Employer came in quite a bit below my offer?
January 24, 2014 2:15 PM   Subscribe

I'm a software developer that contracts for a company. I like the company, they want me to join them full time. Their offer is below my ask by quite a bit, should I even counter offer?

I contract hourly through a contracting company, not directly with my agency. I average about 50 hours a week, and will often see weeks above 60 hours. I figured my salary based on a 45 hour work week, minus two weeks vacation. Benefits do not mean much to me as I'm young and single, but I included that as well.

I'm not used to dealing with large companies and was told that to even make the offer they did they had to bump my title, which will come with more responsibilities. Their offer is 10.8% less than what I asked. In reality, my pay would be go down more than that as I'm contracting hourly ... and if I take it I'll have more responsibilities.

The best advice I've been given is that they likely have a salary band for the position I'm in and that there's wiggle room ... but how do I figure out that wiggle room?

I guess I'm in a bad position because usually with these negotiations I have a job already, right now the job I have is ... with the company offering me the job.

Part of me wonders if I should accept the lower salary and just start looking. I don't know how, "this is my final offer" and then if they say no, if I can even take the lower offer.
posted by anonymous to Computers & Internet (16 answers total) 1 user marked this as a favorite
Well, part of accepting a full-time (assumedly, salaried) job as opposed to contracting is that 1) you're guaranteed a bit more job security and 2) you're benefits eligible, and your employer will almost certainly be more generous than your contracting company was.
posted by Oktober at 2:18 PM on January 24, 2014 [6 favorites]

10.8% lower seems like a perfect spot for negotiation. If it was half, you're wasting your time. But 10% lower is just good negotiation. Counter with slightly closer to 5%, and you'll know if they are going to bother negotiating.

There's 0 risk to countering.
posted by DigDoug at 2:22 PM on January 24, 2014 [2 favorites]

Benefits like.... paid vacation and sick days? Paid vacation is reeeeally nice. Go ahead and estimate how much that's worth.
posted by amtho at 2:27 PM on January 24, 2014 [4 favorites]

It's not clear but if the offer is 11% lower than 45x your contract hourly rate that's a really good offer.
posted by hamsterdam at 2:39 PM on January 24, 2014 [16 favorites]

What other benefits are they offering if you come on as salaried and what's the total value of that?

Is the health insurance better? How much are they contributing to the insurance vs your contract firm? Are there other medical benefits like optical and dental? What about 401(k) matching funds?
posted by JoeZydeco at 2:56 PM on January 24, 2014 [1 favorite]

It is perfectly normal for your pay to go down when you go from hourly contracting to a full-time job. From the company's point of view, they have to pay you whether they need you at the moment or not, and they have to pay benefits; from your point of view, you have security and you have benefits. You can weigh the pluses and minuses and make your decision, but it is not reasonable to expect to get the same income under new circumstances.
posted by languagehat at 2:56 PM on January 24, 2014 [4 favorites]

Who wants you to go full time? You or them?

I'm guessing that your contract rates are raising eyebrows and they see you as a full time employee.

A recruiter to find out what similar roles would be worth, but typically full time employment is quite a but lower, and lower than 10% than contract rates. Depending on experience etc.
posted by mattoxic at 2:56 PM on January 24, 2014 [1 favorite]

Depending on the spot you're in, salary can result in a drop of anywhere between 20-100% on your contracting rates. Contractors are expensive as they need to be able to rapidly adjust to changing conditions, which requires a financial cushion.

The fact that they're coming so close suggests to me that you'r being underpaid as a consultant :). Keep negotiating but be prepared to fold.
posted by singingfish at 2:58 PM on January 24, 2014 [2 favorites]

You will NEVER be in a better position to negotiate than now. I would point out that it's ten percent less than you make now, and at that much of a decrease you would prefer to continue working as a contractor. Can you be flexible? Point this out and suggest you can be flexible in terms of more vacation time or flex time (work at home?).
posted by xammerboy at 3:17 PM on January 24, 2014

They will also likely be picking up a portion of your FICA, which as an IC you are entirely responsible for (assuming you are in the US and that you are currently an IC). That could be worth a few % points on its own.

(If I'm wrong about this, I am happy to be corrected, btw.)
posted by Schielisque at 3:45 PM on January 24, 2014

You're in a great situation to negotiate. And, if you do, you're going to make your job and your life better going forward. This can also be fun too, I promise! (nb: teaching people to negotiate is what I do for a day-job).

First: Time to plan! I want you to sit down and figure what you like about your job and what you wish was different. Do you want more flex time? Less? Different responsibilities? Basically, spend some time thinking about what you really value about your job, your career, and your day-to-day life.

I also want you to think about where you want to be 5, 10 and 20 years from now. This may not factor into the negotiation, but it you never want to go into management, it's good to be in a company that will respect those wishes.

Second: Thank them for the offer. Talk about how much you feel like they value you and how much you like the company. Say you'd like to sit down with them to talk more about the position and the offer.

Third: Actually sit down and talk with them. Don't counter their offer yet. Instead, ask questions about what the job's going to entail and what it won't. Think about all that great planning you did and start to design the job you want. For example, you might say, "One of the things I loved about being a contract employee was that I could work from home, as the quiet can sometimes help me solve a tricky problem. If I was full-time is that something I'd still be able to do?"

Fourth: Express you enthusiasm about the offer again, say that the job sounds great, but that you were a little surprised about the offer. Ask the following question, "Before we talk about compensation, I was a little surprised by the offer. Can you help me understand how you arrived at XXX?" This is a great question because they'll give you the rationale you need to counter it respectfullly.

Fifth: Tell them that their logic makes perfect sense. Express that that's a number you would take if X, Y, and Z were different. However, since X, Y, and Z are what they are, you thought that original number made sense. Ask if there is any way to make up some of that difference. Propose somewhere about 2% lower than your initial offer.

Sixth: Listen to their counter and, I'm betting you'll probably accept it (most people do at this point, I don't know why it only tends to go one round). Thank them so much for treating you so well and talk about how good it felt to really dive into those issues. Feel awesome about the deal.

Concluding thoughts: As you go about this negotiation, the absolute worst thing that can happen---provided you don't reveal yourself to be the world's biggest asshole---is that you accept their initial offer. Really: you risk absolutely nothing here and, if you figure out what really matters to you, you'll have a ton to gain. Plus: if you don't like the offer, you can always walk away. It's not hard to say, "The security of a full-time gig would be great, but I'm not sure I want to take such a big pay cut. Would it be okay to stay a contract employee for now and revisit this in a few months?"
posted by eisenkr at 3:57 PM on January 24, 2014 [30 favorites]

It's unclear whether you're an independent contractor or w-2 employee.

Generally you ask for more as a contractor because the employer isn't providing health insurance, vacation time, sick days, or even the promise of continued employment and you need to compensate for that with more money. Even more if you're an independent contractor and pay the portion of taxes that your employer normally does.

"Benefits" also usually include things like 401k matching and sometimes disability insurance or life insurance, so even if you think you don't need to go to the doctor there is other value in that. I recently got a job with these benefits and the retirement fund matching is over and above my quoted salary, so it's like 5% extra (that I can't spend for at least 30 years...).
posted by jeweled accumulation at 5:04 PM on January 24, 2014

Also consider that they're paying payroll taxes once you're no longer a contractor. That lessens some of the tax burden you were under as a contractor.
posted by quince at 5:27 PM on January 24, 2014

Definitely counter. They're saving a lot of money not going through an agency anyway, and if they like you, they'll either take it or re-counter. Worth it. Just don't be a dick about it.
posted by disillusioned at 5:45 PM on January 24, 2014

What is your goal? All of the answers so far have focused on the financials. If that is really the bottom line, then I'll tell you that all other things being equal, you will net more as a contractor than as an employee.

I've been a contract developer, a W2 developer, and now manage a couple of groups that have both W2 and 1099 developers. In the twenty or so years I've been doing this, the ratios and tax treatment have been fairly constant: in big, round numbers, I would expect a contractor who is getting 2000 hours a year to gross about 50% more than an equivalent employee. Your contract company is taking something off the top that is almost certainly at least $15/hour but could be much higher - the 50% is a swag after the contract company takes their cut. You are averaging 50 hours a week, so your net is actually higher, probably more like 85% more than an equivalent salaried developer - you get paid for that extra 500 hours a year while the W2's don't. You have to pay your own FICA and healthcare, but on the other hand, you can set up a SEP-IRA; you are still going to come out ahead.

If you enjoy contracting and see yourself doing that forever, then it is a no-brainer: play hardball, and be willing to switch to another contract if they are serious about converting you to W2 and drop you. If you don't enjoy contracting, or want/need some benefits, or to get on a career track, then taking the offer may be the best thing. Even then, I would agree with the advice upthread about countering - it doesn't hurt to try. If you are in a developer salary band, you may end up being pegged against the top of the band and not see a raise for a long time. Better to get paid more now and get a raise later than have the "feel good" of getting a bump in your salary sooner. Good luck, feel free to memail me if you want more specifics.
posted by kovacs at 6:13 PM on January 24, 2014 [1 favorite]

Have you heard of SEP? It allows you as a self employed person to put 50% of your income in 401K. Go figure, that alone is good enough for me to never work full time for anyone.
posted by Greenlight2b at 6:20 PM on January 24, 2014 [1 favorite]

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