So I'm in a contract to perm job. I was hired by an agency and get an hourly rate to work for a company. I'm expecting to be offered a permanent position with the company in October. I'm wondering how this works. I'm assuming the agency has nothing to do with the permanent part. So, the company will likely just come to me and say they'd like to offer me the permanent position and it pays "x". Currently I'm not getting paid much as a contractor and hoped for a nice bump but I'm wondering if its common for the client company to know what you're getting paid by the agency so you're basically left at their mercy on the new pay. Is that accurate?
The answers depend on the industry you are working in.
In the IT industry, it means that you will work as a contractor from now till October. By October, if you have been doing a good job and the company makes profits, then they will give you a new job offer to convert you to a full-time employee.
In the IT industry, when people are converted from contract to full-time positions, some of them would get less salary but more benefits such as health insurance, 401K, stock option, bonus, Pay Time Off (PTO), etc... However, if the company thinks that you have very excellent technical skills, then they may even pay you a higher salary to keep you working for them.
Furthermore, full-time employees are less likely to be laid off compared to contractors. So, job security may be better for full-time employees.
The company will decide what new salary and benefits to offer you as a full-time employee. The third party staffing agency will have nothing to do with those. The company may pay that agency some money to convert you to a full-time employee. From that point on, you will only report to the company.
Of course, you can negotiate your new salary as a full-time employee with the company if you want to. Conversely, the company can also reject your demand for a too high salary if they want to.
So, the company will likely just come to me and say they'd like to offer me the permanent position and it pays "x". Currently I'm not getting paid much as a contractor and hoped for a nice bump...
Currently you are getting paid Z per hour. The client is paying the contracting company Z+Y. That Y is supposed to cover your benefits and their expenses and some profit.
If the contracting company is providing you full benefits, and you are a w-2 employee, then the value of Y can be quite large. If your are a 1099 employee and they provide no benefits then they were expecting that Y is small because Z was supposed to cover your benefits and the company part of taxes.
...but I'm wondering if its common for the client company to know what you're getting paid by the agency so you're basically left at their mercy on the new pay. Is that accurate?
They likely know what you are getting paid. That likely was part of their deal with the contracting company.
The question is will they be willing to make the total cost to them exceed what they were paying the contracting company for your pay, benefits, and profits. You will have to decide if the pay and benefits meet your needs. Then either negotiate or keep looking.
Because what will happen in October is a mystery, you might want to start or re-start your job search.
I will start with an answer to anyone else in a similar position to the OP:
There are 3 "likely" outcomes of any Contract to Perm arrangement.
- Either you or the company may decide to terminate the arrangement before getting to the "Perm" part.
- Both you and the company are "agreeable" with continuing the contracting situation (you may not be happy, but if you are not willing to terminate it...).
- The position transitions to a permanent one.
I have two pieces of advice:
- Don't accept any position, unless you are okay with all three outcomes listed above.
- In advance of starting the job negotiate (and get in writing):
- The end of the contracting period (the date when the contract ends and the perm position starts), obviously the company will have an option to terminate instead of moving forward - I would recommend you also negotiate options for you to quit / notification periods etc.
- The initial salary / benefits package that will take affect once the contracting period transitions.
Back to the original question, it soundly like you don't have either an end date or expected package value.
So my advice to the OP is to consider these as if they are two seperate jobs:
- The contracting Job
- The perm job.
Decide what you want from each, if the contracting job is not what you want (long term) set yourself an end date - consider applying for other jobs outside this company.
For the permanent position view it as you would any other job - decide what you want to do and how much compensation you want for it. Also remember you have one additional benefit; which is you have far more insight into this company since you already work there, so use that in your decision making.
With respect to the question about what salary the company will likely offer I don't think there is enough information to even hazard a guess. Hence my previous point about deciding what you want.
Your viewpoint is incorrect. The company doesn't just start off with some random number.
They can inquire as to your hourly rate with your agency. "Project" based agencies are less inclined to share, in order avoid disclosing their markups. "People" based agencies share their markups and your take home rate. This is an easy way. They can match the rate you're already getting, and add on benefits as a bonus to you. You might find this scenario if the company has a smallish HR department.
A larger company will likely take a different approach. They might use third-party surveys to determine what the current market rate is for the work you do according to where you live. This might mean an increase in salary for you, or unfortunately, a decrease. You just never know.
In any case, keep in the back of your mind that you might need to defend against a company deciding that it makes sense to pay you less than what you're making now. You might need to prepare some suggestions (I don't want to say "arguments") as to why you should be paid more. Ultimately you might need to be ready to walk if they won't budge (avoid quitting until you find something else!).