Tips and Tools for Negotiating Contractor Pay Rates

Negotiating a contractor's pay rate can be one of the most difficult parts of placing a contract candidate.  Where do you start, especially if you have had little experience placing the particular position in question?

Luckily, there are a couple of tools on the Internet that can give you a starting place for negotiations:

  • Bureau of Labor Statisics (BLS) Occupational Employment Statistics - This site provides national hourly and salary wage estimates for about 800 occupations based on semi-annual mail surveys. It also allows you to narrow down the data by industry or geographic location.
  • www.salary.com - The site's free "Salary Wizard" allows you to search its database by job title and location, providing a range of salaries as well as the median salary for the criteria selected.

As a benchmark to begin negotiations, divide the annual salary for a comparable direct position by 2,080 hours (approximately one year) to get the hourly rate.  Click here for a free Salary-to-Hourly Conversion table

Once you have calculated that hourly pay rate, adjust the number based on the facts of the contract placement. Here are a few things that could affect the pay rate:

  • Short-term contracts sometimes require higher pay rates because it's hard to find candidates to take those positions.
  • Long-term contracts are more like direct-hire positions. The longer the contract, the closer the pay rate will be to a comparable direct-hire salary.
  • If the candidate has been unemployed, particularly for a long time, that could bring the pay rate down.
  • Skills that are particularly valuable or rare demand a higher pay rate.
  • If the position requires travel or relocation, that could drive the pay rate up.

Debbie Fledderjohann is the President of Top Echelon Contracting, Inc.

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