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  1. #1
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    Consultant asked to switch to employee status

    Hello all:
    Working as a consultant the company I'm contracted out to has offered me a full time employee position and has asked the salary I would accept.

    I know the billing rate the company is paying for me and wonder if there is any hard and fast rule as to the salary I would ask for. I'm thinking I would take the billing rate as my total compensation split out a percentage for benefits and take the rest as salary. I'd appreciate hearing any opinions/experiences out there on the forum.

    One last question, should I contact the consultant company I'm contracting through (I'm an independent) or should I let the company hiring me take care of any interactions. I don't want to step on anyones toes so I want to do the right thing here.
    Thanks and regards Neil

  2. #2
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    Re: Consultant asked to switch to employee status

    neil76,
    a lot of the possible answers to this may be mute depending on your specific contractual position with the various parties mentioned.
    In the context of the Consulting firm having a no poach agreement with their client it may only be binding on direct employees of theirs rather then Independents working through them, or you may be caught by the same.
    There may be a clause in your contract with the consulting firm, which may or may not stand up as in some juristictions it could be classed as a retraint to trade, that prevents you from working for a client of theirs you have worked in within set geographical territories and timeframes (say six months).
    With regards to the question on who should approach the consulting firm, I have first had the discussion with the party that has made the approach and see what they feel on the matter, for some reason they may not want you to deal with the consultancy on this and it may blow the job offer - not something you might want if you want to work there.
    Personally I have always told the client of the rules on approaches and mentioned to the consultancies of all approaches, even if I decline them as it just feels the right thing for me to do- the UK test market is too small to burn bridges, too often.
    As for the remuneration - it depends, it might work in: the UK, which is the market i know, normally the total package comes to around 60-70% of the contract rate on conversion and may be less then 50% of what the total monthly bill was to the consultancy.
    However I have know people move to Investment Banking Clients from contract to FTE and actually be better off with the bonus's paid.
    ------
    Regards,
    Neill McCarthy
    Agile Testers of the World UNIT!

    For more contextual Musings visit http://www.testingreflections.com/ and now at http://www.sqablogs.com/neillmccarthy/
    ---

  3. #3
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    Re: Consultant asked to switch to employee status

    Neil,
    You say you are an Independent, yet you are working through a third party provider?? If they are paying or providing any benefits like medical, then you are most likely bound to them. I would read the small print if you have signed anything. In the U.S. most contracting agencies have a no-hire clause of some sort that needs to be dealt with. Also keep in mind that the bill rate also covers insurance that someone will be there to perform the job if you can not make it. Plus any benefits and time keeping services, etc. These are all part of the fee. 50% - 60% seems quite fair, unless you know something we don't.
    Personal Comment

    Success is the ability to go from one failure to another with no loss of enthusiasm.
    ~ Winston Churchill ~


    ...Rich Wagner

  4. #4
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    Re: Consultant asked to switch to employee status

    Neil,

    I know some people in the situation you are in. They were specifically brought in under a "contract to hire" condition, so the cautions that Rich and Neill voice may not apply. However, their caution is prudent. You must check out the legalities before you make a decision, else you could be in very hot water.

    Regarding compensation (in the US). Typically, contracting firms pay only up to about 50% of the contract rate directly to the contractor in the form of salary. And that is high. The typical range is from 33% to 50% of contract rate goes to contractor. The cost of benefits provided to the contractor in terms of non-salary compensation (health insurance, disability, taxes, etc) is typically about 30% of base salary. That says that the total compensation from the firm to the contractor is somewhere in the 40% to 65% range of contracted rate. The rest is profit for the consulting firm.

    When the company you are doing work for asked you for a salary number, they want the base salary number - they will also have to figure in the 30% number for benefits for their total compensation numbers.

    The bottom line is that if you ask for anything near your contract rate in base salary, when they figure out total compensation, you may just price yourself out of the market because it will be cheaper to them to maintain you on contract. Let's face it, there are two reasons they are making you the offer - they think you have the skills they need, and they think they can get it cheaper by hiring you away from the contractor firm. If you take half the equation away, you shoot yourself in the foot. There are plenty of people with the skills, unless you are in a very specialized niche.

    So, having said all that, what I would do in your situation is this: if you are comfortable with your paycheck today, go to them and tell them that you need xxx dollars in your takehome pay every two weeks and let them do the higher math. If you need slightly more, then ask for that. But don't shoot for the same rate that your contractor is charging them. They will be polite and the offer will die.

    Darrel

  5. #5
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    Re: Consultant asked to switch to employee status

    Thanks for the responses Neill, Rich, Darrel, and Bob. Your responses are all very informative and I am going to save this page for future reference.

    Just to add a bit of information, I am an Independent 1099 contractor coming through a preferred vendor (say company A, their cut is 15% of billings) and do not receive any benefits. I signed up with "Yurcor.com", they collect my invoices from company A, issue pay checks, pay my taxes, supply medical-dental (the cost of which I pay entirely)etc.

    I know something about the company and also know some employees there, I have an idea of what the salary range might be, and also might be able to get some information from the employees there.

    I agree with you Darrel about being careful I don't price myself out of their acceptable range. I mis-spoke in my original message, "I'm thinking I would take the billing rate as my total compensation split out a percentage for benefits and take the rest as salary." I meant the rate I receive and not the billing rate.

    So as an example considering benefits amounted to 30% of total compensation, if my total yearly earnings are 100K, I would ask for a salary of 70K.

    Considering Bob's point about negotiating, I know I should have asked the company for a salary amount, at the time the offer caught me by surprise. As I stated above, I know a little about the company, so I would ask for an amount a bit over what they would pay, so instead of asking for 70K, I might ask for 75K. They might just accept the higher amount, if not I still have a little room to negotiate. If I have to lower my initial amount I can ask for an increased year end bonus or extra vacation, etc. I know if I made the company give their number first I imagine I'd be in a more powerful negotiating position, how much worse off am I the way I'm approaching this negotiation?

    I'll close for now and thanks again all.

    Regards
    Neil

  6. #6
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    Re: Consultant asked to switch to employee status

    neil76

    No hard fast rule. It all comes down to the market and your own negotiation skills. However understand that generally they are only offering it to cut costs. What I would do is think of the lowest figure you would accept and add 25% to it it. Also I would aske them why the are offering such .... is it a cost minimisation exercise or are they trying secure your services ?
    Robert Tehve
    rtehve@bigpond.com

  7. #7
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    Re: Consultant asked to switch to employee status

    Try to get "the company" to give you a $$ figure first. It's clever negotiating on their part to ask you what it would take to hire you full-time. Once you mention a $ figure, that become the upper bound of negotiations. You should expect to be countered lower than that (unless, of course, you are a critical cog in the machine, irreplaceable, and with the unique skill set required for the job at hand).

    They should be able to break down their offer showing the total value: salary, benefits, time off, etc.

    While they are compiling that information for you, make your own calculation of the current situation: your current salary, benefits package, time off, travel reimbursement, etc.

    As for communicating the offer back to your contracting company, that's really the responsibility of "the company" trying to hire you. You can ask questions of them regarding whether this is allowable under their contractual agreement, the conditions that would make it happen, etc.

    Oftentimes, the contracting firm has a graduated fee if their person gets hired (example: within 3 months, 25% annual salary, within 6 months 15% annual salary, after 6 months no charge, etc). This is to help them recoup recruitment and sales costs in spite of the lost revenue.
    Resistance is futile.

    SuperK

 

 

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