Author Topic: Moving from consultant to salary, coming up with a salary number?  (Read 947 times)

protostache

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I've been a software consultant for the past few years. One of my clients currently buys 80% of my time on retainer (no invoices, automatic payment at the beginning of the month). I've been with this firm for the past three years, starting when it was just the two cofounders, but at this point they're doing low seven figures of gross revenue and have several employees.

The cofounder that I work with most closely has been on me to switch to full time for at least a year. About a year ago he made an offer but without health insurance I couldn't make the numbers work. They've recently sweetened the pot with very good 100% company paid health insurance, far better than what I can buy in the exchange in my state for any price. They're also setting up a 401(k) and group term life and disability insurance.

My motivation for actually wanting to do this is two fold. First, the health insurance is great, and not having to worry about the exchanges would be removing a huge burden from my shoulders. I've been constantly worried about them since I started consulting, but especially this year. Second, cofounder is planning on doing another business and wants me involved and wants to give me a big chunk of equity. It's a weird conflict to have an almost-controlling amount of equity but not be an employee, however, so I understand where he's coming from.

I've been trying to figure out what to ask for salary. My current contract includes vacation days and holidays and they're on an "unlimited vacation" policy so nothing changes there. It also includes a 5% automatic increase at every renewal and a 30 day notification period, so if anything by going salary I'm actually increasing risk since they could now fire me with no notice.

Here are my current ideas:

  • Scale up my consulting rate from 80% to 100% time and reduce by the cost of health insurance, other fringe benefits, and employer's share of FICA. This is an intimidating number but it would leave us basically even after tax, modulo less FICA and no employer-side 401K deduction
  • Scale their offer up by 5% then reduce it by the cost of health insurance and other fringe benefits. This is a smaller number than above and costs us low five figures after tax.
  • Scale their offer up by 5% and not reduce it by anything. This is between the above two numbers and leaves us better, but still not awesome.
  • Do a salary survey and figure out what someone of my experience and education makes in the company's local market. Not really sure what this would be.
  • Something else?

Related question: should I attempt to include the 5% automatic base salary increase? Is that something that people do? There's no real room for advancement at this company. If anything I'd be managing people at some point.

gooki

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Re: Moving from consultant to salary, coming up with a salary number?
« Reply #1 on: October 25, 2017, 11:09:06 PM »
I'd do 4 and if it comes out lower than 1, choose 1.

FOr local salaries, best way is to either find a local recruiter, and just ask. Or apply for actual jobs and find out what their upper limit is.

Goldielocks

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Re: Moving from consultant to salary, coming up with a salary number?
« Reply #2 on: October 26, 2017, 01:07:29 AM »
I would want to keep the 80% workload, so no scale up, discount by the value of the health insurance, maybe the fringe, and only work 4/5 days.

starguru

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Re: Moving from consultant to salary, coming up with a salary number?
« Reply #3 on: October 26, 2017, 06:54:19 AM »
One of the biggest benefits of being self employed is your SEP Ira or equivalent.  What are the terms of the offered 401k?  Is there an after tax contribution possibility and in service rollover to Roth (I.e mega backdoor Roth potential)?


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protostache

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Re: Moving from consultant to salary, coming up with a salary number?
« Reply #4 on: October 26, 2017, 07:13:12 AM »
One of the biggest benefits of being self employed is your SEP Ira or equivalent.  What are the terms of the offered 401k?  Is there an after tax contribution possibility and in service rollover to Roth (I.e mega backdoor Roth potential)?


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They'll be setting it up for me so I can sort of pick what provider I want, but because it's such a small company with both highly and normally compensated employees I don't think they'll do anything more than a safe harbor match. After-tax contributions disqualify a plan from the safe harbor rules.

I will be retaining my consultancy with a small amount of revenue so I'll still be able to do a mega backdoor Roth, but it won't be anywhere near what I can do with all revenue running through the business.