Contracting - What is it like where you are?

[rkochis]

Hello all,

I was wondering what the rest of the country looks like regarding contracting.

I have been a Microsoft/Cisco Network engineer for a number of years (10+) and now currently reside in Pennsylvania. I have been approached recently for a couple of contracts regarding networking and/or telecom. The current rate here is $25-$28 per hour and the recruiting firm charges the client $88-$135 per hour for my time. The rates are decent but...

I can make the same amount of money as a finish carpenter or building furniture, both of which I currently do.

Is it just Pennsylvania or is it a similar situation in other parts of the country?

Thank you, Bob

 

[mmorancbt]

The problem is you are basing your contracting rate on an agency placing you. If you were the one making contacts and securing the $85/hr without a middleman, you would be in line to do quite nicely.

The uplift has no value-add and I don't even consider it contracting. It is more a temp-employee situation - the staffing company/agency is simply charging $50/hr to place a body. Shame, shame, shame.

Certainly take the opportunity, if you like the work, and then work to make some of the necessary contacts yourself and go direct. Even at $60/hr you can do okay on a long-term contract.

Matthew Moran

 

[BJCooperIT]

In the south, my consulting firms have charged anywhere from $55/hour (when they were desperate to get their foot in the door) to $105/hour (riding the government contract gravy train) for my time. I realize a bigger percentage of that fee than you have stated but then again I receive no benefits. When I lived in Virginia the fee structure was much the same as you describe.

select * from Life where Brain is not null

Consultant/Custom Forms & PL/SQL - Oracle 8.1.7 - Windows 2000
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[needcoffee]

Out here in New Jersey the rates are only marginally better but our cost of living is outrageous. For your level of experience average runs 33-40/hr for the same setup.

If they really want you, ask for more. They are seeing about 70/hr after taxes when billing 88/hr. Go for a closer to 50/50 split and demand 35/hr. Most likely you'll be on a 1099 so they won't be paying any benefits, mileage, or expenses. Whenever I've been a "subcontrator", I negotiate 1.5x rates for over 50 hrs worked.

needcoffee

 

[junglejimv]

I consult in the Midwest and am blessed in that the clients are all mine, no middleman. When last I worked as a 1099 (4 years ago) the firm billed me at $105 and paid me $70.

Now I bill at different rates depending on the client ($65, $70 and $75).

Since you know at what rate the company is billing you out at you can see what the market can bear in your area. The difference you mention is almost criminal.

It all starts with one client of your own, that you satisfy to the extent that they would not mind referencing you. From one, find another, etc.

 

[rkochis]

Thank you for the replies. A little additional info is in order.

The rate noted is for NO Benefits. I would love to get rid of the middleman, but the majority of corps here will not hire a contractor directly for some reason.

I previously was running under a 1099 status as a chapter S corp but the almost 90day delays in getting paid was killing me. I AM actually looking for permanent employment but... have to take what comes along.
Bob

 

[Rhys666]

Assuming here that most of you guys 'n' gals, (no offence intended to anyone!), are US based, what is the Contract market like generally over there?
I'm UK based and here the market is like a big bag of dog deposits, i.e., rates have fallen consistently for some time, there's a general lack of Contract work, new tax laws screwed Individuals set up as Business, (the way conracting works in the UK is essentially that you set yourself up as a Limited company with two other people to be chair and secretary of company (I think). Then pay yourself wage and dividends whilst company are contracted to pays your 'Company'), and there have been too many contractors to contract jobs for some time now and lots are moving back to permanent work.
Are the rules really that different State to State?
It sounds like I should feel quite lucky as well as employee's rights here have been well upgraded recently with the ratification of the European Convention on Human Rights, and new rules for Employers to follow on Wroking parents introduced in April.
Ooh, this may be a bit 'off-point', please tell me to get my own thread if you think I should, not trying to butt in on anything here...


Rhys
Thought out... Maybe,
Opinionated... Probably
But it is only an opinion!

 

[BJCooperIT]

Actually these are not "rules" here in the states that we are talking about but just the economic climate. The US is geographically large enough that while industry may be lucrative in the Northern Virginia (due to the military influences located there) it could be terrible in Pittsburgh which is two states away.

I used to consult privately. I incorporated and paid myself wages as the sole employee. The problem I experienced was having to spend too much time getting work and trying to get my clients to pay. I spent too much time on the road and spent too much money on travel expenses. Also there was paperwork involved, like quarterly tax reports, that I hated. I returned to consulting as an employee because it suited my personality better.

Contracting here slumped as IT stocks fell. I spent 5 months looking for work last year. My client had wanted to keep me on but could not obtain funding. The market seems to be rebounding here a bit lately. I just got a request for my resume (your CV?) for a six-month opportunity. My problem is that I live in a state capital and until the state government starts spending money again, I am stuck on the road.

[sup]Everywhere is within walking distance if you have the time. ~Steven Wright[/sup]
Consultant/Custom Forms & PL/SQL - Oracle 8.1.7 - Windows 2000
[sup]When posting code, please use TGML to help readability. Thanks![sup]

 

[rkochis]

Rhys666,

I agree with bjcooperit, thee are no rules here in the States.

I have been wondering if contracting was worth my efforts at all. I also was self-employed like bjcooperit and experienced the same issues. Some clients pay right away (usually the smaller companies) and 90+ days or longer (usually the larger companies)... The contracting market is picking up here. I have noticed the volume of advertisements is at least 300% better than it was two months ago.

I have been working on getting a contract as a telecom analyst and had four recruiters call me about the same position. I went with the first one that called and the rates are consistently dropping. A first the rate was $28/hour, then $25 and now $21.50.
I have since told this recruiter that the rate was unacceptable and went with one of the other recruiters that called me.

As I said originally, I can make more performing finish carpentry and will not be giving up my security guard job on the weekends.

Rhys, I think where this thread is is perfect, I originally started it to find out what was happening in the rest of the community (world?).

Maybe I should look at relocating to India! (Been there already and just kidding)

Robert Kochis
MCSE, CCNA (soon to be CCNP).

 

[hallux]

rkochis,
" The current rate here is $25-$28 per hour and the recruiting firm charges the client $88-$135 per hour for my time. "

My opinion is that is an outrageous cut. I have been contracting since 1994. I understand why you are keeping your options open. Of course I have never contracted outside of Utah, although I have traveled many places as a contractor for projects along gas pipelines, the company offices have been situated in Utah.

In the past I have seen up to a 50% cut on my contracts (which all included benefits), many of which have been multiple-year contracts (all non-government, mostly Energy companies).

My current contract W2 employer only takes off 20%, no benefits. These guys are great, the owner had been a contractor, and that's how I met him. He hated being ripped off and seeing the clients ripped off by high cuts by the brokers/contract agencies so he setup his company.

I have found contracts on my own as an independent (and keep them as long term customers), but maintain a regular contract at 40 hrs/week for cash flow reasons. I specialize in UNIX sysadmin, but am very much an IT generalist, as most SA people are.

-Brent

 

[mmorancbt]

Rkochis (Bob):

In reply to something you said a few post up and to others in the group.

First, you are right that many companies will not hire contractor's direct as 1099's. This is on issue that won't go away. 1099 contractors are a risk for both tax and benefit reasons. Many defense contractors and larger companies work through agencies for this reason alone.

I worked with Techies.com and a company called SOHO Resource Group, Inc to create a joint venture called the "Techies Career Benefits Network" which is a business vehicle that allows 1099 contractors to become W-2 employees for the purposes of their contracts that require it.

Also, you gain access to health insurance, tax administration and pre-tax savings programs through a 125 cafeteria plan.

FYI: I make no commission, there are other services that do similar things I just liked the fee structure and hands-off approach. SOHO, the back end processor of the program does not take active receict of your client, determine your rate, or promote themselves directly to your client for additional business. This is important!
If you want additional info visit

http://www.techies.com

and check out the Techies Career Benefits Network. They have a no-obligation free quote when you click through to the SOHO site.


Regarding rate: I work for companies in L.A., Phoenix, Atlanta, Manhattan, and Minnesota. I do not believe, in amy major metropolitan area, that you need to discount your rate for regional acceptance. It is much more an issue of how you market, how you get the contract (referrals are the best), and simply setting "your worth" somewhere.

However, you must also guage what you do. If you are strictly performing technical functions based on your client's direction, you will alwasy have diminishing value as technology changes and becomes more of a commodity.

I have never even looked at a salary survey or rate survey. I don't believe they are meant to gauge those who provide excellent service and create innovative solutions. And if your desire is to be a consultant/contractor, you should be looking to provide those things.


Regarding payment: Never, never, never, never, as an independent, take on a client who's payment terms create cash-flow issues. I consult a lot of contractors in this area and always suggest about the same thing.

When I take on a client, we create a scope of work. I issue a "work initiation invoice" as part of my proposal. Basically, if the project is less than a month, it is 50% of scope of work with final payment due 10 days after completion of project.

The contract is worded something like:
"A signed copy of this document and a work initiation payment for $3,200.00 (Three-thousand, two-hundred dollars) is required prior to project inception. I available to begin this project as soon as mutual schedules permit."

If the project is longer I take a 1/3 of the first month's estimated scope and create a billing/payment schedule. I issue invoices on Friday (every week) and receive payment the following Friday.

In many cases I take a 2 week retainer, and then bill against it. When the contract is up, I issue and invoice and pay for it with the retainer.

Before I hear any cries of that is not realistic, I have worked for several large government contractors (perhaps the worst in length payment terms). Without exception I have all of them on a 10 day payment cycle with retainer.

I am very frank with them and explain that I cannot afford to fund their payroll. I am a small operation and cannot keep both a reasonable rate and an extended payment cycle.

In those cases that they do not agree to the terms I do not work for them. It is not worth the worry and frustration.

The phrase I most often use is: "It is hard for me to remain interested in your project when I have to worry about finances."

I am blunt because in most cases they respond. Once again, if they do not, they are not the type of client I wish to work for. I provide value and am not there to perform charity work.

The only time I have altered this is for long-term contracts where I am paid weekly. In which case, I bill on Friday and get paid the following Wednesday.

Just a thought but I have done this since 1992 and was counseled the same when I started my consulting practice. I just signed a contract Friday and spoke to someone yesterday and received verbal agreement to the terms right off the bat.

In most cases, the "good" clients appreciate getting that piece of the negotiation out of the way. Once again, if not, they are the wrong client for me.

I hope this is helpful.


Matthew Moran