Contract programming position questions.

February 12, 2013 9:06 AM

I interviewed for a remote programming gig recently, and they requested a trial contract before making a final offer. I'd be hired as a long-term remote contractor (year+, 100% telecommuting), not an employee. I have some questions:

1. What multiplier should I apply to my current salary, at a job with great benefits, to calculate the break even point? The contractor position would not include any benefits, and I'm in good ol' USA, so I will need to purchase healthcare. My thought is current salary +30% to +40% would be a break even point considering the length and stability of the contract. If it were less than a year minimum, I would need to use a higher multiple. Is that about right?

2. The short term trial is at the same hourly wage as the long-term position, which is less than I charge for shorter projects. This short trial is hugely in their benefit, as it should greatly reduce the odds of my being a poor fit for the company. I get a somewhat similar benefit, but I think my risks are much lower. If we decide we're not right for each other, they've dodged a bullet for a pittance while I've lost a week of time for pretty poor compensation. It's not a huge imbalance, but it's there.

I am not concerned at all about the money, but I do not want to be a passive participant who sends signals that I can be taken advantage of. I'm more worried about positioning myself than anything else. I don't have sufficient experience to read the smoke signals and tell how "So, my usual hourly rate is $65 per hour. Could you bump up the short-term rate to match?" might go over. I am very interested in the position and do not want to poison the well.

Also, is this sort of short-term contract request unusual? It seems reasonable to me, but I have no experience with it.

3. What warning signs should I be looking for in the company? What danger signals should scream out, "Get away from these guys!"?

posted by anonymous to Work & Money (8 answers total)

For health benefits, I wouldn't approach it as a multiplier - go to an insurer and price out how much they would actually charge to insure you, and build that into your contract price. Build in the extra FICA taxes you'll owe (since you'll be paying the employer's share plus your own) too, and add in another 7% or so to cover you for days off if you want vacation/sick time.
posted by Holy Zarquon's Singing Fish at 9:11 AM on February 12, 2013

You will need to pay your own payroll taxes. that's 17%. You will need non group coverage. Thats $1000/month. You will use up a computer over the course of a year.

If you found this position yourself and didn't go through a third party, it's reasonable to ask for your yearly salary in dollars per hour. $75k/yr W2 = $75/hr * 2000 (52 weeks - 2 for vacation) = 150k/yr 1099.

Good luck!
posted by bensherman at 9:13 AM on February 12, 2013

I was going to suggest that you should be looking to gross 2X your corporate salary, so the example above is perfect.
posted by COD at 9:16 AM on February 12, 2013

I often face this problem from the opposite side, for what its worth. Every company has somewhat different payroll burdens and cost factors, so the answers will be different for each place. In my situation, I could not afford to pay someone double their salary as a consultant that I would pay them as an employee. My ceiling is about a 70% increase. YMMV
posted by Lame_username at 9:28 AM on February 12, 2013

I'm suspicious of any company that wants a "trial contract" in the first place. I've never seen a contract that is not written to be mutually severable on either side, sometimes with no notice whatsoever (in other words, no contractor is contractually bound to the company they work for). So, the company is not gaining anything by a "trial" any more than they would by just giving you a proper contract.

In the programming realm, I would expect at least a 100% markup on your current salary for your contracting rate. However, I would also expect a bit of markdown due to the telecommuting nature of the job. Either way, +30%-+40% is quite low; +70%-+100% may be in the region of what you're looking for.

It should be noted that by taking a remote gig, your market rate is now determined by everyone in the USA (if the job is limited to the USA) or everyone in the world (if the job is not limited to the USA). Either way, if you live in an urban area, you may find your urban salary is too high to compete with someone from Topeka, Kansas or Bangalore. As a practical matter, this would keep your hourly rate competitive, which is particularly disadvantageous for you. In addition, to me, it's a warning sign for the company that the company's compensation to you will never be as high as you could get otherwise.
posted by saeculorum at 9:35 AM on February 12, 2013 [3 favorites]

It should be noted that by taking a remote gig, your market rate is now determined by everyone in the USA (if the job is limited to the USA) or everyone in the world (if the job is not limited to the USA)

This, in practice, is simply not the case. Coders turn out to not be interchangeable cogs, oddly enough, and time zones and language barriers are high costs in themselves. My hourly rate, as a 100% telecommuting freelancer, is decidedly high, and the presence of low-cost hack shops in Bangalore or the Ukraine or even Kansas has not made the slightest dent in it in the past decade, despite years of dire predictions of this sort.

The amount companies are willing to pay for freelancers or contractors has more to do with how much they're used to paying than with any Friedmanesque rational-actor world-is-flat global marketplace thingummy. The people price-shopping on elance et al are generally as amateur as the coders they hire there. Large corporations in particular seem to view a low hourly rate as an indicator of poor quality; they'd rather overpay than get a bargain.

Is this sort of short-term contract request unusual?

I get them from time to time with new clients, and don't view it as a red flag. If anything it means I get the opportunity to find out whether they're worth working for longer term.

What warning signs should I be looking for

If they balk at your (very reasonable) "usual rate" or act offended if you ask for that, run. If they try to treat you like an employee instead of a contractor (demanding fixed working hours or unpaid 'overtime' or whatever), run. Other than that, it's like any other job; you'll find out rather quickly whether you like working for them or not.
posted by ook at 10:18 AM on February 12, 2013 [3 favorites]

FWIW, I generally ask roughly double my salaried hourly rate as a minimum for long-term contracting. Double that again for short term or something especially unpleasant. I have yet to see anyone balk when I throw out a number like $100/hr for two week's work, companies expect to pay through the nose for contractors. Just make it worth their money, and you'll have no shortage of followup offers.

Whether doing this full time or on the side makes no difference - You bring a certain amount of value to the table that, for whatever reasons, this company has decided not to commit to (yet?) in the FTE sense.

That said, I strongly second those who call this somewhat sketchy. Yes, I've heard of plenty of legit contract-to-hire positions. I've also heard of companies jerking "contractors" around for years, always with the promise of a full-time position "in another six months to a year".

Then again, if someone offered me a pure telecommuting position for a year at my requested rate, y'know, I sure as hell wouldn't turn that down!
posted by pla at 10:32 AM on February 12, 2013 [2 favorites]

Please tell me that the initials of this company aren't V.V. Because it sounds an awful lot like a company I worked for who never paid me until I got lawyers involved.

My biggest piece of advice is that you meet these folks in person, at the fixed physical address of the company.
posted by parrot_person at 6:56 PM on February 12, 2013