I've been contacted by a recruiter who's filling some contract roles. The prospect seems OK, it's 6 months W2 with a "likely" extension (I'm not putting any stock in that promise, to be sure). They're filling 20+ similar roles right now, and plan to bring on more.

My (limited) understanding of contract work is that you typically want to target a higher rate than you'd earn in a direct-hire role, in order to make up for the PTO shortfall (and other benefits like bonus potential, etc.)

In my initial discussion about the salary range, the recruiter told me that their client feels they can get away with offering less money because it's a newer/cutting-edge technology and future earning potential etc. I was a little surprised at this sales pitch; it's along the lines of (though not as egregious as) asking creatives to work for "exposure" instead of money.

Specifically, this would be in the field of Robotic Process Automation.

What they're offering: $43/hour, and while they do offer some 401K and insurance benefits, there is no paid time off for vacation, holiday, etc.

What this field pays: Google suggests the average salary in this field is $100-110K, or $48-53/hour.

What I'm currently earning: Based on 2080 hours (including 160 hours of vacation, 80 hours of holiday) my hourly rate is about $47. Adjusted for PTO (a total of 1840 working hours), my rate is $53.

I have no experience specifically in RPA, but I do have ~6+ years of professional experience as a developer in mid- mid-senior roles. I feel that based on my experience, industry "average" would be justified.

Is this worth pursuing or are we too far apart?

I've already soft-declined, but the recruiter is asking what rate I'd need and she will see if they can come to some agreement.

The target rate of $43/hour amounts to a $10K annualized pay cut if I took exactly ZERO time off. Taking vacation & holidays, it would be more like a $20K pay cut! There is also risk that the contract is not extended, or that I hate the work, or that I turn out to be no good at it and they let me go early, etc.

If you were to pursue this, how would you proceed with negotiations?

What other questions should I be asking myself (or the recruiter)?

Do your Spidey-Senses set off any warnings when you see an offer that's considerably below industry average?

  • "... you typically want to target a higher rate ... to make up for the PTO shortfall (and other benefits like bonus potential, etc.)" - In the US, vacation days are a drop in the bucket compared to insurances. Try pricing short term and long term disability insurance so you don't lose your car, house and spouse. The price difference between individual and group rates will make your eyes roll. – user25792 Sep 20 '19 at 16:12
  • @jww indeed. This isn't a 1099 gig though, it's W2 and benefits are provided by the agency. I'm not sure how they stack up to my current package, but they're non-zero. If I were full-time 1099, I'd be targeting a much higher rate ($120ish). – David Z Sep 20 '19 at 16:17
  • "... their client feels they can get away with offering less money because it's a newer/cutting-edge technology and future earning potential..." - A new technology usually has fewer practitioners, which drives up the price of labor because there are fewer candidates in the pool. The company can't change economic theory by fiat because they find it inconvenient or too expensive. About all the company will get is a bunch of junior developers who embellish their resume and can't produce deliverables. – user25792 Sep 20 '19 at 16:28
  • yes @jww my thoughts also. if the field is new, and there is demand for it, then they need to source talent away from their current (and probably more lucrative) roles working in more established fields/frameworks/etc. Thanks! – David Z Sep 20 '19 at 16:30
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    On hold so I can't answer. Based on my experience (30+ years), you're being played by the recruiter. The client might be offering a decent rate but you're being told $43, the difference going into the recruiter's pocket in addition to their normal fee. Don't ask - tell - them what you want and be prepared to walk away. If you lose out even at this stage, it will be to someone desperate to work for peanuts. With this trick, the client is getting stiffed too. Also, don't fall for "I'll call the client and try to get more for you." (they come back with $53). – Justin Sep 20 '19 at 21:23

You asked,

Is this worth pursuing or are we too far apart?

None of us can really answer that, because we don't know how they will respond. Of course, you can always give them a number. And the good news is, in this case, they have asked you for your number! Some may advise that you give them a number even higher than your target, so you have some "wiggle room" to come down to what appears to be a compromise. But I find that, if you have a hard number in mind, you can just tell them that's your hard number, and walk away from anything less.

Recruiting often involves negotiation. "Industry average" rates are often not incredibly relevant, given that they don't take any specifics in mind. However, recruiters generally expect there to be some back and forth - this recruiter has asked you for your number, so it shouldn't cause problems to tell it to them. The worst that can happen is they say no, and you walk away. But maybe they will say yes. Increasing an offer by the amount you're proposing isn't unheard of, especially for contract work (where budgets are often more flexible than direct FTE hires).

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  • The worst that can happen is they say no, and you walk away That's my current thoughts on the matter. Throw a number at them and see what happens. I'm currently employed, and they're trying to woo me away with ephemeral promises of "learning new tech" and "increased future earning potential". But promises don't pay bills :) – David Z Sep 20 '19 at 14:58
  • Yes. Anyone trying to lure you away should be well prepared to do so with something that is actually of tangible value to you! – dwizum Sep 20 '19 at 15:01

Full Disclosure: I grew up around Shopping. My father spent most of his career as a Shopper (contract engineer). My first real gig, while still in school, was a contract job. My first gig after graduation was a short-term contract job.

If the Direct salary you quoted is even remotely close to the going rate, then their proposed contract rate is ridiculously low.

The rule of thumb used to be "take the Direct annual salary, drop three digits off the end, and that gives you your contract rate starting point". This is based on the assumption of minimal to no benefits, no PTO, and time "on the beach", not getting paid, between jobs. Using this rule, the contract rate should be closer to $100-110/hour.

You don't say who the recruiting firm is, but I'd be willing to bet that it is NOT one of the established Contract Engineering companies.

Walk away. The Client and/or the Recruiter is/are delusional, or smoking something that doesn't have a tax stamp on it.

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  • Do we know that the quoted rate wasn't already a contractor rate? Do you know that your presented logic actually applies for this skill set? I know many contract jobs where the contractor rate is indeed much higher, but in many other cases (especially when there are some benefits involved, as in the OP's case) where it isn't. – dwizum Sep 20 '19 at 15:02
  • I was coming here to say much the same. Your tip about how to calculate rate is good. My formula is a little different, but it ends up pretty close to where yours does. This company has talked themselves into believing this. They will stick with this position, end up with mediocre and substandard talent, and will fail in 18 months. As they say in Hollywood: "Never read your own press." – Wesley Long Sep 20 '19 at 15:07
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    @dwizum, well, let's see. This is a recruiter looking to fill a CONTRACT position. They're offering an HOURLY rate for a CONTRACT position, which is standard practice. The corresponding SALARY (full-time Direct-hire employee rate AS OPPOSED TO Contract), when converted to an hourly rate, is significantly higher. The position is for six months, not "permanent". All of this says that they're offering $43/hour for a Contract position, and the going rate appears to be a lot higher than that. – John R. Strohm Sep 20 '19 at 15:08
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    @DavidZ, unless you've been around contracting for a while, it is difficult to know. Start by checking with CE Publications at cjhunter.com. (And EVERYONE makes claims like "an industry leader yadda yadda yadda".) – John R. Strohm Sep 20 '19 at 15:17
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    There are about 2000 working hours in a year (50 weeks of 40 hours), so this formula is basically "contract = 2 * permanent" - which is pretty standard. This offer isn't just slightly below market rate, it's slightly below half the market rate. – Robin Bennett Sep 20 '19 at 15:28

Is it reasonable for me to ask for a rate that's 20-30% higher than their target?

That's a perfectly reasonable request. The total cost to them is only the equivalent of an extra month or two on the contract.

However, based on your numbers, to market rate for a contract would be about 150% higher (assuming contacts pay double permanent jobs). It's just not worth taking that sort of hit to get into a new area and that only pays slightly more than you currently do (unless you personally find it really interesting)

It would be reasonable if they were recruiting a junior permanent person with a plan to train them, but a contractor isn't expected to stick around that long.

You don't need to tell the company that their offer is insulting, but it's OK to tell the agent that you're looking for the market rate. They'll probably still try to pressure you to take it (that's their job) but they'll also pressure the company to make a more reasonable offer.

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Is this worth pursuing or are we too far apart?

You are in a powerful position, they think you're qualified for the job, and you don't need this job badly enough to work for the rate they quoted. Given that you are already comfortable with walking away, you have nothing to lose whatsoever by pursuing this.

Make them the offer you'd like to receive (not just the minimum you'd accept) and see what they say. Again, you have nothing to lose (except for the time it takes to craft an email or have a phone call).

There is nothing wrong with you playing "hardball", just as there is nothing wrong with them doing so either. If they really believe that

they can get away with offering less money because it's a newer/cutting-edge technology...

then they won't hire you. If they turn out to be correct, and they fill these positions with capable staff, then not hiring you will have been a good choice for them. If they are wrong, and their project is delayed because they don't have enough people, or worse, the project fails because they staff they hired wasn't up to the task, then passing on you would turn out to be a mistake.

If, instead, that was really just a negotiating tactic, then you can negotiate back from your position of power.

Generally speaking, if you are currently employed, and happy in your job, for someone to recruit you away, they need to offer you a raise on top of what you are currently earning (that on top of the FT -> contractor multiplier).

In addition, by moving from a permanent role to a fixed-term contract, you are taking on more employment risk. You should be compensated for that as well.

Note that compensation doesn't always need to be monetary, it could be to work with a "name-brand" firm, or better technology, etc., but only you can know how much those intangibles are worth. None of that helps pay the rent.

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