FAQs and Resumes
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Q20: What are your salary expectations?
A: Please first see my answer to the question: would you consider permanent, direct, or contract-to-direct employment?
The math: The salary is right whenever I receive my contract rate over 10 months as salary. I use a 10-month rule, because 12 months, minus one (1) month for vacation, sick leave, and benefits, minus one (1) month for risk, equals 10 months. To figure my salary requirement, I use a simple formula. If my long-term contract rate for the client's area is [$X/hr], then I will need [$X/hr] * 170 hrs * 10 mo = 1,700 * [$X/hr] per year, which is reasonable.
Negotiating leverage: I no longer disclose my salary requirements in advance. When I disclosed that information in advance, I gave up my negotiating leverage. It's never a good idea to give up negotiating leverage. When I did that, I ended up earning LESS than guys working next to me, doing the same work as I was doing!
No one-size-fits all salary: I do not have a one-size-fits-all salary for all markets, all employers, all states, all positions, and all job descriptions. My salary depends on what KIND of work it is, WHERE the job is, and WHO the client is. My salary is negotiable depending on current market rates, expenses, location, and position. I'm aware of what the current rates are nationwide, and expect offers within those market rates for the area. I will negotiate with you on most items. But, negotiate does not mean "give away"!
Making $30,000: What is your benefit? You will receive approx. $30,000.00 cash, upon hiring, in return for little or no work! Why? Because recruiters are given a percentage of my starting salary! Thus, it's in your best interest to negotiate the highest possible salary. This percentage fee sounds like a lot, but many companies are willing to pay it to save the cost of reviewing thousands of "wrong" (QA) resumes, and spending hundreds of management hours meeting with the "wrong" candidates.
$80,000 in 1996: According to "Engineers' Salaries: Special Industries Report 1996, Engineering Workforce Commission of the AAES, 1996, pp. 20-22", engineers in "permanent" non-supervisory positions with doctorate degrees, and 10 years experience after getting their bachelor's degrees made $80,000 per year.
$103,000 in 1996: According to the same source, in the same year, the same engineers in "permanent" SUPERVISORY positions made $103,000 per year.
Contract is better: What if a "permanent" opportunity meets my per annum requirements of 85K/yr? Sometimes my level of interest is still low. Why? Because when I look beyond claims of "once-in-a-lifetime opportunity" and "the fastest growing company in the southwest", I can see high risk and low return. Low return, because a weekly take home pay of ($85K / 52 wks minus 30% tax=) $1,144 is low. As a contract engineer, with all my PD and OT money, I can easily net $2,188 per week, i.e. twice as much. High risk, because not only I will have to burn up several days of my life, per client, every client, without any compensation, but, also, in addition, I will have to give up to six face-to-face interviews per prospective client, without any compensation.
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Q21: What is your rate?
A: I do not have a one-size-fits-all hourly rate for all markets, all employers, all states, all positions, and all job descriptions. My rate depends on the type of work, the location, and the client. My rate also depends on the duration, number of billable hours per week, pay rate for overtime, and whether there are any paid holidays. On contracts, I work on site at a rate that is negotiable depending on current market rates, expenses, location, and job assignment. I'm aware of what the current rates are nationwide, and expect offers within those market rates for the area. I will negotiate with you on most items. But, "negotiate" does not mean, "give away".
LENGTH OF CONTRACT MY RATES ON A W-2 At least 12 months... My base rate * At least 11 months... My base rate * At least 10 months... My base rate * At least 9 months... My base rate * At least 8 months... My base rate * At least 7 months... My base rate * At least 6 months... My base rate * At least 5 months, add... 2.50/hr At least 4 months, add... 5.00/hr At least 3 months, add... 7.50/hr At least 2 months, add... 10.00/hr AMOUNT OF OVERTIME -- IF overtime is less than 10 hours per week, then the rate has to make up for it. Add... 5.00/hr HOLIDAYS -- IF you don't pay six holidays per year, then the rate has to make up for it. Add... 4.00/hr IF you don't pay holidays in the first 90 days, then the rate has to make up for it. Add... 4.00/hr LOCATION -- IF the contract is in California, then the rate has to make up for it. Add... 10.00/hr IF I have to stay at an overpriced hotel in a BIG city like Boston, New York City, Seattle, Tucson, etc. or their suburbs, then the rate has to make up for it. Add... 10.00/hr PER DIEM -- IF you don't do PD splits, then the rate has to make up for it. Add... 12.00/hr IF you pay per diem for less than 7-days, then the rate has to make up for it. Add... 12.00/hr IF you pay less than the legal maximum per diem, then the rate has to make up for it. Add... 12.00/hr ROLE -- IF it is a Lead role, then add... 8.00/hr STATE -- IF there is state income tax, then the rate has to make up for it. Add... 4.00/hr 1099 RATE -- IF you want me to work on a 1099, then the rate has to make up for it. Add... 12.00/hr TIME AND A HALF OVERTIME -- FYI, I'm not a "developer". IF you or your customer still wants to pay me straight time for overtime, then the rate has to make up for it. Add... 8.00/hr FYI, I'm not "exempt". IF you or your customer still wants to pay me straight time for overtime, then the rate has to make up for it. Add... 8.00/hr TRAVEL -- IF you don't reimburse me for my airline ticket (to and from the end client's city), then the rate has to make up for it. Add... 2.00/hr VACATION -- IF you don't pay me my vacation bonus, then the rate has to make up for it. Add... 1.00/hr BASE RATE -- * My base rate is... Confidential
Negotiating leverage: Sorry, I no longer disclose my rates in advance. When I did that, I gave up my negotiating leverage, and made $5 to $10 less, per hour, every hour, for the duration of the whole project. No, it's not a good idea to give up negotiating leverage. And no, it's not a good idea to earn less than the guy working next to me, doing the same work as I'm doing, working on the same project! No, it's not a good idea, especially when I "totally blew him out of the water!" (And these were his words, not mine!)
Your benefits: What are the benefits to you and your company? The first benefit is, these hourly rates are not straight hourly wages, but so called "all inclusive" rates for "out of town" locations, where, by definition, most of the monies I collect go to third parties, i.e. airline companies, hotel operators, landlords, car rental agencies, gas stations, and federal, state, county and city tax collectors. The second benefit to you is that I'm the one who assumes all risks, because every new, out-of-town location represents new risks and new surprises that usually increase my expenses for the duration of the whole project. As you can see, compared to the high-high hotel and motel rates in big cities and their suburbs, my rates are pretty low and reasonable. Additionally, when you consider that most of the money I collect goes to the pockets of third parties, my rates will begin to look to you even lower and more reasonable.
Offer me a rate range: Offer me a rate, will you? I prefer not to low ball myself. FYI, I'm aware of what the current rates are nationwide, and expect your offer within those market rates for the area. The rate you offer should be competitive. Please don't let the current economy fool you into thinking that high-tech skills are now a dime a dozen. Talent is talent, and in today's business climate I know your clients need talent more than ever. There are many employment options available to me.
On a W-2: As to my STATUS with your firm, I see many possibilities. A) I am incorporated, so I could work as a "consultant" through my own company, on a 1099, on a "corp-to-corp" basis. Or, B) I could be an "employee" on a W-2. At this time of my life I prefer W-2 relationships.
No profits: Are my rates too high? No, they're not! On inflation adjusted basis, in the last 10 years my rates have gone DOWN 28%, while my expenses have gone UP 100+%! Let us remember, as of 2008 (vs. 1998), we've got gas prices that are 100+% higher, rental car rates that are 100+% higher, hotel and motel rates that are also 100+% higher! Where are the well-deserved profits? In this business there are no profits, just low hourly wages! Additionally, there is increasing pressure from end clients and screeners to...The high cost of travel: The high cost of client turnover, advertising, marketing, hundreds of long distance calls, constant moving, hotels, motels, car rentals, taxes, training, all my vacations, holidays, insurance, and retirement benefits come out of my own pocket. It's TOUGH to live in hotels and motels. It's also very EXPENSIVE. One's cost of living doubles, and triples when one has to live in hotels, and move often.
- Take jobs without any benefits;
- Take jobs that pay low-low wages;
- Take jobs that do not pay for overtime work;
- Take jobs that pay only straight time for overtime work;
- Take risks far greater than the local "directs" are taking;
- Take jobs that pay less than what the local "directs" are making;
- Use my time (i.e. whatever little time I've got after working 80-hour weeks) to develop additional technical expertise in my own time, and at my own expense;
- Avoid jobs that could expose me to new experiences, new industries, or new technologies;
- Say "yes" to an unlimited number of telephone interviews, without receiving any compensation for my time;
- Say "yes" to an unlimited number of all-day face-to-face meetings in out of town client sites, without receiving any compensation for my time;
- Absorb the cost of out-of-town business travel, if hired;
- Absorb the cost of unemployment, if laid off;
- Absorb the cost of unemployment, whenever the software sector is showing any weakness;
- Absorb the cost of unemployment, whenever the economy is in recession;
- Absorb the cost of health/dental care;
- Absorb the cost of retirement;
- Absorb the cost of holidays;
- Absorb the cost of vacations;
- Absorb the cost of 25 unpaid hours per week to help recruiters for free, without receiving any compensation for my time; and
- Say 'yes' to low rate contracts that don't even pay my expenses!
More on the high cost: I'd love to, but in most cases it's not practical to move next to the client's site, if it's only a contract, and if the contract is only for 3-6 months. Because of this, on contracts - unless I rent a room in a nearby, usually expensive, hotel or motel I cannot afford - the time I spend commuting tends to double, triple, and quadruple. Time is money! Who is going to compensate me for the time I lose when I'll have to fight traffic 2-3 hours per day, every day?
Unpaid overtime work: In addition to my paid 40 hours per week, and 15 hours per week of unpaid commute, in this business I have to work an additional 25 hours per week, so that I can market myself, update my web sites and (QA) resumes, as well as catch up with technology. All of this is overtime work that is (and remains) unpaid to me. I've never received any compensation for any of this overtime work.
Minimum 3 months: On contracts, I usually need two to three complete months just to break even, just to recover my initial cost of client turnover, advertising, marketing, moving, and transportation.
Helping recruiters: In addition to my paid 40 hours per week, and up to 15 unpaid hours per week of commute, I find myself working 25 additional hours per week because of a steady stream of telephone calls and e-mails from hundreds of screeners all over the country who just possibly perhaps someday might have a suitable position for me, and because a great many of them do NOT...Instead, they do...
- Recruit;
- Click on my resume.
- Read my resume;
- Click on my recruiters' FAQs;
- Read my recruiters' FAQs;
- Answer their own telephones;
- Answer their own e-mail;
- Answer my paging, if I'm able to page them;
- Answer their cell phone, if they have a cell phone.
Their excuses are...
- Screen and only screen;
- Play phone tag;
- Waste my time;
- Play head games with me;
- E-mail me long lists of canned questions;
- Ask me canned questions;
- Make me rehash for them, individually, and one by one, my FAQs, without any compensation for my time;
- Make me rehash for them, individually, and one by one, my resume, without any compensation for my time;
- Make me give an unlimited number of telephone interviews, without any compensation for my time;
- Want to spend time with me;
- Make me e-mail them, one by one, manually and individually, my standard answers to their canned questions;
- Make me e-mail them, one by one, manually and individually, my usual resume, even when I e-mailed to them the very same resume two to five days earlier;
- Make me spend additional time on my resume, before I send it to them;
- Want me to drop everything I'm doing, answer their telephone calls 7 days a week, and view their web sites, job descriptions and e-mails as soon as they e-mail or call me.
Great! Here I'm again, chained to a desk, and, in addition to my regular 55-hour work week, I'm working an additional 25 unpaid hours per week, without any compensation for my time. Please notice that I keep helping screeners and recruiters, day after day, every day, and I receive ZERO compensation for my time. -- I am working for FREE!
- "I can't find your resume (in my own desk)."
- "I can't find the requirement (I called you about)."
- "I do not understand your resume."
- "I need a "first edition" resume from you."
- "I'm not allowed to use the Internet."
- "I've got a requirement that is 'hot'... 'urgent'... and 'very urgent'!!!"
- "My computer is 'slow' today."
- "You will save ME time..." (and he's not concerned about my time!)
- "We've never talked before..." (so let's talk and talk and talk!)
- "The resume I've got is an 'older' one..." (i.e. older than 2 days)
- "Your resume came from a 3rd third party whose file type is not Word."
- "If I print a resume off your web site, your resume won't look good."
- "If I download your resume, all formatting will be lost."
Unskilled laborers make more money: Where are the high rates? Where are the benefits? This contract work -- coupled with the need to commute, and constantly market ourselves -- is an (40 + 15 + 25=) 80 hour per week job for a low rate of ($55/hr * 40hrs / 80 hrs =) $27.50/hr.
In contrast, unskilled, uneducated, ordinary computer data entry operators working 40 hours per week with west coast longshoremen make $136,000 per year, i.e. 2-3 times more than yours truly. Add to their benefits the fact that their jobs are permanent, not temporary, jobs, and then you might find they make FOUR times more than yours truly!
In contrast to their jobs, in this business there are no profits, only low hourly wages that do not even pay for much needed hotels, motels, rental cars, airline tickets, and travel expenses!
$60/hr in 2000: Do you want to know what computer professionals charge? According to a January 2000 contract rate survey of "realrates.com", the median rate for contractors working directly for clients was $75 per hour. The median rate for contractors working through middlemen was $60 per hour. According to their April 2003 survey (for the 12 month period ending in 4/03), the median rates for software QA engineers/testers were $82.50 per hour (when working directly for clients), and $62.50 per hour (when working through
middlemen).
Fairness: If the contract is in the United States, then the above-mentioned dollar amounts are in American money. If the contract is in Canada, then the above-mentioned dollar amounts are in Canadian money.
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Q22: What about per diem?
A: Do you know what per diem (PD) is? Keep reading! PD is a reimbursement for temporary living expenses incurred while I'm working more than 50 miles away from my home base. It's a lump sum payment in lieu of expensing my employer for each separate expense I incur.
What is YOUR company's benefit of providing PD? With PD, your company can attract out of town talent, make a lot of money, and save a lot of money! Why? Because on PD payments your firm does not have to pay the usual 7.65% FICA, unemployment insurance and Medicare contributions. Keep in mind, as the "example" near the end of this section demonstrates, PD payments can increase your company's profits by 63.8 per cent!!
Is there any additional cost to your firm? No, there is no additional cost. The PD does not come out of your company's money. The PD always comes out of MY money!
How to increase profits: The more money your company allocates to the payment of PD, the more money your firm is going to make! Did you know that on PD payments your firm does not have to pay the usual 7.65% FICA, unemployment insurance, or Medicare?
Not a favor: A few contract staffing firms, not realizing that this is their chance to make more money, sometimes make me think that they do me a favor when they pay me PD out of my own money!
Fear: Sometimes a contract firm uses *fear* to try to make me think *fear* is holding them back before they agree to pay me the Federal rate out of my own money. Think about it; there's nothing to be feared! You're not breaking any rules! Why don't you read the rulebook? Click IRS Publication 463, and study it or read it.
Does this PD go on my W-2? No, it does not. Read the rules. Read the lower right corner of page 8 of IRS Publication 463 where it says, "Reimbursements treated as paid under an accountable plan, as explained next, are not reported as pay."
What are the Federal rates for PD? PD rates are given in standard tables by the IRS and the GSA. Which one do you use? IRS Publication 1542 is excellent for filing your tax return (for last year), however the standard tables at the General Service Administration's web site are more current, more relevant, and therefore far more useful to recruiters working on new contracts (in this year).
High-low rate: Can you exceed the Federal rate? Yes, you can. If this statement sounds like a contradiction, you need to remind yourself the IRS Code is full of contradictions. Read the rules. Read IRS Publication 463. Scroll down to page 30, and find the subsection titled "High-low rate", and read that subsection where it says the "high rate" (for New York City, San Jose, etc.) is $246 per day, and for any other location in the Continental United States the "low rate" is $148 per day.
Higher rates are possible: Can you get an even higher rate? Yes, you can. The key is **your** location, not the location of your end client. This means, if your end client's plant is in a suburb, but your hotel is in a nearby BIG city, a *higher* Federal PD rate may apply. Click IRS Publication 463, and read the lower right corner of page 29 that says, "For per diem amounts, use the rate in effect for the area where you... sleep or rest".
Example: If a client's plant is located in Coon Rapids MN, and if you're staying at a hotel or motel in Coon Rapids MN, then, based on 2008 Federal rates, you're entitled to a PD of $119 per day. Hold it! Why don't you use the IRS' "high-low rate"? If you do, then you're entitled to a PD of $148 per day! Wait a minute! How about an even higher rate? How about staying at the nearest big city? Based on 2008 Federal rates, if your hotel or motel hotel is in Minneapolis - just 5 miles from Coon Rapids MN - you're entitled to a PD of $185 per day!
Hourly payments: Are hourly payments legitimate? I realize this is a controversial subject, and opinions differ. My guide is the law and the IRS who say that hourly payments are not legitimate. To be considered legitimate by the IRS, the payments must be paid for every **day** when I'm physically staying in a location more than 50 miles from my home base. The days must include non-working weekends and holidays as well as stand-by days. Your firm may **calculate** an hourly rate for the PD based upon your firm's need for a reasonable profit, but your firm must pay me a set rate for every **day** when I'm in that remote city. One possible explanation is that "per diem" means *per day*, not "per hour". My experience is that if an agency is telling me the PD must be paid hourly, the agency is usually uninformed. The best contract staffing firms pay the PD for every day. If this or the next two paragraphs sound confusing to you, don't give up yet! With PD payments you can *still* increase your company's profits by 60+ per cent!!
Can the PD fluctuate, based on my work hours? No, it cannot.
Can it be not paid on my days off? No, it must be paid for every day, as long as the contract is in effect.
Does the rate depend on the type of hotel I stay at? NO, the PD rate has nothing to do with whether I stay at a hotel or get a good deal on a short-term apartment.
No need for record keeping: Do I need to provide some kind of *receipts* for food and housing? The rulebook says the only proof I need is the proof of payment of PD. Read the third column of page 25 and the second column of page 30 in IRS Publication 463, One possible explanation is that PD intends to promote business and minimize accounting costs associated with travel expenses.
I prefer maximum Federal rates just as I prefer high rates to low salaries. Think about it for a second; there's nothing to be feared! You're not breaking any rules! If you have too many fears, you shouldn't be representing me.
What do the best contract staffing firms do? They calculate and pay my PD correctly, and allocate the maximum Federal rates fairly. They're aware of the fact that I'm entitled to the full amount of my Federal rates as long as I keep working, and don't return to my permanent home.
Who sets PD rates and rules? Rates and rules are set by Federal law and the IRS. Do you need more information? Would you like to see the IRS rates for your city or county? A reliable and excellent provider of the most current and up to date PD rate information is the General Service Administration's web site.
Do you need to report this PD on a W-2? The answer is "no, you don't". See "reimbursements" in chapter 6 of IRS Publication 463.
The most useful rulebook on PD that is also online is IRS Publication 463. Other rulebooks on PD include IRS Publications 511, 1509 and 1728.
Do you allocate PD for weekends and standby days? The answer is "yes, you do". See IRS Publication 463 and IRS Publication 1728.
Maximum federal PD rates: Would you like to see the maximum federal PD rates for your city or county? See the General Service Administration's web site.
IRS Publication 463 is an important source of information on the subject of PD payments, weekends, standby days, reimbursements, record keeping, reporting, maximum Federal rates, high-low rates, proof of expenses and the IRS' four conditions that qualify me to receive PD.
What do you say in your contract? Splits are not my preferred way of doing business, but sometimes they can be done without too much harm being done. At other times, if the split is offered and accepted, I start working and get paid, but, when I look at my check stubs, there is a little bit missing from my holiday or overtime pay. This amounts to a minor irritation, and I often promise myself that I probably won't do this "infamous PD split" again.
For your information, let me tell you this: Tying the amount of PD to the number of hours I work is fraught with problems. If you pay PD on an Hourly basis, e.g. use an "infamous PD split", there will be many potential opportunities for misunderstandings. Contractors want to know, "Is my check going to going to be short, if, for example, one of the days of the week is a holiday?"
A solution: One contract-staffing firm prevents potential problems associated with holidays, weekends and other stand-by days. How do they do it? In their contracts they spell out in advance the formula they're going to use. For example, when they want $29/hr split out of $60/hr, they use the following wording in their contracts: "PD is divided as follows: 27 hours or less: PD rate per hour. 28 to 32 hours: PD rate for 32 hours. 33-35 hours: PD rate for 35 hours. 36 to 40 hours: full weekly PD rate. Overtime hours: $90/hr rate and no additional PD."
NUMBER OF HOURS
WORKED PER WEEKHOW MUCH "PD" DO YOU PAY? 27 hours or less PD rate per hour 28 to 32 hours PD rate for 32 hours 33 to 35 hours PD rate for 35 hours 36 to 40 hours Full weekly PD rate. Overtime hours $90/hr rate, and no additional PD.
Is there any additional cost to your firm? No, there is no additional cost. The PD does not come out of your company's money. The PD always comes out of MY money!
How much money would you like to make? The more money your company allocates to the payment of PD, the more money your firm is going to make! Did you know that on PD payments your firm does not have to pay the usual 7.65% FICA, unemployment insurance, or Medicare?
Example: Let us say your company's billing rate is $100/hr, my rate is $80/hr, your firm's sales cost is $8.88/hr, I work on W-2; and for your city, Boston, the IRS allows a maximum PD of $238 per day. Your firm has the option of breaking out OR not breaking out of my $80/hr rate, a PD of ($238/day x 7 days) / 40 hrs= $41.65/hr.
A) If your firm pays no PD, on my work your firm will make only ($100/hr - 80/hr - $8.88/hr - 6.12/hr FICA)= $5.00/hr.
B) Alternatively, if your firm breaks out of my $80/hr rate the PD of $41.65/hr, then on my work your firm will be able to make ($100/hr - 80/hr - $8.88/hr - 6.12/hr FICA + 3.19/hr FICA)= $8.19/hr. The key is the $41.65 x 7.65%=$3.19/hr FICA that you will save on the PD of $41.65/hr. This means that your firm will be able to make an additional profit of $3.19/hr!! Or, to put it differently, your firm will be able to increase its profits by a whopping ($8.19 - 5.00) / 5.00= 63.8 percent !!
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Last modified on 6/28/2008.
Rob is a registered and licensed professional engineer.
http://www.robdavispe.com | http://www.softwaretestengineer.com
