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I'm currently working for a contracting company (X) and I've been assigned to this other company (Y) that needs a web developer. However, I'm planning to leave X after my existing contract and work directly under Y.

Regarding the salary, I want to be prepared to know what to say when the talk comes up. From what I've heard, X takes a pretty large cut so what I'm thinking is if I work directly under Y instead of X, Y would be saving money.

Is it reasonable to ask as a salary from Y whatever they used to pay X, minus the monetary value of the benefits?


Additional info :

I'm planning to leave, in case I can't work under Y directly. So I guess that adds to my negotiating power.

  • Even though you'll never get what they were paying X to hire you, there IS a good chance that they are willing to meet somewhere between what they were paying for you and what they normally pay for someone in your position. They are getting the same worker, who has already proven himself, which saves them time and resources that would be spent finding a new recruit to fill the position. Some companies will take the "you're no longer a contractor so expect to be paid less" stance though. In the end it's a normal salary negotiation except you know they have a fairly high ceiling. – Cronax Mar 19 '15 at 8:35
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Is it reasonable? No.

When companies use contract workers, they expect to pay a premium for the flexibility and simplicity. With a contract worker, if they decide that this person is not working out, or they just don't need the extra staff any more, they can cancel the contract or not renew the contract and their obligation is over. With a regular employee, most companies feel a moral obligation that even if the employee does not perform as expected, they must keep him on and try to work with him. Or if he finishes a project and there is no immediate other work for him, they still keep him on until more work comes along. Here in the U.S., if they lay someone off their unemployment insurance premiums will go up. Regular employees require more paperwork and administrative costs. Etc.

It's like the difference between renting a car and buying a car. The cost to rent a car for a month is far more than you would pay on monthly payments to buy the same car. So why does anyone in his right mind ever rent a car? Mostly because when you rent, then when you no longer need the car, you return it to the rental company and you're done. If you buy a car and decide you no longer need it, you can't just take the car back to the dealer and stop making payments. You're stuck with the obligation.

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    I like the rental car analogy. I don't think OP would agree to buy a car from the dealership at the aggregate cost of the rental rate. – cdkMoose Mar 18 '15 at 16:31
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    as well contractors get no benefits - no PTO, no insurance, in some cases not even a desk to sit at – Kate Gregory Mar 18 '15 at 18:00
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    To continue the car analogy, when the rental cars tire blows you call the rental agency to have them come replace the tire. For a contractor this is the same thing as paying for PTO, Insurance, and depending on the contract all the equipment the worker needs to do the job. – RubberChickenLeader Mar 18 '15 at 20:44
  • Since the OP changed from the headline "is it absurd" to the later question "is it reasonable", you should add something to the "No". – gnasher729 May 21 '16 at 20:35
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That would be a bad move because in essence you're telling them you don't know how much you're worth. You might as well hold your pinky to your mouth and ask for one million dollars.

X negotiated its own bed and slept in it as far as compensation goes. Whatever they used to pay them is likely significantly higher than what they would pay a single employee, who has none the benefits of a dedicated contracting company. Would you give that salary to someone?

No, it's best to treat this as any other job. Figure out your acceptable range and make your offer in good faith. The fact that you already know the product and the client should give you a small boost. You should use that to your advantage, and that's as far as using the previous relationship should go.

  • Your QR code leads to a 404 error. :-) – Peter K. Mar 19 '15 at 20:25
  • @PeterK. I honestly didn't expect anyone to check it out. It seems my personal page has been scrubbed. Thanks for letting me know – rath Mar 19 '15 at 20:54
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    When I see them, I usually check them out. I used to use one that said "No one ever decodes QR codes". Until someone did, then I changed it to "Only DECODER'S NAME ever decoded this QR code." :-) – Peter K. Mar 19 '15 at 22:28
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I'm going to take a different tack - but the answer is still "NO".

Let me tell a story first, and then get to the answer though.

Back in '07 I was working in San Fran, and I had two colleagues there, A and B. They were poorly named colleagues, but it is their experiences that are important here, not their parent's non-conformist view on naming.

A & B were both contractors initially, and both brought on full-time. B immediately took the perm position with minimal negotiating effort, and was consequently on a perm rate far lower than the contracting rate.

A did not. A, in fact, took 3 months negotiating with the company - they still paid her contracting rate because they needed the work done. After 3 months, A finally got across that she wanted the same wages as a contractor, only be a FTE. They agreed, I think there was some deal with guaranteed bonuses to help overcome the salary-band problems.

...

The point is this - if you don't need this job and are happy to look elsewhere, you are in an excellent position to negotiate. Why? Because you are taking a risk, in that they won't hire you and you will be out of a job. Risk, happily, is actually the argument proffered for why a company can pay you $10/hour for a job that nets them $40/hour - the risk the company takes (it might fail, for example) is worth the $30/hour they skim off you.

I would strongly advise you to take the course of action you are taking - but you have to know what the rate you want is. Do some homework - if it is worth the bump in pay you are implying, then do a lot of homework to work out what that rate is. Do not just shrug and say you want whatever the other company was paid, that makes you an amateur.

Remember that you are worth a large portion of the money you are asking for, as it is your market-rate. But perhaps do not gun for the entire rate - it is after all a negotiation, you are not trying to "prove a point", but create a win-win situation.

Good Luck!

  • where A and B 1099 or W2 contractors I cant see any sane company taking someone at proper contractor rates eg 3x the rate a permie gets – Pepone Mar 22 '15 at 16:31
  • @Pepone which is why you will never get that kind of money. – bharal Mar 23 '15 at 0:55
  • "They were poorly named colleagues, but it is their experiences that are important here, not their parent's non-conformist view on naming." I LOLD – Philip Schiff Aug 9 '17 at 11:02
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You should approach this salary negotiation in good faith as you would any other. You cannot expect the company to directly translate what they were paying to your temp company as your new salary. The money paid to your temp company covered your salary, your benefits, profit to that company and possibly overhead like project management or infrastructure. Your "new" company will now need to assume all those costs itself, possibly with better benefits, higher overhead and/or better infrastructure.

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In the several instances when I have been converted from contractor to full-time employee, the employer calculated to the penny what the salary/benefits package was worth compared to the hourly rate I was getting and offered me something less than I was making as a contractor. There was no opportunity for negotiation -- in other words, I tried negotiating, but the offer was firm and they were unwilling to be flexible about it.

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Contracting companies make money off your labor. Back in the mid 1990s, I worked for a contractor who paid me $30 while they charged their client $100 per hour - or may be it was $200 per hour.

Be very careful what you are asking for, because your salary demand, as currently phrased by you, may very likely get you immediately ruled out. Don't ask for "whatever you are paying the other guy" if you have no clue what they are paying the other guy and why they are paying the other guy the money they are paying him. If a client pays somebody a rate that when annualized, amounts to several times their full-time employees' salary, then it's your cue that the client is fulfilling a short-term need.

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