5 ms·

That's why I incorporated a tiny company. Sometimes, companies will interview me and then when I tell them my salary expectations, they usually pretend to be o

That's why I incorporated a tiny company. Sometimes, companies will interview me and then when I tell them my salary expectations, they usually pretend to be offended and refuse by arguing that it would destroy the salary structure inside their company. But that doesn't really mean anything because many of them are happy to book my consulting company at 1.5x that salary afterwards.

mettamage 3y ago
I wonder if you ask them about this discrepancy and how they view it. Personally, I find it weird, but wonder how they'd justify the 1.5x expense.
- cyberpunk 3y ago
  Contractors can be billed to a project, it’s much easier to pass with the finance dept than justifying why one new hire should get 4x what someone else with the same job title gets.
  - chii 3y ago
    > get 4x what someone else with the same job title gets. some enterprising manager realizes this, makes up a new job title (that sound important) to justify the 4x salary, and thus lead to job title inflation as other people sees such a title earning high.
  - pydry 3y ago
    It's justifying why the new hire gets more than their manager that is really hard. It's also easier to book a high fixed cost than a high ongoing cost.
  - FullyFunctional 3y ago
    Contractors are easier to hire and much easier to fire than permanent employees. I've had both good and absolutely terrible experience with QoR of contractors, but IMO the biggest problem is the loss of institutional knowledge when the contract ends. No amount of reports makes up for the warm body in the room that can say, "actually, the reason for this is ...".
- fxtentacle 3y ago
  I show up differently in their accounting ledger, and because investors scrutinise that, management will optimise for it. Instead of employee cost (which is usually tightly controlled) I now show up as an external service next to extortionate cloud bills (where nobody knows or cares what they pay for anyway) somewhere 2 levels deep in COGS. Being the cheapest service provider looks a lot better on paper than being the most expensive employee.
  - antupis 3y ago
    Also depending on country there is tax and social security payments which companies dont have pay when they are buying consulting.
    - notahacker 3y ago
      And in Europe consultants are much, much easier to fire (especially if the minimum standard of performance is "more capable than our existing staff" or the problem is for an indeterminate amount of time)
- magicalhippo 3y ago
  Guess it's different over in the states, but my boss said the cost to the company is roughly 2x the salary. This includes taxes (not income tax), pension and such. So 1.5x would be a steal in comparison.
  - pintxo 3y ago
    2x sounds like it includes non-billable employees like assistants, HR, accounting etc. A 100% overhead is probably quite common. Pure employee costs are more in the 1.2 - 1.3x range (Europe). That is 30% on top of the gross salary for employer taxes, health insurances etc.
    - speeder 3y ago
      I am in Portugal. Here your real wages are tiny compared to the company expenses. To start: everyone pays 34.75% of mandatory social contribution, even if you are on minimum wage. Government tricks people saying the contribution is "only" 11% but charges the other 23.75% from the employer. So if a company pays 1000 eur to "you" (remember a chunk goes straight to government and skips you, but they are still spending that to pay you) you get 652.5 euro. Or 65% roughly. And that is only the social contribution part. The average income tax for a tech worker is around 20%. Thus you get instead 500 euro flat. Thus a Portuguese company to hire a tech worker would literally spend the double of your taxless wages just to hire you and pay the income taxes and social contribution. Then if you factor all other potential expenses things get even sillier.
      - pintxo 3y ago
        So, Portugal is pretty much in my 1.2-1.3 range?
        speeder 3y ago
        So a company to pay 500 euro in wages, spends 1000. Thus 1000/500 = 1.2 to 1.3. I don't get it.
- coldtea 3y ago
  Companies are full of weird cargo cult like that. Having a ssalary cap on certain positions, but paying top dollar for external consultants doing the same is very very common.
  - TheOtherHobbes 3y ago
    Most companies are status-based, not value-based. The primary goal is to maintain status differentials. Pay is one of many tools used to enforce status hierarchies. As an external consultant you are - to some extent - outside the hierarchy, so the usual rules don't apply. When companies get really big and dysunctional they start to treat their customers as if they're the bottom of the hierarchy. Which is how you get all finds of corporate outrages.
- AnimalMuppet 3y ago
  Because it's temporary. That is, if the company hires you, they hire you (in theory) forever. But if they contract with you, that's usually for the duration of the contract - a few months. A higher rate but for a short time is easier to justify than a slightly lower, but still high, rate forever.
- apwell23 3y ago
  > how they'd justify the 1.5x expense. Because of lack of benefits, don't have to go through unions to fire ect. Same reason you pay higher on a short term apartmentlease.
m_a_g 3y ago
If you don’t mind me asking, what specific area do you specialize in with your consulting work? I’d like to do what you do in the future and I’m just curious.
- fxtentacle 3y ago
  I do any kind of research and software development. But the most profitable tasks tend to be finding a new angle for how you can automate something. In Germany, there's still an almost endless supply of companies who urgently need to digitise their customer interactions so that they can react quickly to customer orders. A 2 week lead time for PCBs, for example, just doesn't work anymore if the Chinese competition is not only cheaper, but can DHL Express to anywhere within 7 days. Or imagine you want to book catering for an event next week but the local bakery insists that you should have faxed an order form to their central management 10 days in advance. You'd be surprised how much revenue boost some companies see just from a rudimentary Shopify order form with Stripe+PayPal online payment. Or another classic is automating document inflow. You put all forms of type X into an automated scanner and that'll send the files to a network share and then a cronjob will name the files and sort them for you. Not only do you save one employee (e.g. $4k monthly fully loaded) but you also never have things delayed by vacations or sick days, thus making the entire company more reactive to customer demands.
  - ido 3y ago
    I wish you a ton of success, we need a lot of streamlining and digitalisation here! I hope you’ll do some good work for the government next as there’s so much red tape and antiquated methods.
  - cudgy 3y ago
    Nice. Your work eliminates jobs and transfers their salary to the business owner! Seems more like bean counting than tech. Would be nice if there was more focus from software tech on making more opportunities for people rather than the trend of eliminating more humans from the workforce.
    - 3y ago
picklerish 3y ago
@fxtentacle - I'm currently planning on starting a consulting company for my area of expertise (data engineering), can I reach out to you and learn the 101 of doing something like this?
- fxtentacle 3y ago
  I'd say just ask the questions because 1. I don't have all the answers and 2. if it's a group discussion we have a higher chance of learning something new
scarface_74 3y ago
That’s part of the reason behind hiring consultants - both strategy consultants who are brought in for their subject matter expertise and staff augmentation “consultants”. On the other hand, I’m more than willing to accept my 35% lower compensation to have a full time job than I know I could make if I went independent.
AzuraIsCool 3y ago
So in essence you apply for regular employment and when you get turned down you pitch your consulting service? On last few teams I have been pulling most of the project while being unpaid (southern Europe devs rejoice) so I m thinking about incorporating as well, but with kid on the way I am worried I won't be able to find clients...
- caminante 3y ago
  > On last few teams I have been pulling most of the project while being unpaid (southern Europe devs rejoice) so I m thinking about incorporating as well... Not getting paid? Are you trying to break into an industry with an unpaid internship or is this a hack-a-thon side project? I don't understand how structuring an independent contractor offering will get you paid by the same folks who aren't paying you at the moment. Doesn't sound like it would solve your issue.
  - AzuraIsCool 3y ago
    Underpaid, it was unfortunate autocorrect that slipped, sorry. I am dev with 10y of working experience. I considered freelancing before, got onto toptal and similar pages but got no good offers (net money would be better but with incorporation/sole prop. I would lose health and retirement benefits) - the moment they hear where I am from the offer is cut down or passed to someone else...
stuckkeys 3y ago
I am interested also. Would love to tune in and learn. I am desperate.

mettamage 3y ago

I wonder if you ask them about this discrepancy and how they view it. Personally, I find it weird, but wonder how they'd justify the 1.5x expense.

cyberpunk 3y ago
Contractors can be billed to a project, it’s much easier to pass with the finance dept than justifying why one new hire should get 4x what someone else with the same job title gets.
- chii 3y ago
  > get 4x what someone else with the same job title gets. some enterprising manager realizes this, makes up a new job title (that sound important) to justify the 4x salary, and thus lead to job title inflation as other people sees such a title earning high.
- pydry 3y ago
  It's justifying why the new hire gets more than their manager that is really hard. It's also easier to book a high fixed cost than a high ongoing cost.
- FullyFunctional 3y ago
  Contractors are easier to hire and much easier to fire than permanent employees. I've had both good and absolutely terrible experience with QoR of contractors, but IMO the biggest problem is the loss of institutional knowledge when the contract ends. No amount of reports makes up for the warm body in the room that can say, "actually, the reason for this is ...".
fxtentacle 3y ago
I show up differently in their accounting ledger, and because investors scrutinise that, management will optimise for it. Instead of employee cost (which is usually tightly controlled) I now show up as an external service next to extortionate cloud bills (where nobody knows or cares what they pay for anyway) somewhere 2 levels deep in COGS. Being the cheapest service provider looks a lot better on paper than being the most expensive employee.
- antupis 3y ago
  Also depending on country there is tax and social security payments which companies dont have pay when they are buying consulting.
  - notahacker 3y ago
    And in Europe consultants are much, much easier to fire (especially if the minimum standard of performance is "more capable than our existing staff" or the problem is for an indeterminate amount of time)
magicalhippo 3y ago
Guess it's different over in the states, but my boss said the cost to the company is roughly 2x the salary. This includes taxes (not income tax), pension and such. So 1.5x would be a steal in comparison.
- pintxo 3y ago
  2x sounds like it includes non-billable employees like assistants, HR, accounting etc. A 100% overhead is probably quite common. Pure employee costs are more in the 1.2 - 1.3x range (Europe). That is 30% on top of the gross salary for employer taxes, health insurances etc.
  - speeder 3y ago
    I am in Portugal. Here your real wages are tiny compared to the company expenses. To start: everyone pays 34.75% of mandatory social contribution, even if you are on minimum wage. Government tricks people saying the contribution is "only" 11% but charges the other 23.75% from the employer. So if a company pays 1000 eur to "you" (remember a chunk goes straight to government and skips you, but they are still spending that to pay you) you get 652.5 euro. Or 65% roughly. And that is only the social contribution part. The average income tax for a tech worker is around 20%. Thus you get instead 500 euro flat. Thus a Portuguese company to hire a tech worker would literally spend the double of your taxless wages just to hire you and pay the income taxes and social contribution. Then if you factor all other potential expenses things get even sillier.
    - pintxo 3y ago
      So, Portugal is pretty much in my 1.2-1.3 range?
      - speeder 3y ago
        So a company to pay 500 euro in wages, spends 1000. Thus 1000/500 = 1.2 to 1.3. I don't get it.
coldtea 3y ago
Companies are full of weird cargo cult like that. Having a ssalary cap on certain positions, but paying top dollar for external consultants doing the same is very very common.
- TheOtherHobbes 3y ago
  Most companies are status-based, not value-based. The primary goal is to maintain status differentials. Pay is one of many tools used to enforce status hierarchies. As an external consultant you are - to some extent - outside the hierarchy, so the usual rules don't apply. When companies get really big and dysunctional they start to treat their customers as if they're the bottom of the hierarchy. Which is how you get all finds of corporate outrages.
AnimalMuppet 3y ago
Because it's temporary. That is, if the company hires you, they hire you (in theory) forever. But if they contract with you, that's usually for the duration of the contract - a few months. A higher rate but for a short time is easier to justify than a slightly lower, but still high, rate forever.
apwell23 3y ago
> how they'd justify the 1.5x expense. Because of lack of benefits, don't have to go through unions to fire ect. Same reason you pay higher on a short term apartmentlease.

m_a_g 3y ago

If you don’t mind me asking, what specific area do you specialize in with your consulting work? I’d like to do what you do in the future and I’m just curious.

fxtentacle 3y ago
I do any kind of research and software development. But the most profitable tasks tend to be finding a new angle for how you can automate something. In Germany, there's still an almost endless supply of companies who urgently need to digitise their customer interactions so that they can react quickly to customer orders. A 2 week lead time for PCBs, for example, just doesn't work anymore if the Chinese competition is not only cheaper, but can DHL Express to anywhere within 7 days. Or imagine you want to book catering for an event next week but the local bakery insists that you should have faxed an order form to their central management 10 days in advance. You'd be surprised how much revenue boost some companies see just from a rudimentary Shopify order form with Stripe+PayPal online payment. Or another classic is automating document inflow. You put all forms of type X into an automated scanner and that'll send the files to a network share and then a cronjob will name the files and sort them for you. Not only do you save one employee (e.g. $4k monthly fully loaded) but you also never have things delayed by vacations or sick days, thus making the entire company more reactive to customer demands.
- ido 3y ago
  I wish you a ton of success, we need a lot of streamlining and digitalisation here! I hope you’ll do some good work for the government next as there’s so much red tape and antiquated methods.
- cudgy 3y ago
  Nice. Your work eliminates jobs and transfers their salary to the business owner! Seems more like bean counting than tech. Would be nice if there was more focus from software tech on making more opportunities for people rather than the trend of eliminating more humans from the workforce.
  - 3y ago

picklerish 3y ago

@fxtentacle - I'm currently planning on starting a consulting company for my area of expertise (data engineering), can I reach out to you and learn the 101 of doing something like this?

fxtentacle 3y ago
I'd say just ask the questions because 1. I don't have all the answers and 2. if it's a group discussion we have a higher chance of learning something new

scarface_74 3y ago

That’s part of the reason behind hiring consultants - both strategy consultants who are brought in for their subject matter expertise and staff augmentation “consultants”. On the other hand, I’m more than willing to accept my 35% lower compensation to have a full time job than I know I could make if I went independent.

AzuraIsCool 3y ago

So in essence you apply for regular employment and when you get turned down you pitch your consulting service? On last few teams I have been pulling most of the project while being unpaid (southern Europe devs rejoice) so I m thinking about incorporating as well, but with kid on the way I am worried I won't be able to find clients...

caminante 3y ago
> On last few teams I have been pulling most of the project while being unpaid (southern Europe devs rejoice) so I m thinking about incorporating as well... Not getting paid? Are you trying to break into an industry with an unpaid internship or is this a hack-a-thon side project? I don't understand how structuring an independent contractor offering will get you paid by the same folks who aren't paying you at the moment. Doesn't sound like it would solve your issue.
- AzuraIsCool 3y ago
  Underpaid, it was unfortunate autocorrect that slipped, sorry. I am dev with 10y of working experience. I considered freelancing before, got onto toptal and similar pages but got no good offers (net money would be better but with incorporation/sole prop. I would lose health and retirement benefits) - the moment they hear where I am from the offer is cut down or passed to someone else...

stuckkeys 3y ago

I am interested also. Would love to tune in and learn. I am desperate.