Advice on whether or not to negotiate on hourly rate working for a friend

[jeromedawg]

Hey all,

So my wife got a really informal part-time job offer as an admin assistant to a good friend of ours who is a financial planner. She was looking for someone who could fill this role who she trusts and has relevant experience (there is some accounting involved and QuickBooks, which my wife would be more than comfortable with). Anyway, the hourly rate she's offering is $25 as that's what she was paying the previous assistant. The previous assistant just has too much going on and needs to call it quits. This position would be extremely flexible and work-from-home. She would only need to go into the office for physical filing maybe 2-3 times a year and the office is probably a half hour commute. She needs to have statements filed/submitted at least twice a year in terms of deadlines, so very low pressure. A lot of the working sounds like basic bookkeeping/data entry and balancing. My wife said that she was told that she would probably be paid roughly $5000 per year ultimately, based on the estimated # of hours that the previous assistant put in. Of course, I thinks she could always ask for more work too.

In situations like this, do you think it's a good idea to 'negotiate' up higher on the hourly rate (especially since it's part time)? My wife has prior experience as an accountant (but relatively entry to mid level experience) but hasn't worked for a couple years now since having kids. If so, how do you go about navigating and even asking when it happens to be a friend offering the job (I mean, she wouldn't mind taking it on as she would consider it a form of 'compensated help')? I'm sure some will respond saying "this is why friends don't do business with each other etc" but I'm sure some friends actually do and have... just looking for input for those of you who have had these experiences.

[jeromedawg]

Anybody?

[Hellohi]

If it’s a friend, I would jokingly throw out a high number, then judge the response. “I’ll interested in the job but not for anything less than $50 an hour”. They might say “I’d like to give you more but...” or “you know I could probably give you $x.” 

[jeromedawg]

How will it be structured?  If the employer will treat her as a 1099 contractor, then she'll have to pay the full self employment taxes herself, which brings her take-home down considerably.

Kind of depends on the market rate locally, too -- $25/hour for general admin and simple book-keeping  is probably about right for Seattle, maybe a bit high, actually.  I did see a local company offering that recently for a PT position (property management company admin assistant, 25-30 hours/week)

So she mentioned my wife would need to be bonded and licensed...? I'm not quite sure what that means but I guess she'd need to find out more. From what I thought I heard, she would technically be an employee of the company though. I'll have to double-check on that again.

If it’s a friend, I would jokingly throw out a high number, then judge the response. “I’ll interested in the job but not for anything less than $50 an hour”. They might say “I’d like to give you more but...” or “you know I could probably give you $x.” 

I don't know how we'll she'd respond to this if it's in a half-joking manner. The reason is because my wife was basically already offered the job and I think it could be taken the wrong way. By responding half-jokingly, it kinda makes it seem like you're not really that interested... at least, this is my opinion just stepping back and thinking about how that could come off sounding

[Gremlin]

What would you do if the potential employer wasn't a friend?

Whatever the answer is there, that's the answer here.  Otherwise there's likely to be resentment one way or the other...

[Goldielocks]

You have mentioned zero reasons so far why the job is worth more than $25 per hour.  Yes your wife has an accounting background, but is that needed for this work?   

What do book keepers locally charge?  (We use book keepers here for the quickbooks, and they make a touch more than general admin, but not a lot more).

Here, the $50 per hour for a contract employee is more than good.   It is about $25 per hour for the full time employees, and more for contractors and $50 per hour is very competitive for the work you just described.   We are in a very HCOL area that does not always pay HCOL wages.

[Linea_Norway]

This friend will now become the employer. That opens for negotiations. Your wife should ask for market price. Maybe that is what the previous assistant was paid, plus inflation correction.

[jeromedawg]

You have mentioned zero reasons so far why the job is worth more than $25 per hour.  Yes your wife has an accounting background, but is that needed for this work?   

What do book keepers locally charge?  (We use book keepers here for the quickbooks, and they make a touch more than general admin, but not a lot more).

Here, the $50 per hour for a contract employee is more than good.   It is about $25 per hour for the full time employees, and more for contractors and $50 per hour is very competitive for the work you just described.   We are in a very HCOL area that does not always pay HCOL wages.

It looks like, on average, a full-time salaried bookkeeper/admin assistant in the OC area will make around $45k annually. The other thing is do you factor in benefits/etc to the equation when negotiating part-time salary? I've never taken a part-time job like this and neither has my wife, so we just don't really have a good idea of what negotiations (if any) look like. If you think that the $25/hour rate being offered is beyond fair and above market rate according to what is known, I guess my wife should just take it without question? One thing she has considered is accepting the position and then requesting getting paid more contingent on her 'performance' (e.g. being able to accomplish more things and do more outside of the initial scope of work and more efficiently). I don't really know the specifics of what else the friend could have her do outside of the basic bookkeeping and filing. This is basically in logistical and organizational support of her business as a bonded/licensed financial planner that works for a larger financial corporation.

Just re-read your post - so are you saying that full-time bookkeeper employees doing the same work as bookkeeper contractors are effectively at half the rate per hour versus the contractors at your organization or in your area? If so, I'm assuming this is because the lack of benefits as a contractor, etc had to be factored in right? This is more along the lines of what I was getting at because my wife, it seems, will be taking on more of a "contractor" like position in being part-time with no benefits...

[jeromedawg]

This friend will now become the employer. That opens for negotiations. Your wife should ask for market price. Maybe that is what the previous assistant was paid, plus inflation correction.

What's the most accurate way to determine market price for a part-time position rather than salaried? Do you just take the average of what you might find for the company she would be working for via Glassdoor, Salary.com, etc, and then get the hourly rate?

EDIT: okay, I stumbled across this by googling "bookkeeper salary orange county":

Bookkeeper   $46,118   Orange,CA

Then plugged that in here - https://www.calcxml.com/calculators/convert-salary-to-hourly
"A salary of $46,118 equates to a monthly pay of $3,843, weekly pay of $887, and an hourly wage of $22.17."

So she's getting higher than the average market rate in the area... should she take it no questions asked? (to put this in context, at this point we're almost certain she's going to take the position... really the question comes down to whether or not she should ask about getting paid more or not - this does go back and relate to the whole "contractor" rate vs "part-time" rate and how if at all to factor in benefits to the compensation)

[Goldielocks]

Okay,  try this.

Take the going rate, $45k.  That is $22.50 per hour.   Add in employer taxes on that of 10.2%.

Now adjust for any other benefits that you would normally expect employer to provide - medical or pension plans, etc.   For book keeper at $45k, in a small business that may be zero other benefits, normally.

Next, do you need to provide your own special software, computer, other tools or does the employer provide these things?  Do you need to rent an office?  Do you need to market, advertise, issue invoices or have other "dead" admin time?  This is where the contractor rate jumps up, to cover operating overhead.

Lastly, do you need to charge for travel time for part time work.  Can you bill that directly?  It sounds like you don't need to be in person very often, so I would just ask to tack on 30 minutes (or ?) to your timesheet every time you need to go in.

So,  if no other benefits and you don't need to provide a laptop and bookkeeping software, pay for a secure filing cabinet, etc, then you are at $22.50/hr x 1.102 (employer payroll taxes) =  $24.80/hr.

At this point, it looks like $25/hr is fine, and competitive, as long as you tack on travel time (if any) and get the employer to pay for any IT costs that are additional to your personal use, and as long as you have some flex with the hours in a week.  (people should pay more to have someone on standby for short notice / odd  part time hours in a week).

So - just negotiate the "extras" -- travel time, software costs, maybe loan of a laptop.

[jeromedawg]

Okay,  try this.

Take the going rate, $45k.  That is $22.50 per hour.   Add in employer taxes on that of 10.2%.

Now adjust for any other benefits that you would normally expect employer to provide - medical or pension plans, etc.   For book keeper at $45k, in a small business that may be zero other benefits, normally.

Next, do you need to provide your own special software, computer, other tools or does the employer provide these things?  Do you need to rent an office?  Do you need to market, advertise, issue invoices or have other "dead" admin time?  This is where the contractor rate jumps up, to cover operating overhead.

Lastly, do you need to charge for travel time for part time work.  Can you bill that directly?  It sounds like you don't need to be in person very often, so I would just ask to tack on 30 minutes (or ?) to your timesheet every time you need to go in.

So,  if no other benefits and you don't need to provide a laptop and bookkeeping software, pay for a secure filing cabinet, etc, then you are at $22.50/hr x 1.102 (employer payroll taxes) =  $24.80/hr.

At this point, it looks like $25/hr is fine, and competitive, as long as you tack on travel time (if any) and get the employer to pay for any IT costs that are additional to your personal use, and as long as you have some flex with the hours in a week.  (people should pay more to have someone on standby for short notice / odd  part time hours in a week).

So - just negotiate the "extras" -- travel time, software costs, maybe loan of a laptop.

Thanks! In terms of how it's structured as far as who employs who, I *think* my wife becomes an employee of the company our financial planner friend works for, because our friend told us that if we use our own computer, she'll need to have their IT guy come install all the necessary software on it. In terms of where the pay comes from or how it's billed I really don't know - I would assume that whatever my wife is paid comes out of a portion of our friend's paycheck whether directly or indirectly. And I *think* she would just get paychecks from the company (not our friend cutting her personal checks, etc). Then again, I really don't know and would need to have my wife check how the payment actually occurs.

The main thing is that we have a computer to provision the access and from there the IT guy, as mentioned will install and set things up. No need to rent office space. I'm not sure what is meant by the "market, advertise, issue invoices or have other 'dead' admin time" - can you elaborate?

We likely will need the laptop but everything else it sounds like is provisioned.

In terms of travel time, she only needs to go in for physical filing maybe 2-3 times a year so really not much. 


At this point it doesn't sound like she should try negotiating her hourly rate up-front then? And if she were wanting more, probably better just to ask for a raise later or perhaps mention it as a 'contingency' or something for future discussion e.g. "I believe I can do all of what your asking in less the amount of time you have estimated. If after the first several months we find that my ability to handle the bookkeeping exceeds your expectations can we revisit the hourly rate then?"

[Goldielocks]

Dead admin -- overhead -- if you are an independent contractor, you need to allow for your time and costs to procure more clients, and to do your own taxes, give people quotes, etc.

Sounds like she will be an employee, in which case the employer providing the software, IT support for work related things, and employer taxes (that 10.2%)... and the $25/hr is very reasonable.  I would just ask to be allowed to charge travel to the office at 50% (or more) of the time it actually takes.

[jeromedawg]

Dead admin -- overhead -- if you are an independent contractor, you need to allow for your time and costs to procure more clients, and to do your own taxes, give people quotes, etc.

Sounds like she will be an employee, in which case the employer providing the software, IT support for work related things, and employer taxes (that 10.2%)... and the $25/hr is very reasonable.  I would just ask to be allowed to charge travel to the office at 50% (or more) of the time it actually takes.

Thanks... yea it sounds like there's a bit more work involved as far as becoming an independent contractor goes from her side. I've never really investigated going that route anyway. She did say that there are a few bonuses per year that get issued out but not much (I thought she had said $200 per or something like that). In terms of charging travel, are you saying that if it takes an hour for her for the commute, each time, that she should ask to be paid $12.50 for that for the times that she does have to go in? That seems like a pretty small amount to be asking for given that her commute would probably be about 30 minutes each way and if she were to go in 3x a year that's roughly $37.50 billed to workable hours via commute time. Were you mentioning that more along the basis that the commute were at least 2-3 hours and where she might have to go in few times a month?

[jeromedawg]

Got more info. So the situation is that the financial planner operates under a sole proprietorship and the financial company she's affiliated with she only uses for brokering trades, etc. So she'd be hiring my wife as her own employee. At this point I think it's probably too much to be asking about rate negotiations. My wife is planning to talk with the current assistant whom she will be replacing, just to get her perspective (and also to thank her for referring her) before confirming and agreeing to the position. We figure this will be some nice extra side-income regardless... gotta work on the side hustles!

[Freedom2016]

Almost certainly your wife will not be the employee of the friend (receiving W2 wages), but a 1099 contractor.

I had a contracted bookkeeper years ago who handled my Quickbooks; the local rate in my HCOL area was $30/hr. If that were the going rate for contracted bookkeeping services I would not be terribly open to a higher rate for a friend. It's a business arrangement and I would pay what the market bears, no more, no less.

And the market rate typically assumes that the contractor is absorbing costs like equipment or training - things they need to run their business. It sounds like the friend may be open to providing a computer for your wife to use. "IF you use your own computer, we'll need IT to install software..."

In my business I would have reimbursed my bookkeeper for mileage driven in the course of executing work for me. Compensating also for the time spent driving back and forth would have been negotiable.

[jwright]

Your wife is going to average 4 hours a week ($5,000 per year)?  I think that shows the value the employer is placing on this position.  I think I would take the $25/hour and use it as a resume builder.  Your wife could look into building a contract bookkeeping business and charge more. 

[Freedom2016]

Your wife is going to average 4 hours a week ($5,000 per year)?  I think that shows the value the employer is placing on this position. I think I would take the $25/hour and use it as a resume builder.  Your wife could look into building a contract bookkeeping business and charge more.

Can you explain the bolded? Is there something wrong with an employer who only needs a few hours a week of assistance? See my comment above; this is essentially a contracted gig. Contractors typically hire themselves out to several people who need their services and that combination of clients/customers adds up to some decent annual $$$.

[jeromedawg]

Almost certainly your wife will not be the employee of the friend (receiving W2 wages), but a 1099 contractor.

I had a contracted bookkeeper years ago who handled my Quickbooks; the local rate in my HCOL area was $30/hr. If that were the going rate for contracted bookkeeping services I would not be terribly open to a higher rate for a friend. It's a business arrangement and I would pay what the market bears, no more, no less.

And the market rate typically assumes that the contractor is absorbing costs like equipment or training - things they need to run their business. It sounds like the friend may be open to providing a computer for your wife to use. "IF you use your own computer, we'll need IT to install software..."

In my business I would have reimbursed my bookkeeper for mileage driven in the course of executing work for me. Compensating also for the time spent driving back and forth would have been negotiable.

Yep, this is what it sounds like. So it seems the rate isn't really negotiable and she should just take the job. What area are you? Bay Area, Los Angeles, New York? Just trying to get a gauge on what I might expect to see elsewhere. My wife says that our friend asked if we have a computer for this purpose, so it almost seems to imply that she *didn't* want to provide something if she doesn't have to. This isn't a huge deal since we recently bought a laptop for my FIL who doesn't even use it and keeps going back to using the old laptop we got him years ago. So we could probably just take it back.

So you reimbursed your bookkeeper for mileage driven *in addition* to hours worked? How would you determine what to pay for mileage driven as well as the time spent driving back and forth (50% or more of the $25 per hour)? 

[Freedom2016]

Almost certainly your wife will not be the employee of the friend (receiving W2 wages), but a 1099 contractor.

I had a contracted bookkeeper years ago who handled my Quickbooks; the local rate in my HCOL area was $30/hr. If that were the going rate for contracted bookkeeping services I would not be terribly open to a higher rate for a friend. It's a business arrangement and I would pay what the market bears, no more, no less.

And the market rate typically assumes that the contractor is absorbing costs like equipment or training - things they need to run their business. It sounds like the friend may be open to providing a computer for your wife to use. "IF you use your own computer, we'll need IT to install software..."

In my business I would have reimbursed my bookkeeper for mileage driven in the course of executing work for me. Compensating also for the time spent driving back and forth would have been negotiable.

Yep, this is what it sounds like. So it seems the rate isn't really negotiable and she should just take the job. What area are you? Bay Area, Los Angeles, New York? Just trying to get a gauge on what I might expect to see elsewhere. My wife says that our friend asked if we have a computer for this purpose, so it almost seems to imply that she *didn't* want to provide something if she doesn't have to. This isn't a huge deal since we recently bought a laptop for my FIL who doesn't even use it and keeps going back to using the old laptop we got him years ago. So we could probably just take it back.

So you reimbursed your bookkeeper for mileage driven *in addition* to hours worked? How would you determine what to pay for mileage driven as well as the time spent driving back and forth (50% or more of the $25 per hour)?

I'm in Boston.

If you use your computer I would think you could write off at least a portion of the purchase price as a business expense.

Mileage reimbursement is at the standard federal rate, currently $0.54/mi. See https://www.irs.gov/newsroom/standard-mileage-rates-for-2018-up-from-rates-for-2017

Reimbursement for time spent driving is more discretionary. You could make an argument that it's an opportunity cost for your wife to be driving instead of working at her desk, and ask for the full hourly rate. But I've reimbursed anywhere from 0-75% of hourly rate for the kinds of contractors I use. Depends a lot on prevailing local or industry norms.

Having said all that, there was never a single time when my bookkeeper had to drive anywhere to do her work for me. What kind of filings would your wife be doing that have to be done in person? Aren't there e-filing services? Don't faxes work? I haven't laid eyes on my accountant in 2+ years. He doesn't need to drive anywhere to file stuff for me - so I'm curious what would require your wife to do so.

[jeromedawg]

Almost certainly your wife will not be the employee of the friend (receiving W2 wages), but a 1099 contractor.

I had a contracted bookkeeper years ago who handled my Quickbooks; the local rate in my HCOL area was $30/hr. If that were the going rate for contracted bookkeeping services I would not be terribly open to a higher rate for a friend. It's a business arrangement and I would pay what the market bears, no more, no less.

And the market rate typically assumes that the contractor is absorbing costs like equipment or training - things they need to run their business. It sounds like the friend may be open to providing a computer for your wife to use. "IF you use your own computer, we'll need IT to install software..."

In my business I would have reimbursed my bookkeeper for mileage driven in the course of executing work for me. Compensating also for the time spent driving back and forth would have been negotiable.

Yep, this is what it sounds like. So it seems the rate isn't really negotiable and she should just take the job. What area are you? Bay Area, Los Angeles, New York? Just trying to get a gauge on what I might expect to see elsewhere. My wife says that our friend asked if we have a computer for this purpose, so it almost seems to imply that she *didn't* want to provide something if she doesn't have to. This isn't a huge deal since we recently bought a laptop for my FIL who doesn't even use it and keeps going back to using the old laptop we got him years ago. So we could probably just take it back.

So you reimbursed your bookkeeper for mileage driven *in addition* to hours worked? How would you determine what to pay for mileage driven as well as the time spent driving back and forth (50% or more of the $25 per hour)?

I'm in Boston.

If you use your computer I would think you could write off at least a portion of the purchase price as a business expense.

Mileage reimbursement is at the standard federal rate, currently $0.54/mi. See https://www.irs.gov/newsroom/standard-mileage-rates-for-2018-up-from-rates-for-2017

Reimbursement for time spent driving is more discretionary. You could make an argument that it's an opportunity cost for your wife to be driving instead of working at her desk, and ask for the full hourly rate. But I've reimbursed anywhere from 0-75% of hourly rate for the kinds of contractors I use. Depends a lot on prevailing local or industry norms.

Having said all that, there was never a single time when my bookkeeper had to drive anywhere to do her work for me. What kind of filings would your wife be doing that have to be done in person? Aren't there e-filing services? Don't faxes work? I haven't laid eyes on my accountant in 2+ years. He doesn't need to drive anywhere to file stuff for me - so I'm curious what would require your wife to do so.

So I think the physical filing wouldn't necessarily be the bookkeeping really as much as it would be more of the admin/office assistant part of the role. The role itself is not for the title of "Bookkeeper" but for "Admin Assistant" but I think bookkeeping is a small part of the role... I don't know how 'advanced' it gets with the bookkeeping portion but it seems like it would be relatively simple. Anyway, my wife thinks the physical filing would be for organization of client files, etc...

The computer we got a few years ago, so would that still be considered something we can write-off?

In terms of the commuting, it seems like such a minimal amount (3 times a year?) that asking about reimbursement for that would seem a bit...petty?