How should a part-time independent contractor ask for a raise

Question

I work part time for an engineering consulting firm. I have been working there for about 9 months with the last 6 months being very consistent - the engagement built up slowly. My hours vary between 5-20 hours a week, and are not dependent on how often they need me, but whether I have the time (finishing up a secondary degree) and whether or not they gave the funds.

The pay rate is considerable when compared to the stipend I receive from the university for doing non-research work for 20 hours a week, but since I am a contractor that rate is greatly reduced by the taxes I am paying out of that rate.

I recently had to review some project documents, and learned that the rate the company charges clients for my time if 5-7 times the pre-tax rate they pay me.

I am wondering if this is normal (I have no idea about typical pay versus charge rates), and if not whether this ratio means that there might be some wiggle room that might allow me to ask for a small hourly raise.

Now, as a contractor I imagine many would say to me, "Just charge what you deem yourself worth!" But I believe myself and the company both really think of me as a part-time employee that will come on full-time when my degree is finished. At the same time I've gotten nothing but compliments on my work, quality and speed, and could still use a small bump (saving for a house). Additionally, I imagine my full-time rate would initially be based on my part-time rate, minus some amount due to bringing some of the taxes and costs (healthcare) inside the company.

So what is the typical multiplier? And when is there versus is there not wiggle room?

Answer 1

And when is there versus is there not wiggle room?

There is always wiggle room. There is never a case where a company couldn't pay someone more if they so choose.

The only way you will know if you could get a raise is to ask. Indicate that you feel you are worth more and that you deserve more. Leave the multiplier and any other external factors out of it.

Tread a bit lightly here. You are part time. And the company lets you adjust your hours based on your individual needs. You don't want to come across as overly demanding. You want to ensure smooth sailing for your graduation, so that bringing you on full-time becomes a no-brainer. Save the serious salary negotiations for that time frame.

Answer 2

I am wondering if this is normal

It is.

this ratio means that there might be some wiggle room that might allow me to ask for a small hourly raise.

It does.

So what is the typical multiplier?

It can vary radically. For a Full Time Employee the minimum value an employee needs to provide to a company is around 1.75 times their annual rate. Otherwise it's costing the company more than it's worth.

And when is there versus is there not wiggle room?

The amount of wiggle room really isn't your concern. So this question doesn't matter.

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Now, to the more important aspect here. You have a very nice situation. While getting your degree you are free to work or not as you wish. As such you have very little risk at this time. The company, on the other hand, takes all the risk with whether or not you can deliver. Which means you are likely working on smaller jobs.

Smaller jobs generally have a much higher overhead, as a percentage of job cost, than larger ones. Someone is billing the client, someone is managing the relationship, someone is getting paid for selling the deal, etc. All of these come out of that hourly rate that they charge.

That said, you could likely work out a deal where you made more money. It's just not going to be 2 or even 3 times what you are making now. The main question you have to ask yourself is if this is even worth it.

If you ask for more then there is a possibility of them deciding that these small jobs aren't worth it to them. Considering your situation my advice would be to not bother and instead keep focusing on completing your degree. Once you are in a position to take on full time employment THEN approach them with how much you actually want - while interviewing around.

The reason for this advice is simply that there aren't many jobs like the one you described and the consequences of potentially losing this far outweighs sticking it out until you are ready to pursue full time opportunities.

Answer 3

Here is a fairly simple formula:

(Your rate + estimated overhead costs) * 1.75. If you're billing your client more than that, you have room for a raise.

I'm going to qualify this by saying it sounds like you are more of a contract employee than a contractor, so:

By estimated overhead costs - what gear do they provide you with? What do you think your office space at the firm costs? How much do they spend in processing your billings / timesheets / payments? A good rule of thumb is that it costs a company about 25% - 30% more than they pay you in order to put you in the field. This accounts for the support staff that the firm has that aren't billable - HR, payroll, reception, bookkeeping, etc.

These are, of course, SWAG (Scientific Wild-A**ed Guess) figures, and there are far too many local variables that I am not aware of to pin it down further.

Answer 4

Save the serious salary negotiations for that time frame.

NO!

You seem to suggest that you think the employer may be taking advantage of your relaxed approach to charging by paying you low and charging high for your services. If you let this ride you will be in a very poor position when it comes time to discuss proper terms. Why would an employer suddenly start paying you well when you've demonstrated your willingness to work for peanuts?

Decide now how much you're willing to work for, and get your request in as soon as you can. If the employer balks or quibbles you'll know up front what's likely to happen when proper contract negotiations start. Do you really want to work for them? If they're open to discussion you'll get a feel for how far you can go, and how amenable they are to salary negotiations later on.