Hourly Rate

[Scott Maclary]

I am a Java developer with 5 years of SW development experience, 4 of which are in Java. Over the last two years I singlehandely created a large web based J2EE app from scratch and I've gotten two different Java certifications (SCJP and SCWCD).

My Resume is pretty solid. Three years at Accenture, two years with the small company I am working at now and graduated Cum Laude from a good Virginia school.

Anyway I am considering contracting for a 6 month period starting in July and I am not certain what rate to charge my clients. I am making 80K right now, and I have heard various formulas for calculating your hourly rate using your current salary.

Based on this...I was considering charging $80/hour. Is this too much/too little?

Any advice would be appreciated.

Scott

[Don Stadler]

I suggest you get your resume out there and let the recruiters tell you what's too high and not too high!

If the US is anything like the London market right now there will be some high rates available now for the truly well-skilled.

[Scott Maclary]

I have done that and I am having trouble knowing what I can truly get versus what the headhunters feed me. They tell me that $50/hour - $60/hour is plentiful but $70/hour is tougher. It really wouldn't make sense for me to leave an 80K job for less than $70/hour when you calculate the extra taxes, benefits lost and risk of being out of work.

Three questions:

If a headhunter tells me $50/hour is reasonable...how much room do I have to negotiate (are they getting double that amount)?

When I worked at Accenture (and my current company) billed people of my level out between $100-$175/hour. If $50/hour is really the going rate...where is all the money in between going?

Anyone know any good sites out there for principals looking to hire people that cut out the middleman (headhunter)? This seems like it'd be an easy way for the principal to cut down on costs while still giving us developers a reasonable rate.

Any advice appreciated!
Scott

[Warren Dew]

Scott Maclary:

It really wouldn't make sense for me to leave an 80K job for less than $70/hour when you calculate the extra taxes, benefits lost and risk of being out of work.

If you are worried about higher risks of being out of work as a contractor, you might want to think twice about leaving an employee status. If you use headhunters properly, you shouldn't be involuntarily out of work any more than you would be as an employee.

If a headhunter tells me $50/hour is reasonable...how much room do I have to negotiate (are they getting double that amount)?

Typically headhunters bill you out at 1.33 to 1.5 times what they pay you. Since they have costs, too, there isn't a lot of negotiating room. The rate you quote them at this time will mostly affect which openings they put you in for, not their profit margin. If they pay you $50/hour, they can put you in for jobs at $70/hour; if you want $80/hour, they have to look for jobs that are $110/hour and up, and those openings are rarer.

When I worked at Accenture (and my current company) billed people of my level out between $100-$175/hour. If $50/hour is really the going rate...where is all the money in between going?

Accenture and similar companies have much larger overhead costs. The biggest is probably marketing and sales - the time the senior guys spend shmoozing and putting together presentations to sell contracts. They also pay your salary even if the work you do is nonbillable or otherwise has to be written off.

Anyone know any good sites out there for principals looking to hire people that cut out the middleman (headhunter)? This seems like it'd be an easy way for the principal to cut down on costs while still giving us developers a reasonable rate.

It might seem so, but it isn't. Headhunters spend a lot of time finding openings, finding people, and figuring out who matches up best to what. Basically what they are doing when hiring through a headhunter is contracting out their HR operation. The only time it makes sense to cut out the middle man is when the company has a good HR department itself, or in cases of personal references from current employees or contractors.
[ May 11, 2005: Message edited by: Warren Dew ]

[Mark Herschberg]

Originally posted by Don Stadler:
I suggest you get your resume out there and let the recruiters tell you what's too high and not too high!

No!

This is your life, your job, your family's well being, your money. It's your business and don't let a recruiter talk you into anything. Bad ones move on after they places you, and take little penalty, but you live with it. Obviously if you have a good one you've worked with for years, and can trust, give that one morw weight. Otherwise, let the market tell you your rate, not your recruiter.

As an example, I regularly get emails saying, "I have a client in NC looking for a J2ME dev for $30/hr, please jump through my hoops so that I may consider you." The reality is, I can do much better than those recruiters think I can.

As it turns out, $50-60, especially in VA is probably about right. $70 is possible, perhaps, I don't know the market that well.

Thinking that $80k should get you $80/hr is bubble math. It could be done then, but certainly not today. Benefits are roughly 30% overhead, i.e. a $100k guy costs a company $130, although it can vary from 20-50% depending on benefits and workforce. While you should also be compensated for unemployment risk, I'm not sure I see it as $80/hr right now. The market is picking up, so maybe in a 9-12 months you will be able to get it.

As for Accenture, those companies have two things driving up the price: big overhead and quality assurance. The latter emans that you know Accenture guys are generally trained, and competant, and won't walk off a contract. You don't have as much confidence with Joe Smith off the street.

--Mark

[Don Stadler]

Mark,

I'm not sure you got my point which was not to allow a particular recruiter to tell you what to do but to get out and find out what is possible. Which generally requires talking to recruiters, many recruiters.

As you recognize market value is not an absolute - one can be a much better developer now than in 2001 but nevertheless make a lower salary or hourly rate than you did then.

Talking to a lot of recruiters is one way (not the only way) to determine what the market will bear. Problem is that you need to know that locally - and recruiters usually are the ones who know.

[Don Stadler]

I have a client in NC looking for a J2ME dev for $30/hr, please jump through my hoops so that I may consider you." The reality is, I can do much better than those recruiters think I can

Of course you can. To this kind of recruiter you aren't an MIT grad with X years of high-quality experience, you are an email address with a programmer at the other end.

That recruiter isn't making a value judgement on your skillset. Any recruiter working THAT market is almost certainly clueless about market forces and thus only useful in the rare situations where one is desperate for a job - any job.

What that recruiter understands is that he can make an easy placement at $40-50 an hour for an quick profit. He spams thousands of email addresses to search for his quota of the clueless.

There are a range of skills among recruiters as well as among developers. he good ones can be priceless information sources. But so can the guys at your local JUGS....