Going from hourly contractor work to full-time salary... Pay (need answer fast)

In My Humble Opinion (IMHO)
#1

I am a contractor working for a client through a consulting agency. I receive no benefits whatsoever. I have been offered to work full time by the client, who I have been working for for over 2 years. I am making $56 an hour or approximately $116k a year.

Currently I do not need health insurance because I get it through my wife’s employer. I am also used to the money, although going on vacation hurts and I hear ching-ching sounds every hour when I take them. Or call out sick.

They have not asked for salary requirements yet or offered a salary. I don’t know how much more my consulting company charges them but I suspect it’s considerably more than I make. I’m also pretty confident my client knows how much I make.

The client will likely offer PTO, health benefits, and a little life insurance. Probably not much more.

My question is, how much should I ask for in salary? 3 weeks of PTO would be worth about $6700. Medical probably costs them a bit but is not really much of an an incentive to me. I would like to make what I make now but that is probably not what they would offer. If they don’t offer first and ask what my requirements are what should I say?

#2

It’s very hard to say knowing nothing about what you do. I can say that in my ragged-end ass of the TV industry, I make at least twice (on a weekly basis) as a freelance producer what my “peer” makes in a full-time network job. I don’t have any job security, pay for my own health insurance (I know that’s not important to you), and must fund my own pension. OTOH there are all kinds of amazing deductions you can take as a freelancer or S-Corp; how much that benefits you is a matter for your accountant to decide.

My advice is: if you have an accountant, a half hour’s conversation should be able to help you figure out what the break-even point is. If you don’t have an accountant, find one and pay her for say an hour of time to help you figure this out. You’ll need to bring a bunch of information to the meeting if it’s not someone you already work with and the accountant should be able to prep you with what she needs.

PS, you might might be able to negotiate your salary up a bit if you decline the health insurance.

#3

My guess is that your agency charges at least 50% more and probably 100% more than your salary to your client. Certainly as an independent consultant you would be charging far more than $56/hr.

If you make 116K/yr then you should ask for at least that. Benefits are on top of your salary. The only benefit I would consider as part of salary is 401K match. The rest is incentive to take the job. Moving you from contractor to full-time will save your client .

#4

A) If they know how much of what they’re paying the consulting firm you’re getting then your consulting firm sucks. That’s supposed to be privileged info between you and the consulting firm.
B) I’ve made the transition from consultant to permanent multiple times in my career and never taken a pay cut. The benefit to the company is they’re getting a full time employee who they like and for less than they’re paying to get that person as a consultant who may walk at any time. Consultants get other offers and hop ship more often than permanent employees. Or the consulting company gets a new client who wants butts in seats and is willing to pay more so they pull you from the old client, sometimes not even giving you that raise.
C) They may ask you to prove how much you were making from your previous position saying things like “it’s company policy that we don’t hire without a salary history” and this is generally a lowball attempt. Some states have even made it illegal to try to get a salary history out of a prospective employee. As rbroome stated they’re probably paying 50-100% more than you’re taking home to the consulting firm. Pick a number, I generally go about 10% higher than I’m taking home, and say this is my expectation. Let them decide if they want to meet it. If you’re happy working as a consultant, or especially if you think you could work somewhere else at that or better(which is probable in this economic climate) then be prepared to walk if they won’t meet your number. If they sense that you really will walk then they’ll probably meet your number.

Good luck, and don’t forget to peek your head up every few years to see what the market is for your skillset. A lot of times once you get in as a permanent employee they’ll put you on a cost of living treadmill where you effectively never get a raise and five years later you’re well under market for your skills as well as having ossified in the position. Depending on what your goals are this could be a good thing, becoming a pillar of your office can be good job security for people in certain phases of their lives, or a horrible thing because it holds you back from learning new skills and developing. Right now I’m ossifying a bit because I’m wanting to get the rest of the kids out of the house(four more years…) and then I’ll probably pull up stakes and become a consultant living on a plane for a while. But you gotta do what fits your life.

Enjoy,
Steven

#5

Nice gig. How do you get something like that?

#6

Because you are working for a consulting company, and not self-employed or have your own company, you are not paying self-employment taxes so you do not want take a salary reduction. I would suggest a going-in position of $116K; if you go below $110K then you’re not really much better off (although a matching 401(k) could be worth another couple thou). It’s hard to say without your resume and knowing the industry you are in–for all I know you are under- or overpaid right now.

From their standpoint, they are going to save money if they hire you as an employee, which is the main reason they would want to do it. Your current company’s markup on you could be anywhere from 25% to 100%. From an accounting standpoint, things are slightly more complicated than from a cash flow standpoint, but if they hire you at your current salary they are probably still better off. (They have to add overhead and fringe to your salary to calculate what you really cost them on the books, which might not look nearly as appetizing as if they just look at your salary.)

#7

Will the hiring company need to pay some “buy-out fee” to your agency? Once, when I switched from agency work to independent consultancy, the client had to wait a few months to avoid violating its contract with the agency.

#8

I would ask for a healthy raise over your current pay. As you point out, the additional benefits aren’t worth that much to you.

Via your work consulting, this company has determined that you are a valuable worker they want to keep having work for them. They’re currently paying 50-100% more than you’re making, so as long as your total compensation as a full-time worker comes out less than that, it should be a win for both of you.

The exact number probably is, but they probably still have a pretty good idea.

#9

They will have a salary range for your position based on regional factors and likely won’t want to go much beyond the area average. Also, you will likely not receive the equivalent to your contract paycheck based on benefits. Having health benefits with another source will not be a big factor in larger companies for several reasons including the fact that undergoing a “life event” (marriage, childbirth, spouse loosing job) means you’ll be using their coverage.

What you should ask for depends on your worth to the company, the position and local demand. Other factors, such as holding a necessary certification, also impact the equation. Probably a good idea to look online for typical salaries in your area.

If someone came with an unreasonably salary demand, I’d likely pass as I don’t believe I’d be able to keep the person engaged and happy in their position if their expectations were beyond what I could deliver.

I’m an engineering manager at a reasonably large company and work these issues constantly.

#10

live somewhere expensive? At my office here in Southern California that is probably the median salary for the professionals.

#11

Where do you live? In California they are now required to give you the salary range for the position if the applicant requests it.

The best time to negotiate a salary is when you start a new job. From now on you will probably see 3-5% annual raises. I would go in higher than my current salary and have them negotiate down. As people have said, your company has been paying a substantial fee to the employment agency for the past 2 years. They can afford to pay you more than your current salary.

#12

Thanks guys. I kind of went the middle route and when they asked me how much I wanted I said I needed this to feel like a promotion and to me that meant getting their benefits without taking a pay cut. To my surprise, they gave me $4000 over that and a (standard) 12.5% annual bonus. Fuck yeah!

#13

That is awesome, congratulations!

#14

Obviously you are a valuable employee! Congrats!
Now for the fun part. Do your job AND keep your skills up. The latter will be a challenge over the long-term but it keeps the brain in gear. :slight_smile:

#15

w2 or 1099?