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Contracting
is a far different world than most people are used to. Moving
from company to company, you never really get over the "new
job" jitters, even if it is a short term contract. The
money is good, and staying employed isn't really difficult as there are
usually plenty of jobs to go around. But being really successful
at contracting requires a slightly different skill base and mind
set than most people realize. Understanding how
contracting companies operate, how they value your worth, and
how to negotiate the best possible terms will make all the
difference between being just another "fish", and
being a highly paid, in demand professional. This article is a
combination of my experiences in the contracting industry, the
experiences of several of my peers, interviews with recruiters,
contract sales managers, account representatives, and IT
managers who hire contractors. We will look at the pro and cons
of contracting, take a critical look at how contracting agencies
operate, suggest strategies for increasing your salary potential
and negotiating with contracting companies, and offer advice on
managing your contracting career.
Employment vs.
Contracting
As an employee of a company, you generally have more benefits,
stock options, sick time, education and training, office space,
and a structured plan for career advancement. The biggest plus
is that you'll have a steady paycheck. From a contractors point
of view, full time employees have traded the
"illusion" of job security and stability for less
money. Full time IT staff often
see contractors as "mercenaries" (or worse), who
broker themselves to the highest bidder and have few loyalties.
Some contractors have earned a reputation as snake oil salesmen
who make all sorts of promises and then wreak havoc on
the company's network before they eventually get fired. Others
are viewed as incompetent vagabonds who need a position where
they can moved from company to company, because nobody will hire
them full time. To be honest, I've seen enough of both types,
but I know enough talented people who break this stereotype as
well.
Being an employee isn't all it's
cracked up to be either. We live in a Dilbert
world where bad management appears to be the norm and company
employees (even valuable IT staff) are treated as cattle. I've
watched countless companies pressure their people into working
mandatory overtime, weekends, holidays, and put off vacations
because of some urgent crisis that is always pending because
their departments are chronically understaffed. Many of these
employees are salary, and are often promised "comp time"
to make up for the extra hours, but few actually get it. If they do
manage to take it, it is often brought up later in a performance
review as a negative attribute. Not working free overtime will obviously impact your
productivity, and god forbid if you become labeled as someone
who isn't a "team player." Several large Fortune 100
companies actually pit the employees against each other during
performance reviews. The top 10% of employees get raises ( a
whopping 4%) or get promoted. The bottom 10% get laid off, and
the middle gets put on notice. To make the top 10% requires lots
of unpaid overtime, never saying no to your boss's unreasonable
requests for rush projects, and sometimes even long distance travel on
short notice.
Contracting is vastly different.
Terms of employment are usually short (3 -18 months), and your
hourly pay is higher than many equivalent full time employees.
If you don't like where you're working you can simply pack up
and leave - you're a contractor and expected to jump from job to
job. (Although overdoing it will ruin your reputation). Since
companies are paying you by the hour, they almost always ask their
full time salaried employees to come in on weekends, work holidays,
and stay late. There's no pressure of a pending performance
review or a promotion hanging over your head. If you do a good
job and act professionally, your contract may be extended and/or
you may be offered a full time job with the company. If you're
like most contactors, you'll be bored with a company in 12-18
months and be dying to leave for a new job with new challenges. Occasionally
you may find yourself out of work for a few weeks, but since you
make a higher hourly wage than most full time employees, you
should easily be able to save enough cash and see the break as a
vacation and/or training time. If you use your "down
time" wisely and continued to build your
skill set, you can easily increase your salary by 10%-20% a
year.
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Independents
vs. Contracting Companies
Typically, contractors work in one of two ways. Some are
completely independent and generate their own sales leads, set
up their contracts and pay structures, and pay their own
benefits. The vast majority work through contracting agencies,
which act as middlemen for companies who need flexible staffing.
These agencies have a full time sales staff who find lucrative
temporary staffing projects and a full time recruiting staff to
find qualified IT staff to fill the positions. I've done both,
and they each have their pros and cons as well. So lets start
with the independent.
Independent contractors are often
referred to as "1099" employees. (1099 is the IRS tax
form you file if you're self employed.) When you're not working,
you're actively looking for work, cold calling companies,
networking with other contractors, and always trying to sell
yourself and your skill set. The Internet has made things a bit
easier for you, but unless you have a specialized skill set and
are at the top of your field, it's rare that business is beating
your door down. Typically, you bill $100 or more an hour
(depending on your skill set), but you always have to track
every minute you work. You pay your own health insurance, and
there are no paid vacations or sick time. You spend time to
invoice your client every week, have to follow up to make sure
you get paid, defend your time sheet, and negotiate the fine
points of your contract. You also have a higher chance of
winding up in court for malpractice, contract disputes, or just
trying to collect your fees. Occasionally you make a little
extra cash reselling hardware, or subcontracting smaller
functions to other independent contractors (i.e. you bill the
client $100/hr, but you're paying your subcontractor $60/hr). As
you approach the end of your contract, you need to spend your
free time finding another contract, or you'll be out of work
again for a few weeks. The rewards of being an independent are
great, but there are a lot of pitfalls and hassles.
If you like the idea of being a
contractor, but you don't want all the hassle for finding work
for yourself, billing the clients, providing your own insurance,
etc., then working for a consulting or contracting agency as a W2
employee is the way to go. Consulting or Contracting
agencies operate a lot like traditional temporary staffing
agencies, except that Contract employees provide specific
advanced technical and professional skills, are paid more than
regular temps, and they tend to have longer assignments. Most
agencies will want you work as
their employee (during a contract) and may offer paid benefits,
vacation time, sick time, and holidays. Typically, a contractor
makes 45% (or less) of the agency's billing rate. So if the
agency charges a client $45 -$120/hr for an
MCSE level candidate with a strong skill set and experience,
they may offer to pay you about $25 -$50/hr based on what you negotiate.
The agency will have a
full time sales staff which will find contract positions, and a full
time recruiting staff to fill those jobs. Some offer
limited training options, or provide reimbursement if you pass a
Microsoft Certified Professional exam. However, in every other respect contract
employees are just like regular temps, and traditional contract
employment agencies operate just like regular temporary
employment agencies. Many companies will tell you that you are
an employee (and treat you like one) as long as they have jobs
for you. The true test of a company is how they treat you
between contract positions, especially if several weeks pass by.
Many companies promise that they will pay you during this period
(it's called bench time), but few actually pay it.
Why Hire a
Contractor?
Contractors are often brought
in to help with large scale migrations, complicated IT projects,
to fill positions with high turn over rates (Help Desk and
Support), specific hard to find skills (SMS, Exchange, SQL,
etc.,), or to fill in for critical employees on sick leave.
Companies have also turned to contracting companies to provide
temporary to permanent staffing arrangements. A large financial
services company
based in Cleveland, Ohio has been burned so many times by poor
IT hiring practices, that they will only hire contractors in a 6
month temp to permanent trial basis.
How Contracting
Companies Operate
The IT staffing shortages of the late 1990's created such a
market for technical employees, that companies began turning to
staffing agencies to fill their positions. Making money was
easy. There were 5 -15 jobs for every qualified candidate, you
simply had to match a candidate to an employer and collect the
cash. For a contracting company, the key to being successful is to be able
to find several lucrative contracts with large companies, fill those
positions with as many qualified applicants as possible (and at
the highest margin possible), and control costs. But it's not
all a bed of roses. This market has become very competitive, and
technical employees are easier to find. Agencies that
were successful between 1997-1999 have gone out of business (or
almost out of business) in the past year.
To understand how you as
contractor fit into the big picture, lets look at a typical full
service contracting firm and a fictional contract from start to finish. Our
fictional staffing office is part of a large nationwide company
that has 30 offices across the United States. This local office has
100-150 contractors working for them, with a database of several
hundred more resumes on file. Aside from the Office Manager and
general staff, there are 5-10 sales managers, and an equal
amount of recruiters and account representatives. The sales
staff meets with local businesses to sell their staffing
service, and finds out if the company requires any temporary
technical staff, what skills they're looking for, and what they
are willing to pay. Meanwhile, back at the ranch, Recruiters look for qualified personnel,
build a resume database, and interview potential candidates.
Once a qualified candidate is matched to a job, account representatives
act as a liaison between the client and the consultants. In a
nutshell, their job is to keep the client happy and contractor
happy. If the client doesn't like the you, they'll tell the
account rep who will typically either have a friendly chat with
you, or pull you from the contract and replace you with somebody
else. It also works the other way around. If you don't like the
client site, you don't complain to the client. You talk to your
account manager, who will try to smooth things out, or get you
on another contract.
In this scenario, a large company
in the area is planning a Windows 2000 migration from a mixed
Novell and Windows NT environment. They want to manage the
project themselves, but are looking for several MCSE's with
Novell, NT and Windows 2000 experience to function as technical leads
and assist with the server migration. They also need several dozen
desktop deployment personnel to help deploy new PC's. In all, they
will require 60 contract staffers for a 1 year
rollout. After making the initial staffing estimates, the company's
IT management will meet with several contracting
companies and ask them for candidates unless they have a single preferred
provider. The company will tell the staffing agency the scope of
the project, a range of how much they're willing to pay for the
skill sets they're looking for, and when they'll need the
contractors. The staffing agency's sales force will go back to
their companies and meet with the recruiters and account
representatives and find out how many people they have on hand
to fill these position. They'll first look at people that
already work for them (i.e. coming off of another contract), or
someone who has worked for them successfully in the past. Then
they'll start cold calling the resume database, and as a last
ditch effort, they'll place an ad in the paper or on an online
job board. (If you see a tech staffing job posted in these
places, the position is tough for the agency to fill, and may
have opportunities
for salary negotiation.)
In the next few weeks, the contracting agency will
set up interviews between their first choice candidates and the
client. The agencies recruiters will interview new candidates
(recruited form either the resume database or the through ads)
who may meet the qualifications, and then forward these
candidates to the clients for an interview. If there are several
contracting companies trying to staff this project, things get
interesting when they compete for qualified contractors to fill
the positions. Every agency wants to fill as many positions as
possible, while maintaining the highest margins.
As you near the end of your
contract term, your agency will let you know if the contract has
been extended or not. If not, you'll be given an exit date and
the agency will promise that they'll find other work for you.
They may ask what you're interested in, and what you want to do
next. At this stage, not every one is equal. They'll fill
immediate openings as they come up, but the more lucrative high
profile jobs go to the start performers. Make sure it's you.
Picking the right contracting agency
When you're first starting out in IT contracting, you may want
to ask around and find out as much as you can about the
companies in your area. How big are they? What major companies
do they deal with? How long have they been around? How much of
their business is technical staffing? How much of their business
falls into your skill set? After you become used to contracting,
you may want to keep good contacts with several local
contracting companies and see which ones offer you the best
contracts. But you also want to
avoid being mislead or burned by a contracting company. Although
there are many ethical well-run companies that do temporary IT
staffing, the business is so lucrative that several companies
have emerged with nothing on their minds but profits. In order
to beat out competition, a staffing agency has to be able to
provide a client with as many qualified candidates as possible.
In order to remain profitable, they need to do this with as
little overhead as possible. However, the line between an honest
profit and unethical practice is drawn very fine and is often
crossed.
Some
things to watch out for:
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Agency Office Staff
who are not tech savvy...
In my experience, the majority of agency office staff
were hired for their sales and people skills, and little
emphasis is placed on building a knowledge of what's
required to complete a project. You may discover that
the project description and job requirements that the
agency recruiter gave you doesn't match what the client
tells you in the meeting. This is not only embarrassing,
but a big waste of time. Staffing agencies need to know
what they are selling (you) and what the customer
requirements are. Imagine a car parts store where none
of the people behind the counter knew anything about
cars. Knowing a few industry terms and some buzzwords
doesn't cut it. |
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Presenting
anyone with a pulse...
Since staffing agencies only get paid when they have
someone working in a contract, they will often throw any
candidate (qualified or not) at a client as a temporary
measure. If the candidate makes it through the client
interview, the client actually shares some of the
responsibility for the mistake and will be less likely
to hold the staffing company responsible (unless this
becomes a pattern). This is a gamble on the agency's
part, but the odds are with them. If by some stroke of
luck, the contractor works out, the agency has lost
nothing. If the contractor is unqualified, it will often
take weeks for the client to figure it out and this buys
the recruiter time to fill the position with another
candidate. The important thing is that during this time,
the client is being billed and the agency is still
making a profit. |
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Lack of Background
checks...
Many staffing agencies don't even bother to do
rudimentary background checks to verify employment,
check certifications, college degrees, criminal history,
etc. All this takes time and money, which eat into the
bottom line. After all, this is a temporary position and
it's only for a few months. I've known people who have
had 2 resumes. One padded resume for contracting companies who never
do background checks, and another "clean"
resume for permanent
positions, temp to hire jobs, or for the few companies
who do check. |
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You're an employee,
until you're not...
This turns into a shell game quickly. Staffing agencies
need to maintain a loyal cadre of contractors that they
can re-deploy contract after contract. To keep you from bouncing
between agencies, many offer medical benefits, training
incentives, and some vacation time. Often there are
loopholes that you only find out about the hard way. For
example, you may be told in the interview that you're eligible
for vacation after a year of service. What they really
mean is that a "year of service" is a single
continuous 12 month contract from a single vendor. You
many also find that training is not classroom based, and
is often just access to a poorly stocked technical
library, or computer based training. (Not all bad, but
hardly career vaulting.) Find out what the fine print is
before considering a benefit as part of your salary. |
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Aggressive
non-compete agreements...
A questionable tactic that has surfaced and become more
common over the past several years is to have employees
as well as consultants sign a non-compete agreement. A legitimate non-compete
would simply keep you from seeking full time employment
from the client that you're being contracted to. Most
agencies have a procedure for temp to hire positions,
and simply want you to follow their rules. If the client
likes you and hires you, the client must pay the agency
a headhunters fee, or finders fee. To prevent you from
making a backdoor deal with the client, the legitimate
non-compete may stipulate that you cannot work for the
client directly for 6-12 months after you leave as a
contractor. This type of non-compete agreement is the
industry standard, and reasonable. The non-compete you must
watch out for is the one that prohibits you from working
for anyone in an IT position within a certain mile
radius (often 50-100 miles) for a specified length of
time. If you work in a "right to work" State
(like Ohio), many of these agreements won't even hold up
in court, but are used as a pressure tactic by companies
to keep you on a leash. Any company that asks you to
sign this type of non-compete is really just showing you
how little they think of you. Refuse to sign, and go
work for someone else. Warning:
Companies have started to spring restrictive non
compete agreements on employees on their first
day of work instead of during the pre-employment
screening. Since you've already left your other
job (or turned down other assignments), they
figure your more likely to sign than simply walk
out. Be sure to ask about a non-compete
agreement before you accept the job offer. If
one exists, demand to see it before you commit
to anything else.
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Beware of mandatory
training time that you must pay for...
There are several large companies (not just tech
staffing companies), that use a tactic of sending all of
their new employees to "free" and mandatory
training when they first sign on with a company. The
training is really just a company orientation and rehash
of basic computer skills that you already know, and is
generally worthless to you. However, if you should
happen to leave the company before a specified time, you
would have to pay for part of this "free"
training. In the example I've seen, the company stated
that the training was worth $3,000 (doubtful), and you
were required to stay 3 years. If you left before 3
years, you would have to pay $1,000 for every year left
on your employment agreement. Be careful what you sign
and agree to. Companies have a legitimate reason for
asking you to stick around when they provide a training
investment. But be sure you know the real value of the
training before you sign up. |
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The truth about bench
time...
Bench Time is a promise many contracting companies
promise to keep you from jumping ship and getting
nervous at the end of your contract. "Bench
Time" is a promise from the contracting agency that
you will still receive pay if you are unemployed between
contracts. After all, it's the agency's job to find work
for you, right? The reality is much different. Only the
most valuable contractors will ever see bench time, and
some agencies require that you use up all of your
vacation time first before they'll pay bench time.
Others won't pay your full hourly rate, but give you the
Federal minimum wage, or place you in short term
contracts (1 week at a time) at half of your usual rate.
If your company promises "bench time", ask
around quietly to see how many contractors have actually
received it. |
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The Bottom Line:
The other key thing to keep in mind is that the contracting
agency is paid for results, so they only pay their own
people for results. Sales managers often make a small base
salary plus a commission based on the value of the contracts
they bring in. Recruiters are also paid a commission for people
that are actually hired and placed into a contract. An account
representative's pay may be based on how many contractors she
oversees, and how long they stay on the job. The office manager
makes a fairly large commission based on everyone's performance.
The only non-commissioned people in the company is the
secretary, janitor, and you. This impacts you because you
are the product they're selling. When they look at you
and your resume, they're thinking bonuses and commissions and
probably see little dollar signs floating over your heads. The
better your skill set, the more you'll be pampered. You'll get
invited to expensive lunches, they'll laugh at all your jokes,
and tell you anything you want to hear. The only other people
that drool this much when they're talking to you are life
insurance and used car salesmen. Always keep in mind that you
are the product. They need you as much as you need them. Or
do they?
Where do you fit in?
Knowing what you're worth is the first step in negotiating a
better life for yourself. In my experience, most candidates will
fit somewhere into or in-between the following categories:
Level
5
1% |
You
are the elite candidate. You have a strong skill
set backed up with multiple industry
certifications, proven track record and 3-10
years of experience, good references, good
personal skills, and you can ace any interview.
Ideally, you've done this same type of project
before and can bring the lessons learned with
you and help the project avoid costly pitfalls
and stumbling blocks. |
| Level
4 9% |
You
have a strong skill set, with +3 years of
experience, MCSE certification, but either have
limited experience for this particular project,
or there is a slight gap in your skill set. You've
worked as a Technical Lead on several successful
projects, and have a lot of potential. |
| Level
3
20% |
You
have an average skill set and experience. You're
competent, experienced, and professional. You
have some industry certification, or have
completed your MCSE, but little high level
experience. Your resume contains a good mix of
projects with various operating systems, but
lacks focus and specialized skills. Smart
candidates build skills in complimentary areas
like SQL server administration, Exchange, SMS,
IIS, etc., Scripting and programming skills are
a plus as well. |
| Level
2
35% |
You've
bounced around in several low level tech jobs
for the past 2-3 years, and have begun taking
certification exams. You interview well, have
strong interpersonal skills, and have Level 2
desktop support experience or
small limited server administration roles. |
Level
1
35% |
Everybody
has to start somewhere, and every company needs
a help desk.
You are new to IT and looking for an entry level
position. You may have completed some industry
certification, or you are young and think of
your previous job of selling PC's at a retailer
as "IT experience." These
jobs require good technical skills, but so many
people meet the basic qualifications that
they're easy to fill. People who rise to the top
of this category don't want to stay there, and
are anxious to move to Level 2. |
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These categories are informal,
and based on my own observations and interviews with others. You
may agree or disagree with these categories, they are presented
only as an example. The important consideration to keep in mind
is that agencies hire and base salaries on a similar informal scale, so
you need to examine and understand where you fit into it.
When looking at these categories
and estimates of the overall labor pool, keep in mind that
there are contract positions available for all of them. Your
position in this pecking order has a lot
to do with how valuable you are to a consulting firm. The more
people in your general category, the less leverage you
have.
Level 1 and 2 technicians
comprise 70% of the labor pool for temporary IT staffing. To
most companies you're a "dime a dozen", although
you'll never hear them say it. You are potential billable time,
regardless of your skill set. Your ability to negotiate a salary
is slim as there are 69 other resumes in the desk drawer that
have similar skill set to yours. What makes yours stand out?
Level 3 technicians were gold a
few years ago, when this category was a lot closer to 10%. Now
there are too many paper MCSE's with little or no experience.
And although companies are still outsourcing help desks, they've
cut back on outsourcing server administration and prefer that
their administrators are all full time employees. This is the
time to carefully build your skill set and resume. Focus on
increasing your marketability and street worth.
Level 4 technicians are in the
top 10%. They're competent, rising young stars who maintain
their skills and have chosen their projects wisely. The pay is
top rate, you work in challenging projects and you always have
several job offers waiting for you. Keep your technical skills
sharp and your negotiating skills sharper. This is the class of
technicians who see the widest salary range of all, and it's all
on your shoulders to figure out how much you're really worth.
The top 1% of candidates are well
known in the IT community. They have a highly specialized skill
set that is broad enough to make sure they're always employed.
Large scale server and desktop migrations, data integration
projects, security specialists, web architects, high end
developers, etc., They are considered experts at one particular
part of the IT puzzle and nobody can do it like they can. They
can command top pay if they are willing to travel, and they
often work as independent contractors. Many wind up creating their
own consulting companies.
Negotiating
your salary
Very few people realize that almost everything is negotiable,
especially salary. To put it another way, "It is an
employer's responsibility to get the best talent it can for as
cheap as it can. It is your responsibility to get paid as much
as possible." Salary ranges are rarely hard and fast
rules in the new economy. These ranges are based on the type of
work required, your geographical location, and the availability
of qualified candidates. (The law of supply and demand are
always at work.) Most people underestimate their worth, so
companies have stopped printing salary ranges upfront, and will
simply ask you what you're looking for. If it's lower than their
expectation, they'll meet it. You're happy because you think you
got what you wanted, and they're happy because you've underbid
your own salary.
When you're working with a
consulting company, you'll negotiate your salary with them, not
the client. Most seasoned contractors already have a pretty good
idea of what they're worth. They will let an agency know up
front what kind of work they are looking for, as well as how
much they expect to get paid. Always give this figure as a
range, such as $40-$45/hr. Leave a little wiggle room, and never
tell them what your absolute minimum is.
Typically, your agency will give
you a rate before you start the interview. Never agree to it up front.
Tell them it sounds interesting, and you would consider the
position if you liked the company. Always be friendly and upbeat
during this phase. Sound excited about the job prospect, and
rant about what a great opportunity it would be. If the salary range is
close to what you would like, but think you're worth a little
more, be careful how you express this. You want to get to the
interview. The agency will arrange a face to face meeting with
the client. If you did well in the interview, the agency will
call you within a day to let you know that you got the job.
Sound excited about the job, and then ask the agency about the
salary. Tell them you have to think about it. Call them back the
next day, and say that you really liked the company and the
contract, but...<insert excuse here> Keep in mind is that $1 an hour
will equal $2000 a year (based
on a 40 hour work week), so act carefully. If your skills are good and your
reputation is excellent, the agency will almost always cave.
Remember that they only get paid if they actually place
you,
and now they have time and energy invested in you, they have
something to lose if they walk away. Remember that the agency
staff works on commission, and if you're this close to being
placed they can almost
smell the cash. Giving you an extra buck or two to simply close
the deal and start billing is not a big issue. They'll need to get
approval from the office manager, and then they'll call you back
with a counter offer. Be aware that this strategy can backfire
if your agency has a lot of people in their database who have
your skill set, or if you pull this too often with the same
agency.
If you are negotiating for more
than $5 - $10/hr above the range quoted by the agency, be prepared to
wait a little bit. Usually, they will meet with the client and
let them know that you are interested, but your salary
requirements exceed the range offered. If you are good enough,
the client will make up the difference in salary range. Remember that the client is
playing the same game with the contracting agency that the
agency is playing with you. They're trying to get the most qualified
talent they can for the lowest price. But if your technical
skills are in demand, and not too many people can match your
qualifications, there is almost always room for a little
negotiation.
How much cut is
fair?
Industry standard cuts
are 45% to 65% of the billing rate, but they can be higher if
you don't know what you're worth. This means that the agency's
cut is usually as much as they are paying you, if not more. When
you're negotiating for a higher wage, don't be surprised to hear
the agency deny these figures and claim that they are already
giving you the best deal and barely making a profit. This may be
true for lower paying entry level positions with smaller
margins, but for higher
paying jobs the recruiter's commission is often based on the
difference between the billing amount and the what they are
paying you. This "motivates" the recruiter to increase
the spread by billing the client as much as possible, while
paying you as little as you'll accept.
When negotiating with a
contracting agency, keep this information to yourself and never
take an adversarial posture with the agency. Appear eager,
cooperative, and willing to negotiate. If they know you're
always trying to cut into their margins on every contract,
you'll be the last person they call to fill a position. You may
still get a few contracts here and there, but in the long run
you're considered unprofitable. Your goal should be to negotiate
their margin to 35%-40%, if you've done business with them
before and they don't have recruiting costs (which can be as
high as 20% of the billing rate). Keep in mind that if they are
paying you benefits, you should assume their costs have
increased by $10/hr.
Getting to the
Top
So how do you get to the
top 10% where you can negotiate a high salary as well as pick and choose
your contracts? Like anything else, it takes hard work and street smarts.
Here's my list of caveats.
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Remember
who you are working for
In the contracting business, you are always
working for yourself, even if you're going
through a contracting agency. The agency is
there to find work for you, and ease the hassles
you would have to face if you went 1099. In
exchange, they take a cut of your contracted
wage. If your agency isn't being honest and fair
with you, start shopping around for another one. |
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Think
like an independent contractor, even if you're
not
Contract labor is expendable in the eyes of many
companies, including the staffing agency that
you work for. Even if you've been with the
agency for a while as a W2 employee, never count
on them completely to find work for you and pay
your benefits between contract assignments. When
starting with an agency that pays benefits, find
out how long it takes for the benefits to kick
in, and how soon they expire if you leave (or
are between assignments). If you frequently work
short term contracts and jump between agencies,
you may be better off providing your own health
insurance. As you approach the end of an
assignment, find out from your agency if they
have another contract lined up for you. If they
don't have an interview scheduled for you in the
first week that you're off an assignment,
quietly update your resume and start sending it
to other staffing agencies. Be upfront with the
other agencies, and tell them you're working for
XYX consulting but you've come off contract and
you want to see what their company has to offer.
If you like the company your contracting with,
always try to give them the first opportunity to
find work for you. But you should always keep
your options open if they can't. |
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Never
stop building your skill set
Regardless of whether your contracting
independently, or going through an agency, you
are the product being sold. Or rather, your
skill set and what you can do. Technology moves
quickly, and you need to keep your skills up to
date or your career will stall and stagnate.
Take responsibility for your own training. Set
aside a budget for books and read a new technical
book every month. Build a small server lab at
home and work with the latest products. Keep your certifications current.
Every skill you learn makes you more marketable
and valuable, but focus on skills that
complement each other. Choose your core
competency and work outward from there,
mastering related skill sets. |
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Network
with your peers
To be a successful contractor, you need to make
as many friends as possible. The IT community is
relatively small and you'll need those favors
and insider contacts to get you into the best contracts.
Strive to be on good terms with
as many people as possible, and go through your
phone list every 90 days and call old tech
friends. At the very least, just sending out a
short personal e-mail every 30 -60 days can keep
you in the loop and lead to lucrative
unadvertised job opportunities. That Level 2
tech you worked with 3 years ago may have been
promoted to a management position at a large
company with huge IT requirements. By simply
staying in touch, you'll have the inside track
to any contract opportunities, and you'll also
have a huge advantage when discussing your
salary. Keep in mind that it's not always what
you know that's important, but who you know. |
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Be
willing to travel
If you're single and always wanted to see the
country, positions that require travel can be
very lucrative. There is an art to traveling
comfortably and living on the road, but if you
can muster it, companies pay a premium for your
mobile skills. In addition to your salary, you
may qualify for a tax exempt hourly per diem that covers
your living expenses while your traveling. In
addition, you'll get paid for all travel time
while you're sitting comfortably on the
airplane. $120 -$200 an hour is not unheard
of for traveling consultants who have the right
skill sets. |
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Choose
your contracts carefully
Be careful what your resume says about you. If
your job history jumps around from skill to
skill, you may be of no use to anyone. Don't
take just any job. Choose a direction for your
career and pick contracts accordingly. If you
want to be a deployment and migration
specialist, seek out the companies who are
upgrading their infrastructure. Tell contracting
companies that is what you're looking for, and
try to work for large companies that are well
known and respected. By
the time you've finished 3 high profile large
scale migrations, you'll be in demand and moving up the ladder
quickly. |
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Keep
your own bench fund
As a contractor, you will probably make more
money than a full time company employee per
hour, but if you count time off during the year,
it may all work out the same. Don't count on
your company to give you "Bench Time"
- fund it yourself. Try to set aside 3 to 6 months
salary, even if you never need it. This shields
you against economic downturns and unemployment,
but also allows
you to negotiate your contracts and salary from
a position of strength and "wait" for
the right contract to come along. Over time,
this strategy will pay for itself. Smart
contractors use their down time to update their
skills and certifications. |
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Know
what you're worth
Be honest with yourself. What are your skills
and how much are they worth. Read salary
surveys. Find out (quietly) what your peers are
getting paid. Almost all companies will tell you
that they will fire you for discussing salary
with another contractor because they don't want
people comparing notes. Keep your research
low key, and never tell your company you found
out what somebody else is getting paid. It may
also be helpful to find out how much your
company is billing for your services (never ask
the client!) A contacting company once billed me
out at $86/hr while paying me $27.00/hr. I kept
the information to myself until the contract
came up for renewal and then successfully
negotiated for a higher salary. |
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Develop
your interview skills
Full time employees of a company may interview
for a job once every 3 to 5 years. Contractors
may have 15 -30 interviews in a year. Along with
mastering your technical skills, you must also
hone your interviewing skills. Read plenty of
books on the subject and really strive to ace
every interview. This puts you in the drivers
seat. If the client liked your resume, and
really liked you during the interview, it may
open a lot of room for salary negotiation. |
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Learn
professional negotiating skills
Almost everyone thinks they are a good
negotiator, but you would be surprised at what
you don't know. Negotiating is an art and
learning even a few basics can give you a big
advantage in both your personal and professional
life. Start with a well known book or audio
cassette program to learn the basics, and move
up from there. If you get the opportunity, take
a workshop on negotiating tactics that includes
practice exercises and scenarios. |
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Be
prepared to walk away
Saying no to a contract in order to
force client who really likes you to cough up
more money is a
technique you should only use sparingly. Doing it
too often can ruin your reputation. Never admit that
you're holding out for more money, simply state that
you have another offer from another company for
X dollars more. Obviously,
it helps if you really do have another job lined
up. On one occasion, I really did have another
higher paying job lined up and had to turn down
a job offer. I not only received repeated counter offers
for more money, but they finally threw in a
complimentary Gym
membership and free baseball tickets as well. |
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Don't
price yourself out of the market
So you think you're worth $100 an hour? You may
have found a few contracts where the clients
were willing to pay that much. But now the
market has changed and there are either more
people capable of doing the job you do for less
money, or the demand has dried up. But you've
told all of the contracting companies
"don't call me unless it's for at least
$100 an hour." After all, you've got to pay
off the Viper.
Bad move. Never set a minimum salary in stone
unless you are absolutely sure the market can bear it. Be
flexible as the market changes. Remember that
the laws of supply and demand are always at
work. |
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Always
under promise and over deliver
There is a time to be confident and sure footed
about your skills. But being over confident and
stretching your real abilities in the interview
will almost always come back to haunt you. Be
honest with the client. If you haven't done this
type of project before, let them know why you
think you can get the job done anyway. Never
oversell yourself just because you can. The IT
community is small. Word will get around about
you. By over delivering on your promises, you'll
have everyone believing you are exceptional The word will get around soon
enough, and the raises will follow. |
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Never
burn your bridges
We all come across contracts and employers that
really disappointed us (or worse.) You came in
expecting this great opportunity, but found that
your hands
were tied by incompetent management, poor
equipment, lack of support, etc., Sooner or
later the blame game starts. (Get used to it -
it's part of being a contractor.) The in house
management and staff will almost never take
responsibility for their mistakes, so when the
finger pointing starts, you're left holding the
bag. Resist the urge to lash back and tell them
what you think of their company. Be
professional, and strive to leave on good terms.
Not because it's polite - but because it may
cost you a lot of money if you're not. And you
may never even know how much. IT communities are
small, and managers and staffers move from
company to company. After contracting a few
years in the same town, you have much less than
six degrees of separation away from most of your
peers. Having a poor reputation in this
environment can cost you plenty in lost jobs and
other opportunities. Remember who you work for. |
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How far do you
want to go?
Now that we've outlined
the basics, the only thing left for you to decide is how to
define your measure of success. Being an elite contractor is a
lot of work, and requires a lot of your free time to stay up to
date with new technology. Not everyone wants to keep re-training
all of the time. Not everyone can travel. Not everyone is a
workaholic. Not everyone can make $200 an hour. Decide for
yourself how much time and effort you're willing to put into
your career, what salary you want, and how much of your free
time you're willing to give up. A common strategy is to work and
train as much as possible for 2 years, and then take 6 months
off. Avoid burnout by scheduling downtime, and strive for a
balance. Before I started working in IT, I spent 10 years
working full time as a Paramedic. In all that time, I never met
anyone who was on their death bed and said "I wish I would
have spent more time at the office." Work to live. Don't
live to work.
By:
Bernie Klinder
Senior Editor, LabMice.net
email: bernie@labmice.net
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