[motohagiography]

Mark your salary bid to what it would cost to hire a consultant/contractor to do the same role for a year, then discount it (or add to it) accordingly. The consulting rate is the market rate for a skill.

Why should you be paid less than a consultant, or why are you more valuable than a consultant? Answer those questions and you will arrive at a fair number for all parties.

[MattPalmer1086]

No, this is nonsense. There is a reason why consultants get paid more. They are cheaper for the company to employ (no employment benefits, lower taxation for the company to use them, more risk for the consultant).

If what you said was true, why would anyone be a consultant rather than an employee? They would be paid the same, and manifestly, they are not. Revisit your assumptions.

[motohagiography]

putting aside the quality of this objection for a moment, a company has a choice whether to hire a consultant or an employee for a role. the consulting rate is well known in the market, the employee rate is not well known. for anyone with training in negotiations, they know using principles to arrive at a price is superior to blind haggling, and it's what serious people do. the consulting fee is the employers option of last resort, as otherwise they wouldn't be looking for employees. as a coordinate for finding what an employer is willing to pay, the consulting fee is an objective waypoint.

It can be humiliating to learn how structured negotiations are and that most talent goes into them completely ignorant of the tools that are being used on the other side of the table, but that awareness is where we all start. The difference in the opinions of people who have read even a single book on negotiations are stark to those who haven't. Highly recommend.

[MattPalmer1086]

We hire consultants because they have skills we don't have in house, or where we have a temporary need for extra resource. They are faster to hire and get budget for than a permanent employee. There is no long term committment. Their daily rate is higher but their costs are lower.

They create flexibility for the business. The idea that consultancy rates are a good guide for employee pay makes no sense.

[Agingcoder]

There are plenty of places with ‘very long term permanent consultants’, which you buy because they’re easy to fire in less flexible job markets.

Comparing their salaries ( what they actually make in the end ) with perm salaries, and factoring in the various risk premiums/ contract differences makes sense I think.

[MattPalmer1086]

Makes sense for what purpose?

I guess it makes sense to compare them if you are considering moving from one to the other. The consultant gets paid more, but has a different tax, expense, benefit and risk profile. The rate itself is only one part of that overall calculation.

Which brings me back to the start of this thread, where I pointed out that consultants get paid a higher rate but the costs and risks are also not the same.

[motohagiography]

To say that two people doing the same job under different terms aren't comparable seems disingenuous, as we know what a company has to pay if they don't have an employee to do it, and yet you're saying these aren't related?

An employee should know the consulting rate and then decide what kind of discount or premium they should anchor the discussion to. Employers try to get employees for about 50% or less of the consulting rate as salary, where an employee with unique value can get anywhere from 60%-120% of that in total comp factoring in equity and bonuses.

If you need the job, take what's on offer, but if you have any bargaining position at all, for the sake of your well being and profession, learn negotiation. An employer or hiring manager who tries to bully or gaslight you on this has told you most of what you need to know about them.

[MattPalmer1086]

Absolutely agree people should learn to negotiate well. But comparing apples to oranges isn't a good place to negotiate from.

Employers don't set employee pay at some lower percentage of consultancy pay. And neither do they set consultancy pay as some higher percentage of employee pay. They are distinct markets. You won't get far as an employee if you try to negotiate based on the consultancy pay rate.

[motohagiography]

The statement "you won't get far" appears meant to discourage people from using the most effective negotiating tool available to them and as a threat to the ones who do, which is a pretty standard body shop recruiter hustle.

If the talent you are buying can decide between your job and a consulting gig, you have no separate markets. What absolutely aren't the same things are the negotiating techniques of high value talent vs. low skilled labor.

Employers don't "set" pay either, they are in a market, and if a candidate knows what that company pays for a related service, they can anchor their bid to it. The exception is the minority of collectively bargained jobs.

Sure, if the company is a commodity talent shop or an institution that buys talent by the pound, then there's a race to the bottom to be the most liquid asset you can be for a mature company with limited growth in front of it. If you're actually good at anything and deliver value, consulting rates are one of many leverage data points.

Be extra suspicious of anyone who tells you to take less risk, as it's cheap and not high quality advice.