I am considering taking a contract software engineering role with a company I am excited about. We are in the final stages of the interview process, and they are pressuring me for a rate. When they first asked me for a rate, I asked whether they have a typical rate that they pay contractors and they said yes, “based on experience”, but did not disclose the rate. I have no idea how they are intending to level me and am confused as to why they are asking me for my rate if they have a standard contractor rate. Would welcome any advice about how to proceed.
Edit: to clarify, I’d like help with how to ask them to tell me their usual contractor rate
Shoot for the moon, ask for 1.5-2x what you need. Everywhere I’ve worked has overpaid so much for contractors
There’s also admin time which needs to be paid for and it’s not directly billable, generally.
Edit: to clarify, I’d like help with how to ask them to tell me their usual contractor rate
You ask them and then they will tell you or not. If the say “based on experience”, then ask for a range for an engineer with your similar experience.
They might not want to tell you. They want to get you for as cheap as possible, which is way everyone on this thread is telling you how to estimate a rate.
You might be able to find other contractors for them on LinkedIn and ask them, but they are also unlikely to tell you and might inform their client that you did it.
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The issue is that there is a very wide range of rates for a contract software engineer, not just based on level, but also based on where the company is located, how large they are, etc. etc. That is why I would like to at least get a sense of how they intend to level me and what their usual range is before giving a rate.
Here’s a formula I have used. You have a certain target amount of money that you need/want to make per year. Now remember that you will need to pay taxes and other expenses such as health insurance (in the US) from that number and bump it up accordingly. Let’s call that T. Now there are 52 weeks in the year and the average work week is 40 hours so 2080 possible hours to work. From that number take out holidays, vacation and and an estimated amount of sick time. The average US corp has 10 holidays that they won’t expect to pay you for so the total hours should be no more than 2000. Now simply take T/hours and that is your starting rate. If the contract is 6 months or more and likely to get extended use that number. If it’s contract to hire use that number and remember that your FTE rate will be less than your contract rate. If the contract is short term or has some instability bump up the rate enough to at least partially cover some down time while you’re looking for the next gig.
Here’s my simple formulas based on how much I would normally make: Short term hourly = Yearly Salary / 1000. Long-term (2+ months) hourly = Yearly salary / 1500.
So, if your salary before being a contractor was $200K, then you would charge $200/hr for short term work. For a 6 month job, you would charge $133/hr
Depends on your circumstances. Are you broke and just need work? Ask for the same salary as you made before.
Are you just looking to line your pocket? Ask 1.25x-1.5x your previous rate.
Hint: If you need more experience than a college degree, your asking rate should be at least $48/hr. Healthcare is expensive, afterall.
I would figure out the range of salary the type of position usually goes for, then start with an estimate slightly higher than that. Assuming this a full-time role, you’ll need to account for things like “office” expenses, healthcare, utilities (internet?), and what you will eventually owe in taxes. Contractors’ rates will often be “higher” than salaries for the same position because of this, but in the end the amount you actually take home will balance out.
I’ve done contract work since finishing university, and managing taxes and expenses has been a constant challenge. Make sure you’re comfortable with the deal you make.
