I have worked in IT for 25 years. I am currently a “techniccal manager” meaning I do some website development, but mostly manage our offshore team in development of multiple projects, coordinating between them and our DB developers, quality assurance team, and the business analysts. I am a contractor in the north New Jersey area, and have worked here for 1 1/2 years without a raise.
What percentage should I negotiate for for a one year extenstion?
if you’re a contractor can’t you just check what the market looks like and go from there?
I have been in IT for 36 years. There is no numeric answer to this question for a particular individual. Even if you knew the actual average annual raise for someone in your job category, it doesn’t mean it would apply to you as an individual.
The best way to ask for a raise is to demonstrate what value you have to the company you are contracting to. Make the case that are you are providing value beyond your current rate. Of course, I have no idea how to do that because I don’t know what value you provide and I don’t know your current rate. As a manager who has been making salary and rate increase decisions for 26 years, I can tell you that the only thing I consider is the person’s level of performance and contributions, not industry averages. I use the average as a guide but if someone is overpaid, they are going to get little or no increase, and if someone is underpaid I am going to give them a big bump.
Also, as a contractor, you may have a little more power to negotiate but only if you have alternatives if you can’t come to terms with your current customer.
That’s a good question. Since I’m familiar with that area, I will throw out a number. If you are getting $80.00 an hour on W2, ask for $85.00 an hour. But if you have been getting called for other contracts which pay more than $85.00 an hour, then you should ask for more. Now some of you will say that after 18 months the OP should get more than $85.00 an hour, but considering this contract house has not brought it up to the OP, it sounds like they would be unwilling to go with the market rate.
Of course, all this also depends on if you like the job you are at and want to stay. Sometimes a few more dollars per hour to change isn’t worth it.
But to be honest, the only real way to get a raise after that period of time is by taking another contract with another contract house with a different assignment. I say this because some contract houses have a business model where they simply aren’t going to pay you as much as their competition. And depending on the number of contractors they have with that client, don’t care because they will replace you with another contractor. But if your contract house has been working hard to get someone in there, and trying very hard to get more people in there, they might not want to loose you. After all, if you leave the contract there is no guarantee your contract house will be able to put in a replacement and the work might go to their competition.
If switching contracts, be very careful to compare cost of health care benefits and such. Sometimes your out of pocket for the premium can be double with another employer who has selected and they might be kicking in more than the 10% that’s required.
It’s hard to say what a good annual raise ought to be, but I do know that the real pay increases are found when you switch companies, not by staying put in one place.
That said, I’ve got between about 1 and 2% consistently every year for the last 7 or so years. Before that, it was more haphazard since my jobs were 2-3 year at most, so I’d usually get a decent raise initially, and then either not much of one the following year (why i left one job), or in one case, I got a fixed dollar amount raise instead of a percentage and then got laid off 3 months later.
When I managed contractors, in New Jersey, their company negotiated their rate every year, and some of the increase went to them, I assume. (They stayed for a long time - this was pre-Microsoft.) Our normal salary administration process did not cover them. Since there is no expectation of long-term retention of contractors, raises to reduce turnover is not going to happen, except in the pay me more or I walk sense.
They may be more willing to raise the rate especially if that’s the rate they are paying for newer contractors. For example, if 18 months ago they were paying contractors like the OP on a W2 $70.00 an hour, and the ones being hired today for the same project are getting $75-80 then it can be a good point for the contract house to make. As for retention it depends. If the company has a complex situation (also meaning the office is just a mess) where it can take months for a new person to become really productive it can give them a better reason to increase the rate.
I’ve gotten raises on contracts but the better raises can from going with a different contract house for a new assignment.
As a software engineer I can tell you that this is hugely variable. HUGELY. One year, during the dot-com boom of the late 90s, I got a 13% raise. In many other years, I got no raise at all.
That’s a good point. The barrier to moving to a new job would seem much lower for a contractor. For permanent people, new hires get paid a competitive salary but experienced people tend to stay even if ripped off. So there is salary compression. Since the contract house makes more for higher salaried contractors, I’d expect less of this for them.
By retention I mean over years, not over months. I don’t know what the contracts say about people leaving suddenly the way a permanent employee can.
I was on a contract with a fortune 500 company. In a fluke I got a copy of the renewed contract that was signed by management and purchasing. It had some very interesting things on it. Even though the contract was between the client and my contract house, it specifically had my name on it that the contract house was supplying my services for the assignment. It didn’t say anything about substitutions and it was clear that either party could terminate the agreement for any reason. My employment agreement with the contract house was the same, that either of us could terminate the employment agreement at any time. So this would require the client to replace me by issuing a new purchase order and it would be subject to negotiation with another contractor’s name on the client contract agreement.
I also found out my exact billing rate for the new contract, and there was also additional information on the contract that purchasing had budgeted 10% additional costs for overtime. I had wondered how strict they were with 10% over budgeted additional costs, but it turned out the client supervisor just had to get a signature on it to authorize more overtime. It was done without even any discussion with me to limit the hours I worked. But this was a huge project and they weren’t stingy with overtime like some other clients.
Another contract I was on, my supervisor told me since I was highly paid compared to the costs of the permanent employees that he preferred to have them work any overtime before I did.