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Started By
Message
How much should I request when moving from contractor to full-time employee?
Posted on 9/22/14 at 8:50 am
Posted on 9/22/14 at 8:50 am
I currently work as a contractor to a fortune 500 company through two middle men. The company I work for (I'm a full time employee with them) is contracted by another firm, who is then contracted by the Fortune 500 company.
The fortune 500 company has put in the request with the contractors that I be converted to a full time employee with the fortune 500 company.
So I know that my company charges a certain high rate to the top tier contractor and then that contractor charges a rate to the fortune 500 company so the cost to the fortune 500 is probably significantly higher than what I make now.
I think this gives me a little wiggle room in how much I ask for. I just don't know how much wiggle room I have.
For instance, let's say I make $150k a year, would asking for $165k a year be to much?
The fortune 500 company has put in the request with the contractors that I be converted to a full time employee with the fortune 500 company.
So I know that my company charges a certain high rate to the top tier contractor and then that contractor charges a rate to the fortune 500 company so the cost to the fortune 500 is probably significantly higher than what I make now.
I think this gives me a little wiggle room in how much I ask for. I just don't know how much wiggle room I have.
For instance, let's say I make $150k a year, would asking for $165k a year be to much?
Posted on 9/22/14 at 8:59 am to lsufanintexas
Just my opinion but I think you're looking at it backwards. Their associated costs will go up when you become an employee. Right now as a contractor you bear the full cost of everything. They will be sharing some of those costs when you become an employee.
Posted on 9/22/14 at 9:04 am to VABuckeye
quote:
Right now as a contractor you bear the full cost of everything. They will be sharing some of those costs when you become an employee.
This doesn't apply to me, I'm not 1099. I'm a full-time employee of one of the contracting companies that is one of the middle men. So both middle men charge the fortune 500 company higher rates than what I'm making.
I'm making these numbers up but let's say I make $150k, the company I work for charges the top tier contractor $172k a year, and then that top tier contractor charges the fortune 500 company $190k a year.
Posted on 9/22/14 at 10:32 am to lsufanintexas
quote:
I'm making these numbers up but let's say I make $150k, the company I work for charges the top tier contractor $172k a year, and then that top tier contractor charges the fortune 500 company $190k a year.
I bet the fortune 500 company pays more than that...
Posted on 9/22/14 at 11:08 am to lsufanintexas
We recently had 2 contractors who come form similiar situations as you describe. We paid a set hourly rate and the contacting company empoyee the person and provides that person with benefits they determined to offer. We had no say in thier pay rate or what benefits they were offered.
Well recently we decided to eliminate the contracting agency. We offered both contractors full time positions, with full benefits and retirement. Their hourly pay rate..went down!!
So your thinking may be a little off as a previous poster stated.
Well recently we decided to eliminate the contracting agency. We offered both contractors full time positions, with full benefits and retirement. Their hourly pay rate..went down!!
So your thinking may be a little off as a previous poster stated.
Posted on 9/22/14 at 11:39 am to ScottieP
quote:
We recently had 2 contractors who come form similiar situations as you describe. We paid a set hourly rate and the contacting company empoyee the person and provides that person with benefits they determined to offer. We had no say in thier pay rate or what benefits they were offered.
Well recently we decided to eliminate the contracting agency. We offered both contractors full time positions, with full benefits and retirement. Their hourly pay rate..went down!!
So your thinking may be a little off as a previous poster stated.
Maybe the overall hit to your budget went down. But the amount that the employee actually receives likely went up.
This post was edited on 9/22/14 at 11:40 am
Posted on 9/22/14 at 12:01 pm to lnomm34
Negative!!
Employees hourly rate went down $0.50 when transfered from contractor to full time employee.
Upward mobiblity and stability as full time employee was worth the decrease to these individuals.
Employees hourly rate went down $0.50 when transfered from contractor to full time employee.
Upward mobiblity and stability as full time employee was worth the decrease to these individuals.
Posted on 9/22/14 at 2:31 pm to lsufanintexas
we are in process of hiring a contractor, and the markup the firm charges is close to 45%. Just an FYI.
Companies will often pay more for a contractor so they can cut at will, decrease hours, not worry about benefits, etc.
But since they are subbing, its unlikely they know how much the mark up is. I would ask for 10-15% more, see what you get. They already like you.....enough to hire you, see if you can turn that into a job.
Don't be afraid to ask for more money, assuming you offer value.
Companies will often pay more for a contractor so they can cut at will, decrease hours, not worry about benefits, etc.
But since they are subbing, its unlikely they know how much the mark up is. I would ask for 10-15% more, see what you get. They already like you.....enough to hire you, see if you can turn that into a job.
Don't be afraid to ask for more money, assuming you offer value.
Posted on 9/22/14 at 2:50 pm to Hawkeye95
That's what I thought. I assume they are charging anywhere from 40-50% more on top of my base.
I'm going to put in for 12% increase and hope they either accept or counter for no less than 5%
I'm going to put in for 12% increase and hope they either accept or counter for no less than 5%
Posted on 9/22/14 at 2:59 pm to lsufanintexas
My bill rate is about 3 times the hourly.
1/3 to office overhead, 1/3 profit, 1/3 to met direct pay.
1/3 to office overhead, 1/3 profit, 1/3 to met direct pay.
Posted on 9/22/14 at 5:42 pm to lsufanintexas
It is actually not uncommon for your pay to go down when you take a full time role, this is especially true in Software Engineering roles. A person could me making $80-$100 per hour as a contractor, but when they go salaried, they don't come close to that hourly rate. Full time employees cost the company a lot more when you add benefits (vacation days, health insurance, stock options, bonuses, 401(K) matching and other perks). Sometimes the benefits add up to as much as your base salary itself.
Posted on 9/22/14 at 5:49 pm to saintforlife1
quote:
Full time employees cost the company a lot more when you add benefits (vacation days, health insurance, stock options, bonuses, 401(K) matching and other perks). Sometimes the benefits add up to as much as your base salary itself.
Agree. For example, my company matches $ for $ 401K up to 9%. Add in health insurance, dental, paid vacation & personal time, short term disability, long term disability, company paid life insurance, and other benefits, I would think the norm would be a reduction in salary. Maybe I'm totally off base though....
Posted on 9/22/14 at 5:56 pm to saintforlife1
I think this would be the case if he was currently being paid by the company he is going work for, but that isn't the case.
Posted on 9/22/14 at 5:59 pm to Epic Cajun
quote:
I think this would be the case if he was currently being paid by the company he is going work for, but that isn't the case.
Not completely true. They are already paying for him.
Posted on 9/22/14 at 6:10 pm to VABuckeye
quote:
Not completely true. They are already paying for him.
True, but his cost to them is currently much higher than it would be if he was contracted directly through the future employer. They are paying a company to pay another company to pay him, thus his current cost to them is greatly inflated.
ETA: I'd guess the ratio of his salary to his cost to them is much greater now, than it would be for them to take him in house, at his same hourly pay.
This post was edited on 9/22/14 at 6:12 pm
Posted on 9/22/14 at 6:32 pm to Epic Cajun
Let's use the numbers the OP used. He said the end client (the Fortune 500 company) is paying $190K for his postion, which turns out to be: $190,000/(40*52) = ~$91 per hour. But if they hire him full time, do you think they will offer him an annual salary of $190K? I think not. Because they still have to pay for his vacation days, health/dental/life insurance, 401(K) etc now that he is a full-time employee. If they offer him a salary of $190K, all his benefits will be on top of that making him much to expensive to hire as a full-time employee than as a contractor.
A senior director at my company once said, even thought engineers under him make about $100-120K in salary per year, it actually costs the company closer to $200K to employ the person when you tack on all the benefits. Believe it or not, they even look at stuff like cubicle space, laptops, company paid cell phones etc. when considering the overall cost per head count.
A senior director at my company once said, even thought engineers under him make about $100-120K in salary per year, it actually costs the company closer to $200K to employ the person when you tack on all the benefits. Believe it or not, they even look at stuff like cubicle space, laptops, company paid cell phones etc. when considering the overall cost per head count.
This post was edited on 9/22/14 at 6:34 pm
Posted on 9/22/14 at 8:04 pm to saintforlife1
I guess it would depend if markup #1 is based on his salary or total cost of employment. The latter being the only way asking for a raise would still net a savings by cutting out the middle man.
Posted on 9/22/14 at 8:13 pm to VABuckeye
quote:
Just my opinion but I think you're looking at it backwards. Their associated costs will go up when you become an employee. Right now as a contractor you bear the full cost of everything. They will be sharing some of those costs when you become an employee.
This. I pay my contractors more than I pay employees.
Posted on 9/22/14 at 8:21 pm to SmackoverHawg
Don't you pay them more to leave than for anything else?
Posted on 9/22/14 at 8:41 pm to saintforlife1
He should definitely make more working direct
The company may be paying him less per hour than they originally paid for him (even after adding benefits), essentially because they were already paying for his wage, benefits, and the cut of two different firms
By eliminating those two cuts, he should have some wiggle room no doubt
Even though indirectly, the F500 company was always paying for his benefits, contract or not
The company may be paying him less per hour than they originally paid for him (even after adding benefits), essentially because they were already paying for his wage, benefits, and the cut of two different firms
By eliminating those two cuts, he should have some wiggle room no doubt
Even though indirectly, the F500 company was always paying for his benefits, contract or not
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