Am I charging enough? I think that maybe I found myself in a strange situation

Question

Here is my situation with rough numbers. I would like to know if it seems to me that you guys like my thoughts (below). (Side note: I read many related questions and is useful as they did not seem to address this specific issue.)

For 2 years, I was a senior developer at Company X. I was a full-time worker, W-2, and earned $ 100 thousand / year with benefits. (Approximately $ 50 / hour).

[Then they fired me, but that’s not the point. I am in a big city and can easily find a job. I am very happy to work at home, not in the office.]

Within 2 months I did several independent projects for company Y, a web firm. It was 1099, and I pay $ 80 per hour. (I did about 100 hours or so months, and decided that I would need to get some other customers soon).

Company Y loves my job and got new jobs because of this. They want more of my time and offered me a 6-month contract by paying a fixed monthly rate regardless of the hours (they assume 40th per week). I will still work remotely.

SO ...

My freelance rate is higher than my old W-2 full-time rate for obvious reasons. I also understand that since freelance full-time work requires a lot of administration and sales, I would never get 40 hours a week for $ 80. (I played with the idea of ​​charging more from other clients, for example, $ 100 / hour.)

However, I understand that from the point of view of company Y, by offering me a guarantee of a 6-month contract with the holder, I have to lower my hourly rate (volume discount?), Since now I will have more opportunities to pay for hours and less administrative responsibility. This should still be a boost on my old W-2 job, as it is worth it, especially because of the lack of benefits and the more difficult tax situation.

Now, I would like for me to initially pay Y $ 100 / hr for the initial freelance projects so that I can give them a better deal and pay them $ 80 per hour for this 6 month contract.

Sorry for taking so long to wind up, but I hope you guys get my drift. Essentially, I have to give them lower hourly, but I really don't want to.

Is my guess correct that hourly rates are coming,

full-time-W-2 <long-term 1099 <1099 ?

If so, what could be a good negotiation strategy with Company Y in order to maintain my hourly rate and also effectively reduce their volume discount? "Hey guys, you were getting an ultra-low bet on these individual projects!"

Answer 1

Company Y loves my job and got new jobs because of this. They want more of my time and offered me a 6-month contract by paying a fixed monthly rate regardless of the hours (they assume 40th per week). I am still working remotely.

Are you sure about that? At any time, when I was asked to work a “fixed monthly rate”, it was not a too subtle way to try to get a lot of “free” hours (effectively a massive rate).

I don’t know of any consulting project where you can just leave at 40 o’clock, especially if the client receives a “push”, where they need materials sooner rather than later ... urgency always belongs to them, and often it’s rather than real "

So, if they want you and want a discount, give them maybe $ 70 / hour for the HOUR contract for 6 months. This way they get a discount and you get protection from overtime and any urgency that may arise.

Anything else and you will get hosed. Almost guaranteed.

Answer 2

I am not from the USA, so part of W-2 and 1099 goes beyond me, but I will talk about the rest, because these problems are quite universal.

Generally speaking, the rule of thumb is that if you earn $ 100,000 per year, you must charge $ 100 per hour, or close to it. This should cover some or all of them:

• Lack of personal / sick leave;
• No paid annual leave;
• No bonuses;
• No training;
• Insurance (healthcare, state responsibility, professional compensation, etc.);
• If you do not work with a certain number of hours per week, there is variability in income;
• An employer can get rid of you much easier than a full-time worker.

Now this is my experience in Australia and Europe, where you really have quite significant public medicine. I would suggest that since you are not in the United States, health insurance costs may lead to even greater growth, so perhaps you should ask for $ 120 per hour.

Note: if you don’t pay for things like professional insurance or you don’t have any legal protection (for example, through a limited liability company), you play with fire, and I urge you to seek professional advice on establish a structure and / or obtain appropriate insurance to adequately protect you, your assets and your family, if you have one.

Of course, you must balance all of this against the current market conditions, which are not so great (but vary from locale to locale).

I like the hourly scenario because it is "fair." By this I mean that if you work 80 hours a week to get something, then you get paid for it. You just get paid for what you do and what it is. It's simple.

Now employers often do not like it because they cannot necessarily predict (and, therefore, the budget) costs.

The next step is to pay a daily rate. I usually try to resist this, but I will follow him in certain situations. If so, you need to pinpoint what a day is.

• If you work at all, do you get paid for half a day? Full day?
• Do you need to work a certain number of hours to pay per day?
• Are you only paid for the full day no matter how many hours you work on that day?
• Can you get more than 5 days a week?

As a rule, for such situations, I will gradually change my hourly rate to 9, basing it on an 8-hour day. You take a certain risk, so you need to pay for it.

In addition, you can switch to weekly and then monthly. They also have the problem of determining what constitutes a week or a month. There are an average of 20 or 21 working days per month, so multiply your daily rate by 21-25 to get a monthly rate.

Regarding the negotiation strategy, make the most of the points listed above. If $ 120 / hour sounds like a lot (for them), list all the costs, which are also the costs that they save. Use your proven track record to your advantage, because I can guarantee that for a company there are several things that are disastrous for a company than incompetent software development.

Answer 3

You could just tell them that the contract is only for 40hrs / wk max, and if you need you to switch to it, then it will be at your new rate of $ 100 per hour, which may not be a problem if You gave them a discount for the first 40 hours.

Then write it as a lesson learned and for any new customers change your bid. :)

Answer 4

6 months, 40 hours a week = almost 1000 hours, so for every dollar that you reduce from your hourly rate, you will throw them off at $ 1,000, so a drop of $ 5-6 per hour should be quite significant, IMO.

Answer 5

Is this "discount" still being discussed? If not, the simplest solution is to just go ahead with the implicit assumption of no change in payments - remember, a “discount” is something generous, not mandatory.

Answer 6

I am not an expert, but I would explain to company Y that the initial course was a discount. If you can convince them that you always put a minimum minimum, instead of trying to buy back more money from them, I think they consider it positive.

If you were completely healthy with the blow of a significant percentage of your course, I think that deep down they will think that you play them at the beginning.

As an analogue, let's say you go for a lot of cars. The seller first quotes $ 30,000. You come back with $ 20,000. He accepts without hesitation. In fact, you can get a lot, but the seller still becomes a shadow.

Answer 7

They want more of my time and offered me a 6-month contract, paid a fixed monthly rate regardless of the hours (they assume 40th per week). I will still work remotely.

My argument is:

I probably end up working more than 40 hours a week. If you prefer a 6-month guaranteed contract, paid hourly, rather than at a fixed rate, we can review this.

However, I would also say that a six-month contract is not necessarily "long-term" - more than an "average term."

Answer 8

So, 1: you do not want to lower rates, 2: they need a fixed rate.

Most likely, the fixed part is more important than the lower part. So call them and talk to them first and find out if this is true. If this is due to being corrected or being cheaper. Secondly, explain to them that you cannot lower your bid. There are many arguments for this. Good luck