I will have to wait until July to ask for the raise in order to actually have the leverage of possibly leaving. I’m not sure I could stick to my principles and be willing to pay back the $3k for leaving before the 6 months are up.

Thanks again, Mike. Your insight and openness have been invaluable to me.

If you don’t address the situation now, you’re going to be a less than stellar employee for the next 6 months and feel as though you’ve been taken advantage of for the entire time.

I would come up with some solid facts about why you deserve the raise. Cite things like your work ethic, the fact that you’re a known quantity now, as opposed to a risk of hiring someone new, etc. Obviously, having another job opportunity certainly gives you additional leverage.

But I think I’d definitely bring up the fact that you hadn’t taken into consideration the additional expenses of SE Taxes, medical insurance, etc. As an independent contractor, generally you should be able to walk whenever you feel like it. Make sure you have a definitive number in mind when you ask and just say “$36/hour would make me happy.”

If they do it (and I suspect that they will), then great. If not, find something else. You’re not doing yourself any favors by sticking around.

As a last ditch effort, you could simply ask the customer if they would consider hiring you full time. Typically, with contract agencies, there’s a policy in place that states the customer is required to pay $X if they hire a contract worker directly. Sometimes it’s a fixed dollar amount, other times it’s based on the rate, and occasionally it’s based on the cost of finding a replacement. However, it might be barred completely.

Given the discrepancy between what your salary is and what the contract agency is making from you, it might be worth it for the customer to break that contract and hire you directly. They’re not likely aware that you’re being paid so little, and if they were, they probably don’t realize that you’re paying your employment and medical insurance yourself.

The numbers you threw out (at least to me) seem too far out of whack to justify. Someone is making a killing and for you to ask for an extra $6/hour is very little for a sales rep to give up as opposed to going completely without while they find a replacement, and then risking the inability to find someone the customer likes at a similar price as what you are being paid.

It’s not unusual to pay 2X salary for a consultant. What is unusual is to pay 2X salary for an independent contractor for a 6 month basis. Really, it should only be 1.5x at the most because the money and income is basically guaranteed to the agency.

I think if I were the customer, I’d be really upset if I learned I was paying 2x what the person working for me actually costs. There’s something to be said from their standpoint for flexibility on a short term basis, but for a lengthy contract, that’s just not right.

I’ve been trying to find a way to re-negotiate a higher rate now that I’m 1 year into this contract position. Renewals were supposed to be every 6 months, but my ‘agent’ called me in February to let me know that the client had extended my contract through December, so now I’m stuck. I think I should be making about 20% more than I am, though I’m unable to find any other contracts out there to compare it to. Basically, I’m getting paid $30/hour and the client is being billed $58/hour (someone left an invoice on a copier – couldn’t believe it!).

Do I just wait until 6 weeks before the end of December, as you suggested to Raphael above? I have brought significant value to the client in a couple of projects by reducing man hours through automation, but I feel like I’ll probably be more successful getting an increase through the Agency rather than the client.

Any suggestions?

I would structure the rate as a weekly rate based on 40 hours/week and if you work overtime, it cuts into the total budget for the job. It’s really not your fault if they’re poor planners or if you advise them on what to do and they ignore you or can’t follow your advice for “business reasons”. In those cases, you’re absolutely right. You could easily work 50-60 hours/week and only get paid for 40.

If that happens, either you screwed up, it was poor planning on your part, or poor negotiating on your part. If given the choice, always do a fixed time engagement, rather than a fixed price. If they burn through the hours making you do something stupid, that’s on them, not you. The only thing I would caution is that you need to advise them of the risks of taking different actions.

ie: I know you want me to do X instead of Y, but if I do X, then I’m going to spend twice as much time as if I did Y instead and you’re going to be short on hours at the end of the project.

Doing a fixed time engagement offloads the risks associated with delays (or blatant stupidity) onto the customer. There’s no good way to account for everything that can happen. So long as you know what you’re doing on any given project, this will work well. The time it becomes a problem is when you genuinely screw something really big up and need to spend a lot of extra time on a project to meet the deadlines. An hour here or there isn’t a big deal. Burning an extra 40 hours of customer time because you did something that crashed their production database is.

I’ve never had that happen to me, but if it did, I’d probably eat the hours and tell the customer “Look, I screwed up. It’s going to take me X hours to fix and I won’t charge you for those hours.” So long as X is some number under a reasonable amount and it was something where I should have known better.

One last question: a results based (% of savings, productivity, sales, labor, etc.) full time engagement mostly means that you will require at least a 40 hr/week to get the job done, most likely sometimes you will go up to 50 to 60 hr/week, with the inconvenience for you of having set an income ceiling of a weekly rate, it might end up to be a tricky way for getting lower rates per hour. Any advise you can share about it? Thanks again.

By the way, I just discovered your site, I am impressed and I appreciate very much your sharing advise and knowledge.

When you take on a long term project, you typically need to cut that rate by anywhere from 20-40% in order to land a deal. In exchange for a lower rate, you’re getting guaranteed work. What I would be cautious of are things like:

1) When do you get paid?
2) Under what circumstances do you not get paid?
3) Can you walk at any time?
4) Can they walk away at any time?
5) How much of the contract and work is really guaranteed?

If they want to lock you up for 6 months, then you need certain assurances that you will be kept busy for those 6 months. The problems usually surface when parts of the project are delayed and you’re sitting around not doing anything.

They’re not going to want to pay you to do nothing, but you shouldn’t suffer the financial burden because of problems that are outside of your control.

Here’s what I would do:
If you can, find out what the American company is making from the deal, determine what it would cost to send in another consultant from the US, and price yourself lower than that. At the same time, price yourself just a bit above what they would find someone else in your area to work for, but not so much that they’re going to go looking for someone else. Most of the time, a relationship is good enough that a bit more money isn’t going to kill a deal.

If you’re willing to take a risk, price yourself much closer to what it would cost to bring someone in from the US and justify the price based on your extensive experience as a local consultant. They might say yes, but chances are that they’re going to try to talk you down to a more reasonable number, or simply look elsewhere for someone to fill the position.

Negotiations are usually delicate, but there are things that trump most others, such as experience, abilities, and relationships. Leverage your relationships to negotiate for a better rate. That’s the only way to come out ahead. And if they’re looking for something that’s just too low, don’t be afraid to walk away. You’ve got to make a living, after all.