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>That is my billing rate to the government is 2.8 times my hourly rate as determined by my salary. Why does your salary define the overhead rate for the entire

• michaelrpeskin 5y ago
  Sorry, that was me being lazy because I was typing on my phone. The government tallies up all qualified expenses the company has (salaries, benefits, rent, utilities, etc). And then tallies up all how many hours employees worked on "direct labor" so things directly related to a client (in lawyer speak, think "billable hours"). And then they come up with a ratio which is your overhead rate and that's the rate you're allowed to charge the government. all_expenses / total_hours_worked_by_all_employees = average_rate all_expenses / direct_hours_worked_by_all_employees = direct_rate direct_rate / average_rate = overhead_rate my_hourly_rate * overhead_rate = my_billing_rate There's more nuance on what are qualified expenses and what are direct hours and things like that, but the government has formulae, and they determine your billing rate - or at least the overhead that turns into the billing rate. Now, of course, my company can't pay me $1000/hour which turns into $2800/hour invoices to the government because then we'd be too expensive and never win the contract. So there is downward pressure on salaries because of that, and it prevents us from hiring superstars because their hourly rate will be too high. So that's one reason the government doesn't really get the A team working for them.