How much would you ask to be paid for "consulting" work

[By the River]

My wife is retiring next month.  However, her main project still has maybe 40-50 hours required in December and up to 100 hours in 2023 and she wants to see it to the end.  Her boss has made arrangements for her to go through a consultant that they regularly use and to figure out her required rate.  I said just double your normal hourly rate but she disagreed.  She accepted her hourly rate increased by the megacorp's normal labor overhead rate. 

What amount would you ask for in this situation?

[Michael in ABQ]

If you're a professional I would expect to be billing at least $100 per hour. My attorney charges $350 an hour. I've talked to CPAs that charge $200 an hour. When I was a commercial real estate appraiser several years ago my goal was to bill about $100 an hour. So, if I expected an assignment to take 40 hours, I would bid $4,000. I only got to keep 40% of that as an employee on 100% commission.


Look at it from the company's perspective. Can they really get someone to work on this project in that timeframe? Probably not. They could spend thousands of dollars trying to find someone, and thousands more getting them trained up. Paying $100 an hour would be much easier and cheaper than spending the next two months trying to hire someone at $30, $40, $50 an hour (plus benefits and overhead).

[JLee]

I'm not sure if it's helpful (I'm in tech), but I was contracting and then subsequently hired full time by my current employer - my contracting rate was just over triple my current hourly rate. Basically every consultant we're working with (SaaS etc) is north of $200/hour.

[Adventine]

My husband @MustachioedPistachio did something similar when he transitioned from a full time employee to a consultant for the same employer. I'll let him give more details.

[BeanCounter]

I do some consulting. 2.5-3.0 times your previous rate is a good rule of thumb. You’ll have an extra tax burden as a contractor and your employer does not have all the benefit expenses of a full time employee.

[GilesMM]

Can she change the rate now? If not, move on.

[By the River]

Can she change the rate now? If not, move on.

No set rate yet.  Yesterday that her boss told her that the company would use her as employed by a consultant for some hours in the same role until the project is over and asked what rate my wife would want.  My wife will give her a rate by end of today. 

[AMandM]

$100/hour sounds low to me. I charge half that just to tutor schoolchildren, and the parents I'm dealing with aren't the highest-paid tranche.

[GilesMM]

I would ask for $300/hr and see what they say.

[Dee_the_third]

At least 2x her hourly rate when she was employed. They’re not paying any admin overhead, benefits, etc. I work in engineering and that’s the expectation.

[MustachioedPistachio]

Echoing the suggestions for minimum of 2x the employed rate. I am close to triple, and will be upping that for the new year.

[LightStache]

What rate are we talking about? The rate the mega corp is going to pay consulting corp or the rate the DW will get paid from consulting corp?

I think DW's logic of multiplying her hourly salary by megacorp's overhead rate is sound. But then you have to add on the consulting corps cut and a reasonable profit, 10% - 20% on top of that to get the rate charged to megacorp.

I'm full time independent and I bill 1.85x my prior megacorp salary, including profit, but excluding middleman admin/passthrough. Because my business is so much more efficient with overhead and tax, with that 1.85x multiplier I keep 53% more than when I was a megacorp employee.

ETA: OP, from a relationship standpoint, it's weird to me that you feel entitled to deference on this decision.

[Gronnie]

What rate are we talking about? The rate the mega corp is going to pay consulting corp or the rate the DW will get paid from consulting corp?

I think DW's logic of multiplying her hourly salary by megacorp's overhead rate is sound. But then you have to add on the consulting corps cut and a reasonable profit, 10% - 20% on top of that to get the rate charged to megacorp.

I'm full time independent and I bill 1.85x my prior megacorp salary, including profit, but excluding middleman admin/passthrough. Because my business is so much more efficient with overhead and tax, with that 1.85x multiplier I keep 53% more than when I was a megacorp employee.

ETA: OP, from a relationship standpoint, it's weird to me that you feel entitled to deference on this decision.

Not sure I follow -- why wouldn't a husband and wife discuss an important decision such as a career decision together? That's kind of the point of marriage.

[bryan995]

Double to triple your W2 (total comp) sounds about right.

[NorCal]

I've gone from W2 to consulting. 

The consulting rule of thumb is 3x salary with 2080 annual hours assumed.  Although that factors in some overhead, so I'd say anywhere in the 2x-3x range.  So if she's making $100K now, she should ask for about $145/hr.

The thing most people don't realize when making this shift is that it's really easy to work a 40 hour week in the W2 world, but very hard to translate that into 40 hours that are actually billable back to a client. 

[use2betrix]

I have worked as a contractor/consultant most of my career. I’m starting a “permanent” job in January for the first time in a very long time. I also work with tons of other contractors/consultants.

I would say at a minimum of around 1.5x her actual reimbursement rate. You have to also figure in there’s likely no more sick pay, vacation, holiday pay, 401k match, etc. etc. In my opinion, those all need to be factored.

For example, if someone makes $200k/yr, I would not consider their actual hourly rate to be $200k/52weeks/40hrs. If they get 4 weeks vacation, 5 sick days, and 10 paid holidays, I would consider their hourly rate to be $200k/45weeks/40 hrs.

It also needs to be known how many hours they will be working and whether it will be straight time or 1.5x OT (if OT is available).

My last two contracting agencies I’ve also been able to work in referral bonuses of anywhere from 1% pay increase for each referral or $750-$1000 bonus for each referral. This has been huge when I interview with the agency first for a position (before the company) and I tell them that in past projects i’ve been able to pull on 5-10 more people onto the staffing agency. They see this as a huge incentive and then push harder and also had less of a markup on my wage so they could get my foot in the door.

[mistymoney]

I'm not sure what is happening to the term consulting these days. And your "quotes" have me wondering!

If the role is the same as w2 work, just on contract I would go 2x former hourly rate. If actually consulting on an area of particular expertise, 3-4x would be appropriate.

[chasingsnow]

I would easily double the salary. For reference, I worked for a consulting firm in Canada in Planning and Architecture and they were paying me $40 an hour, but billing me out at the expert" rate of $150 an hour. She is so close to retirement, I would throw out an outrageously high number and see what sticks, she has all the leverage in the world. She brought the project this far, I am sure its easiest for them if she is the one to get it across the finish line.