the feds will give you a modest tax deduction on them as well as on 10-25% of your home maintenance and utility expenses, but you still come out behind.

Bench time. This is the killer. Most contractors spend more time unemployed than they admit. For me it was a total of two and a half years out of seven, a dismal record. Sure, these days no salaried job comes with the kind of security your father had, but contractors are always the first people cut loose during hard times.

Do the math and you won't find my 2:1 ratio at all far-fetched.

If your particular contracting relationship doesn't have some of these attributes, then by all means make the adjustment. Particularly if you're guaranteed a long-term engagement, you won't have quite as much bench time as most of us do in a year.

But it's ludicrous to suggest that a contractor only has to bill himself at a rate 30% higher than a salary for the same job. That's a formula for poverty. Check back in about twenty years with the people who are telling you that and you'll find that they have absolutely no retirement investments, are paying rent on an apartment, and take vacations at their parents' house. Either that or they have a spouse with a salary.

by dc_guy

I was self-employed as my only source of income for five years, and I've been working with many self-employed people whom I know very well for ten or fifteen years. They all use this formula. As I said, the killer is bench time. No one believes that THEY will ever be on the bench for six months -- much less eighteen -- but real life happens to you whether you are prepared for it or not.

by jfollin

Charles,

2 to 1 is right - I did a job for a firm's internal financial accountant department years ago who worked on a factor of 2 to 3(!) times the salary of an employee as the true cost of employment (the more senior, the nearer to 3 they used) and 10 years plus of freelancing myself confirms the math.

by boatmeadow

I was self-employed for 9 years. I finally took a full time job 5 months ago. Self employed I billed $100/hour (= $200K if you can bill 40 hours for 50 weeks). New job $90K. Looking back I usually made $125-$150K/year. My longest downtime was 9 months. That's my experience.

by scott

CFXavier:

I have been a consultant for 3-1/2 years now and all full calender years matched that formula of $xx/hr x 1000 = $xx,000 yearly gross consulting income.

I charge $30 CDN/hr for my programming fees and have made $30,000 CDN/yr for the last 3 years plus or minus 5%. That's 1000 billable hours and the rest working for free and on-the-bench.

It's an excellent formula and I thank DC_GUY for pointing it out so clearly.

Fulltimers get 2020 hours in a year plus benefits, so a job at $15 CDN/hr full-time would be a very close match to mine.

If I found an employer willing to hire full-time but pay me 20% less, my income would jump 61%. I would lose my freedom to head to the beach with my kids in the summer any day I wanted and I would have to work nights and weekends, but having enough money to pay expenses would be huge.

To Fulltime depends on your situation CFXavier. If you can bill for more than 1000 hours in a year, you are a great consultant. You can see the great spread of income and opportunities and experiences from these posts. Thank you TechRepublic for your service.

A warning to all Canadian users that was given to me by an accountant I work with...
If most of your hours come from one employer (now a customer) and you cannot prove to Revenue Canada (Canadian Customs and Revenue agency) that you have a host of other customers from which you draw significant money or spend considerable time with an expectation of immediate or future profit, then you will be deemed an employee by the Canadian Government. You would lose any business deductions you claimed to reduce your income for as far back as Revenue Canada wants to go, and the employer/customer would be fined and charged for all missing Employment Insurance, Workers Compensation Board, and Canada Pension Plan premiums for as far back as they want to go as well. The employer would also have to remit any GST credits you charged the customer, and I don't know or want to think of what GST consequences you would face personally since your GST credits and receipts would all be voidable and actionable by Revenue Canada.

People working as 7-11 night clerks never seem to have these concerns, though bullet-proof clothing never suited me much personally.

sj

by oz_media

You seem to forget that I live in BC. Those were mubers from last months bills, also why I said Avg. as they are reviewed annually and I either have a larger or smaler payment to make depending on the annual adjustment.

As for the numbers you provided from Fortune 100 companies, I was offered a similar offer to leave the CRTC and join one of the largest telecom companies in Canada (US owned and operating INTO the US not Canada)and be paid in USD. I turned it down flat, at that time just because they wanted me to move to Toronto. I wouldn't even have my casket do a stop over in Toronto on the way to Europe. As it turns out, most of their employees quit rather than move East and the company is now operating on a skeleton crew as they can't keep employees 9being US operated).

There is no way in hell, I would take a pay cut to work ANYWHERE, I don't care if you are gonna let me drive a new Ferrari each month, it just isn't worth losing your freedom over to take a job where someone else dictates your daily work.
To do that for LESS money than I already earn is just ludicrous.

As for RRSP's and 401K's. I have too many associates and working partners that are in finance. An old girlfriend who has a UBC degree in finance and SELLS RRSP's doesn't even have one herself as she doesn't believe in the longevity of RRSP's in Canada, I'm only 35, I need to think 30 years ahead and RRSP's don't look so good for 2030. Even the colleges in Vancouver and The University of BC have a program on WHY NOT to invest in RRSP's and teach new finance students to avoid RRSP programs or persuing them for employers, i thought thyis was now common knowledge in Canada, everyone I can think of has cashed in RRSP's to look for alternate ways to retire. Are you saying that they are still trendy in Montreal as they once were here?

I have a LOT of money in the market, my close friend/mentor is a self made multi-millionaire due to his ability to get in early on new private companies and get several thousand shares at below half the opening market price by creating their public investment portfolios. This money I see instantly, often with MASSIVE opening day increases which can be quickly sold in the case of dot com's because I also help him with portfolio creation and get a few thousand shares thrown at me every now and then for my efforts.

I am not saying that the stock market is where most people should invest as it is only due to association that it works for me. I don't cringe when my NASDAQ shares drop because they didn't cost me a penny out of pocket. NASDAQ has been more positive than negative for me though and I can afford to let the dead cat bounce when needed because it isn't MY money so to speak.

I have made FAR more money off the market already than I would EVER earn through RRSP's if I waited until retirement. It would be nice to see a straight up and honest retirement program started that actually paid out over time, as many feel the RRSP's and 401K's should/will, but there really isn't anything lucrative enough for me in THAT world yet, I can make much more privately and don't need to worry if the program stays alive.

For a company to offer me something I already have and expect me to work for someone else at a reduced income is like me saying I want to go back to high school without my parents supporting me. I can't see why ANYONE would be better off making someone else money unless thay are unable to earn it for themselves, there is no benefit from doing your own thing to backstepping into the 'worker bee' world again unless you can't make it on your own.

Just liek RRSP's and 401K's, it's just a way of admitting to yourself that you are never gonna earn that much cash yourself, no thanks, I aspire to do better.

by jamesrl

I was an independant in the 80s -made a fair chunk of change too. But working for a fortune 100 gave me exposure to more breadth and depth of technology than I had working for small companies as a contractor/consultant.

You are obviously a single person with numbers like that. Try for a moment to put yourself in the shoes of someone with three kids whose wife can't work due to medical reasons. My benefits obviously have a higher monetary value because I have those dependants. If you are single and healthy you can get away with a lower cost plan.

Not sure why you have such an aversion to Toronto - again, millions of people here who are happy - different strokes for different folks.

As for RRSPs, not sure what your issue is. You can have self directed RRSPs where you invest wherever you want TSE, VSE stocks, GICs whatever - the only restriction is the Canadian content restriction which means you can't have more than 20% foreign content. Obviously because earnings are non taxable until retirement, its not a vehicle for income now. Are you suggesting the stock market won't exist in 2030??

In the RRSP plans I've been in, the company has contributed thousands of dollars. I have taken out early withdrawls to put a downpayment on a house. My employer helped me buy a house with their contributions to my RRSP. Thats a tangible benefit.

As to worker bees and making it on your own, who do you think you are kidding. Are you suggesting everyone who isn't independant is a failure? Grow up. Its a choice - some of us prefer to have stability, benefits, training. If you enjoy being an independant more power to you. I certainly have lots of friends who are succesful contractors. But none of them think I am a "worker bee" or a failure because I chose the corporate route.

James

by oz_media

"As to worker bees and making it on your own..."

By no means did I intend to downplay being an employee for someone. I learned at a really young age that if you want to make money, you can't be working for someone else because no matter how much YOU earn, you are makig more for your employer. This is very obvious and I'm sure nobody thinks otherwise. I just have a real sore spot when it come to other people gaining greater benefits from my ability than I am.
Why should I accept $50,000/yr when I bring my employer several hundred thousand in service revenue alone, not including marketing and operations/infrastructure rebuilding?

SOME people will always be employees and that is what they aspire for, they enjoy the stability etc. There are a lot of benefits for most people to seek employment with an established company.

As I also run other businesses from my home, IT just gets in the way if working from an office full time.

A former roomate was a Liquor Store employee, nice government benefits etc. He was happy and never aspired to do more, he was content, earned a paycheck and that's all he expected, therefore he was successful in his own way. He had achieved whaqt he wanted.

When I am working for someone else, all I can think of is how much more money I could be making on my own. I don't consider myself successful if I am relying on someone else to dole out my share of the monthly revenue, I feel like a worker bee or a drone bee. Come to work at ?AM in the morning and go home at ?PM day in and day out, follow protocol and toe the line to remain employed, wait for that paycheck and then wait for the next one. This I can't do, I need more freedom in mY life than that.

So when I say worker bee, I am not downplaying anyone who needs to be employed to feel successful, I am merely saying that's how I see working for someone else. I have never been a follower in ANY aspects of my life, I have always been either the leader or done my own thing.

As for RRSP's, again, whatever turns your crank.
I don't think that a few million when I'm 65 is going to amount to anything. In 2004 being a millionaire is NOTHING, while in the 80's it was really something. Now I am NOT a millionaire by any means, but I live comfortably where I choose to live (not so I am close to an office). I have free time to do whatever I choose prety much whenever I want, my other business is running very strong and I am in an issue where I almost need to relocate to England but can't pull myself away from home now as I live in what I consider to be paradise. As for RRSP's I have a strong market portfolio and get semi-annual residual checks from several countries so I stay aafloat without needing to work full time.

As you say, different strokes.

Don't get me wrong, I DID the corporate thing and succeeded quite well. As I got a bit older i changed my mind as to what I wanted and so I did something different.

Thenagain, I am also the type of guy who gets bored easily and would go from being a network admin to a bus driver if that what I felt like doing that week. I do what I want to do, not what I have to do.

P.S. I do have a son, I have always supported him and his mother, well....she does her thing too I guess but I have ALWAYS supported both of them when needed, yes I do understand the dependant thing.

by tomsal

I'm in the USA, I don't know the details on RRSP's that you were talking about...but I am happy with my 401k performance so far -- especially considering that I can't afford to contribute the max amount and I've only been in the program for 3 years now.

What's wrong with someone trying to stash money away for their future?

by jamesrl

I understand an RRSP is similar to a 401k. Its a tax shelter where you can put money away(pre-tax) which will accumulate tax free until you need to redeem. The assumption is that when you redeem you will have a lower income than when you are working so its a net tax benefit.

I cashed some of mine in when I was unemployed - so it worked out better than having regular savings (in post tax dollars)

I too was happy with my employer's contribution.

I could contribute up to 6% of my salary, and they would match with up to 3%. So for every dollar they would kick in 50 cents. We had the choice of company stock, an market index fund, a balanced fund or guarenteed income funds(a fund which bought only gurenteed interest certificates). We could switch from one to another with ever paying any fees(only once a day).

Its true that some of our funds were mediocre performers - fairly conservative. But if you factored in the company's contribution, we made 50% per year guarenteed - not bad at all.

The only way to better performance is to get into the more speculative areas of investing. And while that migth be attractive to a young single person, those of us closer to retirement will gladly trade for a little security.

James

by jimhm

Look at the benefits - the options of what happens when theres no contracts how long are you on the bench, look at travel and expense coverage - some only give you $34 a day total expenses for meals and housing -

Have the employment lawyer review the contract and any contracts they send you on - you have to do your homework - they have done theirs.

Consultanting work can be very good for the wallet or very expensive - if you aren't careful and look out for number 1.

Yea the lawyer will cost you a few hundred a year - but he/she could save you thousands on a bad contract -

You know TechRepublic is always looking for articles - this would be a good one - interview contractors - and contractees - and tell everyone to watch out for - where the pitfalls are and what some of these outfit try to get around.

Like in PA - they have you sign a non-compet clause - well PA is a "right to work state" and that clause has never been upheld by any court in PA. So its an Illegal contract you are signing - but they make you sign it figuring your stupid and will follow it - some do - most don't ...

Best of luck ... hope you get some good pointers from the group..

by jamesrl

Funny I had lunch today with one of my contractor friends. He is making more than me despite the fact that I am a manager and he is a business analyst.

But when I asked about his benefits, he mentioned he pays about 2500$ (Canadian)a year for his benefits, and he has caps/maximums on a number of items - $400 per person per year for prescriptions for example, caps on dental etc.

No matter whether you work as an independant or as an employee, there is always a revenue calculation which says you bring more to the company than they pay you - otherwise the company would have no profits and would go out of business. This is basic economics. What you can strive for is fairness - a good employee/employer relationship, again regardless of contract or permanent, is when the gap is reasonable and fair. Most importantly, if the person's value to the company goes up, their compensation should go up accordingly.

Obviously there is more than one route to personal success and wealth. I've met more than a few VPs and Presidents of large corporations who have been quite successful, monetarily and in personal achievement.

I did some contracting last summer while I was looking for permanent work, and enjoyed the freedom - I didn't have staff to supervise, I could spend 100% of my time working on project tasks. It was refreshing. But I do find satisfaction in developing staff, so a permanent position as a manager was the right move for me.

James

by oz_media

I am reall;t not trying to stir the pot or create any animosity between us, I am just stating MY case here as you know.

I have the 'been there done that' mentality when it comes to working for someone else. Within a week or so, I have too many things I can see as operational flaws and get too frustrated with the way companies are run, unless it's MY way of course. I come from a family of very successful people and see WAY too many micromanagement flaws or even worse, lack of proper management where needed.

I have managed hundreds of people for a fortune 500 company as well as a staff of only 18 for the CRTC and even though I loved it at the tmie, sharing knowledge and helpig people grow in an organization is very rewarding, but I have sacrificed my own wants and needs for others for too long and devided I want to do my own thing.

As I've said before, who knows, I may get back into machining full time next year, or full time mechanic again, or ?????

I certianly don't think I will be in IT forever nor do I see it as my future, just something I choose to do for now as it interests me, although it becomes more redundant and boring each day and I find I am distancing myself from it even now.

I need excitement in my day, I cannot sit in a cubicle or office and do it day in day out. Evenm with site visits and fun seminar getways and stuff it is still COMPUTERS COMPUTER COMPUTERS until I'm ready to puke. Once someone knows you can help, the phoe doesn't stop ringing and the emails just flood in, it drives me nuts sometimes as I feel I can't get away from it. This is exactly why I generally only put in a few hours per day on client networking and a few days per week is enough to keep me aware that I don't want to work for a living, to me there are much better ways to enjoy life without my becoming a corporate 'drone' or 'worker bee'. Been there done that, didn't buy the t-shirt because it sucked FOR ME.

If I am still working in IT in 10 years you can feel invited to come and kick me in the ass and say "I told you so". If I am not at least semi-retired by the time I'm 45, I will probably be looking for a new line of work that actually gets me somewhere.

I have high expectations of myself, low expectations of others. People amaze me all the time by what they are willing to offer in the way of help, knowledge and ability as i don't expect anything from them.

As for myself, I am my own worst enemy, I KNOW I can do it, I KNOW I WILL do it, but I kick myself all the time to keep moving forward with my own goals, but not those of a company for which I work or those of an RRSP. I COULD wait 30 years for some retirement money, but if I haven't made it myself in the next 10, it's time for some serious changes. Perhap that's what motivates me, it is up to me to make it and earn a retirement, not time.

by thador

FTE or Contract/Consultant doesn't really matter. I almost made a big mistake once going from FTE to contract because the lure of money sounded so much better. I was young and stubborn, but my dad, who was even more stubborn, shoved an excel spreadsheet down my throat and forced me to really run the numbers. Once I ran benefits (and DON'T forget vacation, paid holidays, or 401k type stuff) I realized that the "50%" pay increase...well, it wasn't. Not even close. In fact, I basically would have broken even.

I have found that you have to treat every job separately. I've had some enjoyable FTE and some boring FTE, as well as some great consulting gigs and a few gigs where getting paid and consistency was a huge problem.

Look at each job separately and look at the company and don't be afraid to jump if things go south. One of the most important things in this business is to keep you finger on the pulse of your current environment.

by cmessina

Hey Thador, do you still have that spreadsheet? It might be
helpful for folks in this situation to at least put some numbers
together to evaluate different offers or possibilities.

by mark.pescatrice

Hello Raistlin,

As a fellow consultant who works primarily in HR applications, I can tell you from a consultant and HR/Pay perspective to look at total compensation. I have been approached with job offers and nothing has come close to what I can make independently. With that being said, I make a formal analysis.

As an independent, I take my billing rate, minus overhead (annual budget for office supplies, computers, furniture, internet connection, etc.), taxes (estimated), benefits (paid by me, of course), and any other expenses. Take into account, of course different scenarios, such as rate + expenses, rate all inclusive of expenses, and W-2 rates (which I tend to avoid, but occassionally a client will require). I use a separate spreadsheet to calculate all of these scenarios for each project I take.

I take into consideration the number of billing hours I can conservatively estimate, including time on the bench/beach, which I estimate for myself to be 2 months per year, though this year will differ because demand is greater for me right now. I then can determine an annual net pay amount.

Employers use 'total compensation' to communicate with employees the total worth of their compensation and benefits package. This includes salary, benefits (including the employer cost), taxes (employee and employer), worker's compensation, unemployment insurance, travel allowances, leave policies, work policies, day care, free massages, use of company vehicle, etc.

Keep in mind the number of hours you will be required to work. I was approached a couple of months ago with a lucrative employment offer, but instinctively knew that this company would have me working 50-60 hour workweeks. This drives my own 'hourly worth' down, which makes the offer much less attractive.

Using this sort of analysis, you can come up with a general idea of your worth as a independent and as an employee. Spreadsheet analysis is your best tool. You must also look at non-monetary aspects, which includes quality of life issues.

Hope that helps. Take care and good luck!

Mark Pescatrice
Matrice Consulting LLC

by cmessina

Hi Charles,

I too am a 23-year-old consultant doing everything for myself.
I've just hired my first developer and am sure I will learn some
valuable things managing a second-person's workload--and
from making mistakes!

Like you, I'm in the process of considering FTE against staying
on my own. There are a number of factors involved in this
decision and some of them have been addressed and debunked
in this forum already. Others that I'm considering:

* Change in work environment: Currently I work from my home
office and coffee shops. I love the flexibility of being able to
work whenever and wherever I want but this of course means
that I have to be more disciplined in choosing how
I work. Cubeland does have its benefits...

* Distributed responsibility: Unless you incorporate or become
an LLC (which is on my list of things to do), you and all of your
assets can be vulnerable to lawsuits. The point here is not so
much about protecting your rearend but that when you work for
someone else, they're usually the ones who are more legally
exposed.

* Learn through doing: one of the reasons I've always preferred
to do things on my own is that I learn so much better doing than
being shown. This is true with learning new technologies as
much as it is with managing subcontractors, figuring out taxes
or designing business cards. There's always so much to learn--
and this is both a blessing and a curse of doing things yourself.

* True work ownership: Just like there's distributed legal
responsibility, oftentimes when you work for someone else, you
don't get the same satisfaction when you complete a project that
you've seen from start to finish. I realize that FTE jobs vary
widely, but if you're stuck adding bezel X to widget Y over and
over rather than designing the whole thing yourself, there's
bound to be a reduced level of job satisfaction.

* Social opportunities: this area is a toss-up, as working in a FTE
situation will often expose you to many new and interesting
individuals. You may also have to deal more regularly with
incompetence, management bureaucracy or politics. Being a
"gun for hire" (so to speak) precludes many of the frivolous
social niceties that come with going corporate. I have
real relationships with my clients. In FTE,
you may need to make strange-bedfellows that on your own,
you would never have considered.

* Teamwork: working on my own, I've had few opportunities to
really collaborate with another designer/developer on a project.
This will change now that I've hired someone but one thing to
think about is the chance to work with other pre-qualified
employees.

* Philosophical or value differences: one of the biggest reasons
why I've always been averse to joining the world of FTE is that I
simply have a different way of viewing the world than most
corporate entities. Of course, there are great
companies out there--many of whom I'd love working for as a
FTE--but going it alone allows me the opportunity to work with
many of them instead of just one over and over again. This
obviously is a personal taste and I won't pretend to believe that
one should be morally opposed to FTE.

* Susceptibility to outsourcing: time on the bench I think is now
equally balanced with the threat of overseas outsourcing,
especially in the IT sector. Staying on your own keeps your
skillset sharp and relevant... and your ideas up-to-date. FTE
may lead to deterioration of your native interests in high-tech
(as suggested earlier in this thread) and you may have to deal
with the specter or training your overseas replacement someday.

* The FTE Robinhood Scenario: perhaps the most unanswered
benefit to me is this: I've decided that my life work will be
dedicated to creating a business organization of which I can be
proud and that I know will do good work for its clients and
business partners. Many such companies already exist today and
I intend to join their ranks. However, my brother-in-law (who is
a successful financial analyst) told me that I should go work for a
big company while I'm young, move up the ranks and then take
all the new talent with me and create my own company once I've
learned the tricks of the "big boys". It sounds like effective
advice but completely rubs me the wrong way. Maybe I'm not
much for dog-eat-dog, but I'd rather get ahead and attract a
quality workforce based on the work that I do and the
relationships I create. But then again I'm still young and naive
and working for myself!

Anyway, I hope some of these issues will help you consider all
the different facets of the issue. It's certainly not an easy
decision to make and compensation/benefits, for me, is only
one part of the question.

by witchdoctor

I am currently in the same kind of situation, I have been running my 'own business' as an independent consultant for 3yrs, and am being headhunted at present.

By being independent in the field I am in, I don't get long contracts, so there is always a lot of work doing admin, marketing, advertising, sales - all the 'everything needed to make a successful business', and I don't get the time to spend on the work I enjoy the most, working with clients.

Like the others stated, there can be a lot of downtime between jobs sometimes, especially in certain economic climates.

The company headhunting me works in the same field as me, so the variety of work (at least with clients) will be very similar, but it does have some benefits of:

* being in a team again
* regular income (my bank would love me for that)
* work/travel/extra expenses covered
* admin and other accounting work done for me
* my reputation grows even further
just to name a few things

But on the downside, I have to consider that -
* yes there is a loss of freedom/independence
* I probably have to pay for regular city parking
* I might have to fly more often (I hate flying but do it anyway)
and so on.

But there are also benefits and disadvantages for the company to hire me as well.

Whatever I decide, FTE doesn't have to last years these days, and I can pull out if something else comes along. (no real difference in time to a long contract) But since I have a lot of intellectual property I would be bringing to the company, I'd have that noted and sewn up before starting - if I do.

There are companies, then again, other companies, make sure of the rep by talking to ex-staff and current staff, and clients also if you can. Make sure you are comfortable with being associated with them, or have the power to change things if this is needed.

Don't settle for second best just for FTE, look out for Number 1 - you. Be sure the employer always will be.

Hope this helps,

by witchdoctor

Sorry, PS, a few other points to consider.

While working from home I have a 30 second commute to the office each day, but I work 14-16hrs per day, and weekends now too, because I can't leave the retched computer alone.

It's right there, and I have to walk past it every darn day, and I get to the office before I get to the kitchen. It's hard to go away for a few days without my mobile, or my computer with me.

I'm hooked, I'm addicted, and it is seriously starting to affect my health, far more than when I worked for FTE.

I'm disciplined in that I get dressed for work everyday, and run as an office.

But. While I do go out to client sites, there is simply not enough 'difference' in working by myself from home, or exercise in my day to get me out of my chair long enough.

Even if the FTE position I'm considering wants me to work p/t from home, at least I'll be moving around more and away from the computer as well.

In the end - I think that this could be one of the biggest unacknowledged advantages in going to work for someone else.

I also figure that most people 'burn out' in IT and consulting after about 10 years, and change what they do, totally. You simply get tired of the 'keep-up' situation, and the 'wonderful' users.

Use opportunities as they come to you to consider what you will do - AC (After Consulting).

Cheers,

by pmtk724

I'm definitely not "age prejudiced", but your insights are pretty darn good for a 23 yr-old...not being in the workforce that long unless your teen years were spend with a good mentor.

I'm faced with an offer to become a department director, but my little voice tells me I need to pursue building my company. As a contract temp CIO and program director, I see a lot of need for a fresh approach to IT project management and true integration of IT and business strategy, and have some peers who believe the same. I appreciate your comments and enjoyed the perspective of a younger, deep thinking individual.

In a nutshell, be persistent and continue to build with deliberation and enthusiasm while you're young and full of energy. Keep your eye on the ball...that is, gaining the knack of discerning how the whole picture of technology and biz architecture (not just technology) fits together when you deal with a client. Do that and you'll hit the ball out of the park.

Further, in my experience hiring contractors, it's not all that easy to find really good ones. Be a really good one...reliable, professional, formal, and work for the satisfaction of being a problem solver and not just for the bucks.

Go for it and good luck! Your "different view of the world" may be the key.

by apstlscreed

When I transitioned from FTE to consultant, the rule of thumb that was repeated to me and has worked very well ever since was "multiply what you would hope to make per hour as an FTE by 3." For example, I moved from a salary that worked out to $40/hr and developed an hourly billing rate of approx. $120/hr as a consultant. Obviously, this hourly fee is negotiable depeding upon the nature of the work and the client. Hope this is helpful.

Good luck.

by relm

What the independent can do that a full time employees can't is taxes. AS an independent you have the abilty to write off costs. Hence, education, travel, and many perks are a business expense. That golf game that you share with a client is an example. Trade shows are also in that category. If you have a good tax attorney (Not just a CPA) you can set up a corporate structure to be very well rewarding.

It is a matter of how and what you are doing. You can make independent contracting half the salary of an employee's (most do), or you can make it double. Knowing how to get the business and keeping the cash flowing is important. Off is off, when you stop it all stops. That is unless you have learned to create income sources that do not require the body shop mentality of hours for dollars. I perform work that is by the event, and not simply hourly. Hence, I can have several contracts at one time. It makes a big difference.

There is no simple answer!

Robert Elm
[HEGL International]
9812 Pleasant Avenue South, Suite 100
Bloomington, MN 55420-4702

952-884-4692 Home Office
relm@usinternet.com
ISO 17799 Information Security Management Systems
(BSI Qualified Implementation Management & Auditor)
WWW.heglintl.com

by pwhisman

You should also remember that the company will be paying for other benefits in addition to your salary. The company will now be paying 1/2 of your payroll taxes, Health insurance and paid time off. Other possible benefits are retirement funds - many companies match employee contributions. When determining your entire compensation package make sure you are including these "hidden" dollars - you may be surprised how it adds up.

by scott

I don't want to sound like a whiner,
but how do you guys make so much money?

I live in the Interior of British Columbia (45 min south of Kelowna.

I work as an independent Visual Basic / Microsoft Office Programmer and Access/SQL Database Developer.

I try to charge $40 CDN/hour ($28 USD/hr) for programming, and local business people around here just can't believe a programmer would charge that much.

I got a longer-term local contract where the company would accept that a programmer consultant could make $30 CDN/Hr. But, then 3 to 4 months per year is still spent looking for fill-in work.

I had some work last year working for a big Vancouver mining company and was able to charge $50 CDN/Hr. But they said I would have to lower my rates because their Electrical Engineers were paid far less than that. They said $35 CDN/Hr is the most they'd pay for programmers now.

A Vancouver bank saw my resume on Monster.ca and I had a phone interview with them for some Access/SQL database work. I offered the $35 CDN/Hr rate. But he said no thanks because he had six good resumes where the people would accept between $20 to $25 CDN/Hr.

If I were to find any full-time employment around here, then $20 CDN/Hr would seem like a dream job if they kicked in $100 CDN/month to pay my basic provincial plan.

How do you all get away with high contracting rates?

For that matter, how does a full-time employee make $90,000 CDN/Yr?

I have a Bachelor's Degree in Administrative Studies, a Marketing Management Diploma, a Computer Programming Diploma, 5 years of Visual Basic programming experience, 12 years of retail management experience, point-of-sale and barcoding experience, lumber and mill equipment experience.

And, somehow I just don't "get it". The programmers in Bangalore India make more money (30,000 rupees/mo; $1000 CDN/mo) than I do on my off months.

You guys floor me. I am in awe. I am outdone. I bow to you. You win. I give.

Now just a crumb please. . . how do you do it?

Just How Do You Do It?

How do you do it?

Howdoyoudoit?

Cluelessly yours,
*****@*****jackson.ca

by slam5

Well you know, it really depends on how good a programmer you are. Not all programmers have the same skill set and some of them can "program in their dream". I think the folks who are earning this kind of money are "hotdog" programmers. It takes a lot of work to become of this and it may involves some personailty/intelligence. Also, there is a glut of Microsoft programmer all over the world, if there is the case, it is a small wonder that you cannot charge $ 30 US an hour! Think about it, your perspective employer can use their electrical engineer to do programming! On the other hand, you cannot do the EE's work, right? Do you see my point of view now?

This discussion is closed to new replies.