A friend of mine has been a W2 contractor working in IT for a large client company. He said he’s coming up on a year in the job and the client supervisor already said they intend to renew him for at least another year.
What is the going rate for a raise on a W2 contractor after a year on the job? Does 5-6% sound reasonable?
What are people’s experiences?
Where, what skill set? Dare you say what client? How essential is he to the project? Does he actually have room with his firm to negotiate, or is he REALLY an employee of the firm (w-2 consultants work both ways). What’s the job market like where he is?
There is a Twin Cities company notorious for extending contractors, but forcing lower rates after six months. Don’t like it, they’ll drop you. And this with a market where its easy to place people, hard to find them.
w-2 raises? For many employers the while point of a w-2 contractor is that they are not a an hourly or salaried “employee” that might expect raises. He can ask for a raise but I’ve never heard of any protocol for w-2 employee getting an annual raise as a built in expectation.
https://www.learnvest.com/knowledge-center/the-difference-between-a-1099-and-a-w-2/
Indeed. I have a large team of W-2 contractors that I manage for a client and the overall expectation is that if the role stays the same, the rate stays the same. I tell the team that realistically, if they want more money, they need to step up and add skills and take on additional responsibilities, or work with me to find another placement that pays more elsewhere. Once I’ve negotiated rates and roles with the client company, renegotiating those becomes a major event, not likely triggered by the rollover of any single contractor
The average annual raises in the US since 2011 have only been 2-3%, more towards 2% than 3%, so unless he’s pretty special…
He’d be going back to his contract house. The contract house would either eat the raise out of their markup, or they’d increase the rate to the client. Most likely, they’ll just say no. The client isn’t likely to take a rate increase, large companies usually work off a fee schedule and what they are willing to pay is what they are willing to pay. Whether the contract house will eat the difference sort of depends on what their margin is.
Thanks. That’s for salaried positions, but it is a good starting point. According to the Consumer Price Index, it has increased about 1.3% since 2015.
W2 contractors in IT can stay in the same assignment for years, and they do get rate increases and they do increase the billing rate to the client too. A friend of mine was on a W2 contract for 5 years, and he got raises. The posting was more about what is the going rate percentage wise in 2016.
I discussed this more with my friend and suggested he talk with other contract houses he has been contacted to see what rates increased he can get by leaving. He said he gets contacted several times a week for other contractors. Because that’s the actual market.
If he’s working for a contractor he can ask him for a raise, the contractor work out the price with the client. If he’s an independent he can ask the client directly but they’re likely to just say no. Many companies have an established contractor rate and won’t change it on an individual basis. Contracting isn’t a job, there’s no expectation of annual increases, and there is an expectation that contractors are replaceable.
While they might be replaceable just as any other regular employee is, they have to consider having all that experience walking out the door where they would have to start over with a new unknown contractor learning all their office specific proprietary methods assuming they will work out. I’ve had client supervisors tell me increasing a contractor’s billing rate for them to get a raise was entirely for the benefit of the company, because it was more cost effective to authorize the raise than replace them. I’m talking about very large companies where the W2 contractor is involved supporting the main line of business. Someone who is there to simply reboot routers or at a Help Desk can be easily replaced.
I’m sure it happens, but that company is being foolish. Contractors have no ties to the company, if they are valuable and not easily replaced they should become employees or have a custom long term contract which commits them to the company. I would be surprised to see this happening in IT except in some cases where the contractor has a long term relationship with the company already, not the one year relationship you describe.
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My husbands biggest long term client he’s had at least four bill rates with. And sometimes it goes down - if he isn’t busy with other clients and have a budget crunch, he’ll give them a lower rate - some money is better than no money for him. But it works the other way as well, when he is exercising skills that are really rare, that they really need - his bill rate goes up. But he’s corp to corp, and he usually has more than one client at a time - and the decision makers at the client is a guy he’s worked with at three different companies over more than twenty years, and the CIO - who he worked with at his last real job - and who loves him. So there is some level of trust and honesty around billing that you don’t get in most body shop type jobs - and he’s working at the level where they get to ignore the established contractor rate.