Tips and Tools for Negotiating Contractor Pay Rates

Negotiating contractor pay rates can be one of the most daunting parts of placing a contract candidate when you are first getting started. It’s also one of the most important. The contractor pay rate is vital to establishing the hourly bill rate charged to the client because it is the largest single component of that rate. But where do you start?

Fortunately, it is not as difficult as it may seem. If you have experience placing direct hires for the position in question, all you have to do is take the typical annual salary for a direct hire and divide it by 2,080 (the average number of working hours per year). We even have a Salary-to-Hourly Conversion tool that can give you the hourly conversions for the most common annual direct salaries at a glance.

Your candidate may also be able to provide guidance if they are an experienced contractor. They may tell you what they want to make per hour, and you can then decide if that rate is appropriate based on on their education, experience, skill set, etc.

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

• Bureau of Labor Statistics (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.

Once you have the hourly pay rate, adjust the number based on the unique details of the contract placement. Here are a few factors 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.

Are you struggling to broach the subject of contract staffing with your clients in the first place? Then check out these scripts to help recruiters succeed with contract staffing!