Should I charge this project hourly, or by salary?
May 6, 2014 8:03 AM   Subscribe

I'm a designer and front-end web developer who has always charged hourly. I was just offered a great part-time opportunity (20hrs/week) which pays half a salary - less than I'd be paid hourly. Please help me negotiate.

I usually charge $100/hr, so that would be $8000/month for part-time. But the part-time job offered to me is $85,0000, and half that would be $42,500 which comes to $3,541 a month.

So, $8000/month vs. $3541/month.

Am I looking at this wrong, or should I ask for more? I'm happy to have the work, but if I did hourly jobs I could obviously make more money. It just happens that this is an interesting project. FWIW, I have about 15 years experience and am considered good at what I do in the field.
posted by anonymous to Computers & Internet (13 answers total) 3 users marked this as a favorite
Assuming you're in the US, is the part-time opportunity billeted as a regular employee (benefits, sick leave, annual leave, withholding) or as a 1099 contractor (i.e. you have to pay both parts of withholding quarterly)?

There's a fairly substantial difference between the classes of employee, not the least of which is who is holding the bag for federal income taxes, at-will status, etc. which would also benefit from what state you're in. FYI, you can message a mod to have information added anonymously for you.
posted by bookdragoness at 8:17 AM on May 6, 2014 [2 favorites]

Questions you should ask yourself:

1) Do you always bring in $8,000 a month or do you have quiet weeks and busy weeks? The part-time job offers the security of a guaranteed $3,541 a month while allowing you the rest of the time to fill with contracting.
2) I presume you are contract/consulting. What benefits does a permanent job come with than contracting doesn't? I'm thinking paid holiday, paid sickpay, paternity/maternity leave, health insurance, pension?

If none of the above matters to you, keep contracting.
If you want the extra security of 1) and 2), consider the part time job.
posted by Wysawyg at 8:18 AM on May 6, 2014

Do you currently make $16,000 per month, every month? If so - you're right to counter with your going rate.

Salaries are typically lower because stability has a value - if you spend 20% of your time on non-billable hours as a contractor (drumming up work, accounting, marketing, as examples), then you're actually only making $80/hr amortized across all the work you do. The same is true for hours you are available for work but are not actually being paid because there isn't work.

There are also the added wrinkles of tax, deductions and status as an employee vs. a contractor which an accountant should be able to work out for you.

I would not take this deal if you were turning down regularly guarantee-able contract work - but if you bill 25 hours a week and rarely break that ceiling, it's worthwhile seeing if they'll go higher but ultimately taking it because it converts more of your $0 hrs to $42.50 hours.
posted by rutabega at 8:27 AM on May 6, 2014 [2 favorites]

You get paid less, but even if work is slow you still get paid. Are you currently completely booked? Or do you have an extra 20 hours a week?

If you're willing to play hardball and reject them, you could always tell them you need more.
posted by jjmoney at 8:40 AM on May 6, 2014

I agree with the other responders that it's important whether you are being offered this job on a consulting (freelance) basis or whether you are being offered it as a temporary employee (or even a full time employee). If you are being offered it on a freelance basis, then you owe a lot more taxes, as others have alluded to, and your hourly rate should be sufficiently high to adequately compensate you for that extra expense. $100 per hour sounds reasonable. I work as a freelance consultant and bill between $150 to $200 per hour, and I offer a 25% effective discount if they bill by the project (i.e., if I estimate that something will take 10 hours and they pay me for the whole project ahead of time, I would bill them $1,500, not $2,000). The reason I offer this discount is that cash up front is more valuable than cash paid over time.
posted by dfriedman at 9:12 AM on May 6, 2014

I second the above. You've got to weigh the value of income stability and the innate interestingness of the project against your earning potential.

What has your average month been over the past year?

Another consideration: If you work 20 hours/week on this part-time job, will you have the other 20 hours/week fully available for contract work? Or will there be uncompensated time taken out by commuting, mental gear-shifting, administrivia, etc?

Another way to look at this. At your $100/hr rate, you need to work 8-9 hours/week to make $3541/mo. How much is your free time worth?
posted by adamrice at 9:17 AM on May 6, 2014

Well, the first thing you should do is negotiate. You did a good job explaining your concerns here, so you'll be able to explain them to your new employer is well. Here's how I normally teach folks how to do this.

1. Express enthusiasm and gratitude for the opportunity. Talk about how interesting the project is, how much you like the team, etc.

2. Tell the employer that were a little surprised about the salary they offered. Ask if they can provide some insights into why they arrived at that particular salary for you and for this project. Get the "why" behind the number.

3. The reason why you ask the question in (2) is because it gives you a basis for asking for more. If they say, "That's the going rate for web developers," you can propose a counter-offer by starting with something like: "I agree. That's the going rate for 'average' web developers. However, I've been in the field for 15 years and normally charge $100/hour...."

4. You should then give a specific number as to what you want. However, before you give that number, tell them that you're going to explain "where my number comes from." Explain the logic and math behind your number (e.g., normal rate is $100/hour, but the stability of this job is worth something, so let's say $80/hour. Extrapolating out for 50 weeks, 20 hours per week, etc...). Your goal with this counter is ask for _more_ than what you want so that they can negotiate you down a bit.

5. After giving your number, say that you know that might be more than their budget can handle. Say that they can help make up some of the difference between so that you're not sacrificing a lot of money for the opportunity to work on this interesting project with this great team.

6. They will either counter with a new number or stay with the initial offer. This is usually when people decide to take the job or not (for whatever reason, job negotiations usually only go one round).

Good luck!
posted by eisenkr at 9:34 AM on May 6, 2014 [1 favorite]

Do you currently make $16,000 per month, every month? If so - you're right to counter with your going rate.

Salaries are typically lower because stability has a value

No - salaries are lower because employees get benefits, don't have overhead, don't have to market themselves, and their employer pays part of their taxes all of which costs a lot of money. If they're not offering those things then a good rule of thumb is to double the salary, which gets us back up to $100/hour land. Stability might be worth something, but doing a freelance job for a salary rate is not a sustainable way to do business.

OP wasn't clear on whether this is employment or freelance and what his current workload is like so it's hard to answer this question. If this is freelance then "if you're not billing your absolute best case scenario of $16k every month, take whatever" is not exactly a great way to figure out what your rates should be.
posted by bradbane at 9:50 AM on May 6, 2014 [2 favorites]

$3541 for 80hrs/month comes out to about $45/hr. One risk of salary is that they could go over 20hrs/week ("just this one little thing," "has to be done by tomorrow") for the same price, so I'd counter with an hourly of $50/hr with a 20hr/week (or 80hr/month) minimum so that you get paid for extra hours, $60/hr or more if you really want to get the negotiation ball rolling.
posted by rhizome at 10:04 AM on May 6, 2014

Lots of good info above.
Comparing apples to apples is easy. The trick is translating the true compensation from both arrangements into apples -- and the apple that makes the most sense is 'cash value for an hour of work.'
I've done it many times over the years, but not in the last five. It's possible to monetize the two almost to the penny -- almost, because some things are intangible. E.g., the peace of mind a regular paycheck provides, or the freelancer's vaunted 'freedom'.
You have to go thru the benefits and determine their value. Beyond actual money, health care has always been huge, tho I assume Obamacare is changing that. Factor in everything: paid vacation, training that benefits you, etc. Some 'valuable' benefits may not be -- a job-paid health club membership isn't worth anything to a long-distance runner.
Wish I could dig up my old spreadsheets. But you can do it. Good luck!
posted by LonnieK at 10:16 AM on May 6, 2014

People who charge hourly tend to be a bit looser with requirements and to allow requirements to be iterative. That's fine, if the client adds requirements then as an hourly staff you simply bill for more hours.

If you're doing pay by the project, then you need extremely clear specifications and a clear process for "Additional Services." You should have a specified rate for each additional hour. Anything outside of your original scope needs to be documented, estimated, reviewed and signed off by the client.

For me, the determining factor is whether you're able to be a hardass about staying to the project spec and about requesting AddServices. If you've worked exclusively as hourly, that behavior might be outside your comfort/experience.
posted by 26.2 at 11:16 AM on May 6, 2014 [1 favorite]

I think interesting work is a legit reason to take a lower rate.

It only being part time work helps too, you can keep billing out at the higher rate.

That doesn't mean you shouldn't negotiate. Ask for more money and see what they say.

Also, you had better set expectations about what they'll pay if they want extra hours, they probably will at some point. Those I would not sell for less than $100/hr if I were you.
posted by mattu at 7:08 PM on May 6, 2014

I usually charge $100/hr

You might charge that but consider if you make $100/hr for all the hours you work. Are you charging anyone by the hour for the time you spend looking for new business?
posted by yohko at 7:17 PM on May 14, 2014

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