$150 per hour is $300,000 per year including two weeks vacation per year.
I have a side client that I met 11 years ago that I charge $150 per hour for remote development. They feel lucky to get that rate! Most people around us charge $200 per hour but since I work full time for someone else and can’t always be available I give them that discounted rate.
I don’t think they’re hard to find at all for consulting. Being a full time employee for $250k, I agree with you that those are more rare. In my experience you have to possess an in-demand specialty for that or get into management.
2 weeks vacation per year is pitiful. Do people really get on and are happy with only that? I get 5 weeks ( minimum legal in France), i use it to the max and it's okay, but sometimes insufficient.
2 weeks (as in 10 non-holiday days) is pretty normal in the US, even if you get more. I get 4 paid but I barely take two and bank the rest. My European parents think I'm crazy but they're used to a pretty nice safety net when you get old, and the concept of early financial independence never entered their mind.
There is a curious symmetry in that the idea that you only do certain things when you are young(er) or may not live (or be healthy enough) to harvest (or enjoy) the fruits of your early financial independence does not seem to enter the mind of many people chasing this.
In my thirties I worked in many different countries for many different companies. Going new places with different cultures and being able to enjoy my time there was always the main driver: i.e. experiences & work/life balance over salary.
I would never trade these experiences for early financial independence at maybe age 50. I think there is a best before date for some experiences in life.
Maybe now it is possible for a select minority to have both. But most of of my friends in their 30s who work 'normal' jobs and have this early financial independence aim it doesn't hold true.
I.e. they will simply not have made these experiences when they reach that goal. Few have ever managed to leave their country of birth for anything else but holidays.
Some personal examples:
Living & working in Japan and thereby traveling the country on weekends or going to a cool club in Tokyo. When you're 35 vs when you're 55. Would you even do the latter at that age? Would it be the same?
Living and working in India and thereby going for a weekend hiking trip in the western Ghats were you're sleeping in an abandoned train station in the middle of the jungle. When you're 35 vs 55. Would you even do the latter at that age? Would it be the same?
Living and working in Sydney, going to a party of friends on a yacht on Friday after work and on a diving excursion to the Great Barrier Reef on Saturday morning when you're 35 vs 55. Would you even do the latter? Would it be the same? I was still hung over when I put on the diving gear but it was ok. With almost 55? You would simply have to skip the diving trip.
None of the above are made up. The pandemic-related lockdown made me realize what rich tapestry of experiences my past life choices have afforded me.
I have four people in my circle of friends who are actively working on early retirement. They do 'compensate' a lot on the weekends and when they go on holidays but that is not the same as the above.
I don't disagree, and yes I am choosing to optimize for early retirement. Another reason that may not be obvious to non-US people is that PTO in many cases is cash money, especially if you can accrue and roll it over. If you used before you hit the cap you're leaving money on the table. Twice when I quit my job I got an extra month of salary.
10 total days off would be below normal. Usually, vacation time is quoted as an addition on top of normal holidays like Christmas and Thanksgiving and other days.
Average professional job has about 8-9 paid holiday days, plus vacation time on top. My worst number of vacation days was 10 at my first job right out of college (they had to change after they struggled to attract employees) but every other job has been more than that.
But only accounting for 10 unpaid days per year would barely cover minimum federal holidays, so it’s not realistic. It’s equivalent to saying you’re never going to take time off unless the company is shut down for a federal holiday.
I'm quite sure the five weeks he mentioned don't include official holidays. In the Netherlands it's also five weeks on top of a number of official holidays, and we gave the lowest number of those in the EU (7 iirc, some of which may be weekend Sat's in some years, like Christmas now).
Of course good companies typically don't offer only the minimum.
272 days is very high. Full time work in the US with 0 vacation (typically is 10-20 days) and 0 company holidays (typically is 5-15 days) is 250 days. Perhaps you mistyped?
A lot of people are quite happy working, quite happy with their local environment, and feel no need to take a vacation. For other uses of (paid or unpaid) days off (being sick, funerals, important kid events, 'just not feeling it today', maternal leave, paternal leave, whatever) policies vary so much from company to company and individual to individual; I think this variability is a good thing and gives an additional dimension for companies to compete for workers on.
2 weeks makes the arithmetic easy (as you work 50 weeks in a year and 50 is an easier number) but I think it’s not really relevant: you can just plug in a different number of weeks or hourly rate and get your own answer.
As a blanket statement, I think that's ridiculous.
Hourly is a good choice for contracts where they are looking to buy labor. Which is a common model, because they often see contract labor as a substitute for employee labor.
The other models you mention can be much better, but also require the contractor to have both particular skills and enough relationship power to make them work. I have seen well-meaning developers absolutely get screwed on fixed scope contracts. And I've also seen less-well-meaning developers absolutely screw their clients on fixed price contracts. This is an area where blanket statements are harmful.
You can’t do hourly in London, the lowest you can go is a day rate, hours being 1:1 with fees is a great way to leave money on the table as a contractor. As a contractor you want to structure your deliverables on your terms so you can choose how the spend your time. Alan Weiss wrote a lot about this and his writings changed my life. Also, if you’re hourly in London you can’t claim to be independent and you’ll get smashed on tax as HMRC will treat you as a perm employee because your client controls your hours and activities.
How do clients get screwed with fixed fee? Clients should pay for value, not hours sat in a chair.
There are plenty of ways to screw clients with fixed-fee projects. The most common is to ask the client what they want, write that down, and build it for a fat fee based on the value they imagine they'll be getting. It turns out clients mostly don't know shit about what they actually need. Indeed, for many projects it's impossible to know the right thing to build up front, as much of the data is unavailable until you start shipping things. So what they sign up for and what will actually help them can diverge wildly.
Now that you have shipped the technically correct but not very useful thing, you collect the fee and then start accepting "change orders" at a punitive rate. At this point switching to another contractor will be even more risky and expensive, so they'll probably just suck it up. Or if you're really good at the game, you then negotiate a whole new fixed-fee contract with a higher price tag, and the deliver what they now think they want.
Bonus points if, as I've seen a big-name global contractor do, you deliver something not even barely working but possibly conforming to specs, and then just walk off the job. Even though the client has contractual obligations that they can't fulfill if the software doesn't work. At that point, the client realizes that a) they still need the software, b) the big-name contractor is the only who can deliver in time, and c) suing is risky, will take years, and anyway the big-name contractor can afford more lawyers. In this case the client signed another multi-million dollar contract with the big-name contractor, easily doubling the "fixed" fee. I lost touch with my contacts there before the thing ever worked, so I don't know how many times the big-name global contractor pulled this off on the same job.
And the clients aren’t to blame? Some will force waterfall on you then change their minds on requirements, am I a charity that just gives work away for free when they change their mind?
Many large companies absolutely refuse agile delivery and require fixed scope and cost to get anything done.
> "fuck the clients, they deserve to get cheated".
Why use quotation marks for something I didn't say? Nothing I've said means "fuck the clients" unless you are maliciously taking the worst possible interpretation.
A change that takes a massive amount of time and effort isn't something I should do for free.
I'm more than happy to build a backlog, refine it, and build until there's a RC... so few enterprise clients want to subscribe to the perceived risk, they'd rather spend months specifying everything upfront to make some senior person happy whether that delivery methodology has been proven to work or not.
> Clients should pay for value, not hours sat in a chair.
I think the implication is that if one party is capturing the excess value produced disproportionately, that is screwing the other side. Particularly if this occurs because of information that is asymmetric in negotiation.
If that’s the case, getting screwed is pretty common.
If my SAP implementation is going to save over 1 million per year in increased manufacturing efficiency, how should I price my services? The floor is set by the cheapest contractors in my market, the ceiling is how ever high I can negotiate.
The client will capture far more value than me over the lifetime of the product. I also don’t want to charge by the hour because there’s a conflict of interest and I want to detach hours worked from fees charged otherwise I’m just slaving away.
Hourly is for blue collar work, it’s not professional at my and your level.
It really depends. In general I prefer charging by the task but that assumes a well-scoped and predictable task. That works for some things and not for others.
Of course, there are a number of professions (law, accounting, etc.) where hourly charges are absolutely the norm. I've done some legal work and it was in some ways very nice to get paid whenever you were "on the clock."
I agree with Alan Weiss, lawyers are unprofessional and mostly terrible at maximising income. They charge 1:1 hours to fees which is a bad deal for a professional.
The legal work I did was for an expert witness case as a subject matter expert (not a lawyer). There is no way we could have/would have agreed to a fixed fee up front unless it was for a really outrageous amount. (Well, it ended up being a pretty outrageous amount anyway but there's no way we could have reasonably scoped the work.)
Most of the work we did in general was for specifically scoped deliverables and we actually tried very hard not to do day rates, much less hourly rates, but this was one case it really wasn't avoidable--and, of course, was the way the white shoe law firm operated.
The point is that we would have had no way of pricing "value" up-front. It wasn't our primary business (which we mostly did price based on value). So charging $500/hour (or whatever it ended up being) made a lot more sense for everyone than just throwing a $100K invoice out there when we really didn't have any idea what sort of time commitment we were looking at.
Why? Money doesn't give you time back. I guess I understand if someone is banking money to retire early but personally I've always taken every day off I could.
That’s what the person you’re replying to means as well, five weeks or 25 workdays. I think all or at least most of the EU have more than 15 days minimum mandatory paid leave.
$150 per hour consulting is not the same as $150/h salary. With consulting you have to pay for your downtime, the time you use to acquire clients, your insurance, etc.
If I was doing full time consulting I would charge $200 per hour.
I only give the discounted $150 per hour rate because I work full time at another company.
Since someone else brought up tax advantages - I don’t pay social security tax on my self employed income. Because I max it out on my full time job. I also have an Individual 401k plan that I can contribute 20% of my self employed income as the employer contribution. I can’t contribute my self employed income as the employee contribution though because I max that out at my full time job.
Having combination W2 and 1099 income gives a ton of tax benefits.
It is especially not the same due to loss of tax advantaged benefits like health insurance ($20k+ per year if you have a family), 401k matching ($10k+), DCFSA and HSA matches ($5k), and then the 8% FICA taxes up to $10k that have to come out of your pocket.
What these comments ignore is that, if you form an LLC for your consulting work you have access to a massive number of deductions that do not exist for someone who is an employee. My recommendation is to have a conversation with a good accountant and have them quantify the potential differences for you.
That's all stuff you can calculate and price into your rate. It's not like you just take the salary number they offer and divide it by two to get your rate.
Sounds like he has a steady client that accommodates as many hours as he likes at that rate, and has done so for a dozen years.
I imagine he has covered his business development expense by now.
This is how I do it too, by the way. Long term relationships with good companies. It's more like contracting, but without the 40h expectations of a contractor. ( Unless I feel like working 40 hours in a given week for some reason).
> Sounds like he has a steady client that accommodates as many hours as he likes at that rate, and has done so for a dozen years.
It sounds like he’s basically been employed by this one company for 11 years, albeit on a contract basis.
These positions exist, but they’re not all that common. Usually if a company is paying a single person a premium for many years they’ll just hire a full-time person and be done. The average freelance contract you find should not be assumed to be a decade-long opportunity.
> I have a side client that I met 11 years ago that I charge $150 per hour for remote development.
That's not too surprising, and depending on what you are doing might be a great deal for everyone. Usually contracting work out is done at 1.7-2x the rate you'd pay an employee. This is because the the consultant has costs and risk that an employee does not. Costs like insurance, accounting, legal, personal benefits (i.e. savings to allow for vacations, healthcare), sales overhead (consultants have to keep finding new clients). Risks like contract cancellation and getting paid on time.
> I don’t think they’re hard to find at all for consulting.
You said you found your $150/hr 11 years ago. How many other $150/hr clients have you met since then? What makes you say that it’s easy to find them?
I think it’s easy to say that consulting is easy when you’ve had a single, long-term client that pays well. In practice, it’s much harder to find these clients when starting from 0, unless you have such luck to find the dream client right out of the gate.
I was self employed for five years many years ago.
It’s easy to find clients - one of the best ways I did it was to go to computer stores and tell the salespeople if they got me a new client I would pay them $15 per hour in perpetuity for every hour I charged the client. I had 3 people that made more from me than their regular job.
Then there are chambers of commerce, LinkedIn messages and frankly just putting yourself out there. I met my long term side client studying for a certification while my oldest son was at a baseball clinic. My client saw the book I was reading and walked up to me and said, “Are you in IT?”
$150 / hr as a 1099 Contractor, is more like $75/hr has a W2 employee after you factor in employee benefits (normally 30-40% of your total comp) and taxation (10-15% more for self employment depending on your deductions)
If you’re doing it as part time to your full time job, it’s a bit more. The taxes are a little higher, but you’re already getting benefits from your full-time gig
I have a side client that I met 11 years ago that I charge $150 per hour for remote development. They feel lucky to get that rate! Most people around us charge $200 per hour but since I work full time for someone else and can’t always be available I give them that discounted rate.
I don’t think they’re hard to find at all for consulting. Being a full time employee for $250k, I agree with you that those are more rare. In my experience you have to possess an in-demand specialty for that or get into management.