Chris Shiflett shiflett-at-php.net |nyphp dev/internal group use| wrote:
Nicholas Tang wrote:
All of those are reasons why I never understood why so many
companies hire so many contractors - if I had a choice between
hiring someone for a 6 month contract, or to be a full-time
employee for 15 months for the same rate, I'd hire them
full-time in a second.
It sounds like you're not considering the fact that you pay the overhead
whether they're your own employee or not. That 2.4 factor applies to
businesses with full-time employees as well as consultants.
It might sound like an obvious statement out of context, but salary
isn't the only expense of doing business. It's the biggest, but the
other stuff adds up.
Chris
Chris' number matches what I have known and lived for many years. My
source numbers are:
50 weeks per year at 5 days per week - 6 holidays minimum = 244 days of
paid work MAX, per year
A good consultant (not just a replacement worker, but someone who has
unique knowledge of the field) does not "work" for clients 244 days x 8
hours. She spends 1/2 day per week "learning/advancing/participating" at
a minimum. That is outside of the typical evenings/weekends stuff we all
do, and often it costs money (registration and training fees, etc). The
ones who work for client projects every day all day are the ones who are
obsolete after a few years. That is why you need consultants. So this
formula may not apply to "contract workers" as much as "knowledgable
consultants". So take that consultant billable man-day count down to 210
*at best* because we have toalso cover the costs of the training and
education.
Sales takes time and effort, and is covered by the billable work it
produces. How many days per year are spent selling/getting new work?
Good months it's zero. Bad months it's 30. I tend to work with 2 or 3
days per month, but I know that is low. Billable days goes down to 180
or so. Your company pays additional people for sales, HR, marketing,
etc. Sometimes we do, sometimes we do it ourselves. Meeting with the
accountant, interviewing/hiring, handling mandatory legal issues, all
non-billable time. 2 days per month (4 half-days lost) is 24 more
billable days per year. We're at 156.
Typical overhead cost for an employee of this nature is 25-30%
(self-employment taxes, corp tax and fees, health, workers comp, SSI,
etc). That's not hard coded, but based on consumption (how sick do you
get, how much to you draw from beenfits) but it still has to be there.
After a year of operations, if you count everything and apply weighting
factors to your performance (I should have sold more, not taken that one
gig, should never have done that free proposal, etc) you get two
"factors". One is reality (what you did, for that year) and one is
estimate based on what you know you can now do. I find the 2.4 factor to
be low for most challenging jobs, and high for jobs where it's really
contracted labor more than consulting. But I also recognize that if I
did more of the "more profitable" contract style jobs (lowering my
"factor" and thus my "profits") I would become less marketable and have
to lower my rate. Instead, by doing more challenging work and pushing
harder at my own expense, I become more unqiue and can raise my rates.
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