Retainer / Part Time ID

Postby imadesigner » December 12th, 2012, 6:17 pm


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I'm discussing the possibility of transitioning from full time to part time with my employer, and I could really use some advice and opinions. My employer and I are pretty far apart on what we consider appropriate compensation.

Here's the situation: My current job responsibilities include ID, quoting and estimating, proposals, trade show hunting, and project management. A part time position would probably be only ID with perhaps a sprinkle of trade show hunting. My main objective is to spend more time with my family, but I need to get a decent rate with min guaranteed of about 20-24 hours a week to pay the bills and stay current in the field. When the kids are older I'll go back to work full time. What is a reasonable rate? What's too low to accept? No benefits, no vacation, just hourly rate.

The other possibility is to take them on as a freelance client (at a higher rate), but with no hours guaranteed I would need to find additional clients. I've daydreamed about starting a consultancy (what in-house designer hasn't) but really only want to work part time. I'm concerned that could create a pretty irratic schedule for my family. Also constantly searching for work isn't my cup of tea.

If I can't agree on a decent rate with my current employer, would a part time designer on retainer situation be attractive to other employers? I haven't shopped around in a while but it might be time...

Re: Retainer / Part Time ID

Postby imadesigner » December 12th, 2012, 6:42 pm


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oh I should add, rural Midwest location

Re: Retainer / Part Time ID

Postby TaylorWelden » December 12th, 2012, 9:17 pm

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imadesigner wrote:I'm discussing the possibility of transitioning from full time to part time with my employer, and I could really use some advice and opinions. My employer and I are pretty far apart on what we consider appropriate compensation.

Here's the situation: My current job responsibilities include ID, quoting and estimating, proposals, trade show hunting, and project management. A part time position would probably be only ID with perhaps a sprinkle of trade show hunting. My main objective is to spend more time with my family, but I need to get a decent rate with min guaranteed of about 20-24 hours a week to pay the bills and stay current in the field. When the kids are older I'll go back to work full time. What is a reasonable rate? What's too low to accept? No benefits, no vacation, just hourly rate.

The other possibility is to take them on as a freelance client (at a higher rate), but with no hours guaranteed I would need to find additional clients. I've daydreamed about starting a consultancy (what in-house designer hasn't) but really only want to work part time. I'm concerned that could create a pretty irratic schedule for my family. Also constantly searching for work isn't my cup of tea.

If I can't agree on a decent rate with my current employer, would a part time designer on retainer situation be attractive to other employers? I haven't shopped around in a while but it might be time...


Depends... :?

Sorry to give such a useless answer, but it is the correct one.

How many years of experience do you have? How good are you? How much value to you bring to the company? How much profit have you directly brought the company through your work? How big is the company?

I'd do it this way....
Based on all of those answers above.
Decide what your full-time salary should be, or what you want it to be.
That # is based off of a 40-hour week. Now reduce that by half for 20 hours a week, tweak accordingly if you want to do 24 hours per week.
Will your boss/client be taking taxes out? Factor that in if necessary.
Now, since your boss/client won't be paying benefits, vacation, or anything else, I'd feel comfortable adding in an extra 10% of that final total. This part is entirely up to you. That is likely what I would do. The issue is, you're asking for this part-time role, so your employer thinks they're already doing you a favor. They don't necessarily "owe" you the compensation for vacation and benefits, as you'd simply become a part-time freelance consultant, not an "employee"... but for your own self-preservation, I'd factor it in. But, it all depends.

This method isn't the "right" way. Just a suggestion based on my experience/morals. YMMV.
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Re: Retainer / Part Time ID

Postby iab » December 13th, 2012, 9:30 am


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Depends on the client and the work being done.

That said, $125-$175/hr is the sweet spot. But as low as $75/hr and as high as $225/hour.

Disclaimer: I never worked on retainer, never told a client my hourly rate and never told a client the time involved. I only gave them a price per project.

Re: Retainer / Part Time ID

Postby johnAM » December 13th, 2012, 10:31 am


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IAB

Dude I gotta step in and say these numbers just don't make sense. Perhaps in ID wonderland they do, or if you run your own company they might but lets do the math:

$125 x 40/hr = $5000/wk
$5000 x 52/wk = $260,000/yr

How many freelance designers working 24 hours a week are pulling in 130k a year that you know of, how many designers do you know making that much period? I'll be honest I know a few, but they aren't working 24 hours a week. Also you cross ref. these numbers with the coroflot salary and you see how far off the mark those numbers you provided are.

Here's the link I found: http://www.coroflot.com/designsalarygui ... ted-states

Lets assume since this guy has kids he's been in the field long and worked hard and is safely above the median salary (57k provided in the survey). Lets put him at 80k, that would mean his hourly wage is around 38/hr, maybe with benefits and payroll taxes he's closer to 50-52/hr. Now if you were his employer, would you jump at the chance to cut his hours in half and triple the expense for yourself?

Sorry for the rant, I'm just a guy that's been reading these things and I see these numbers getting tossed around and they don't make sense. I hear good friends of mine that are skilled designers and they keep a lot of work off their plates because they significantly overestimate what they are really worth. I get it there are expenses, but this guy isn't paying rent on an office, he's trying to stay at home he'll probably write off part of his residence now on his taxes.

EDIT: I just noticed next to the coroflot ID salary survey chart, it says the avg freelance rate is 32/hr, that seems a little cheap given that you have to pay higher taxes, but it's a far cry from even 75/hr.

Re: Retainer / Part Time ID

Postby TaylorWelden » December 13th, 2012, 10:41 am

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I have never publicly stated my hourly rate. But the number that iab has stated is very close to the number that I charge. However, I usually quote and bill per each unique project.

There are many other factors involved when running your own design firm. It isn't as black and white as you might think. I suppose it takes the first hand experience of doing it yourself to fully understand.
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Re: Retainer / Part Time ID

Postby johnAM » December 13th, 2012, 10:58 am


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I'm not going to dispute that either way, like I mentioned I know people that charge that much.

BUT

This guy isn't starting a company, he's working fewer hours at the same employer, he doesn't have an office to pay for, and websites own survey doesn't support the information being given.

If he was moving on to a new employer, and could take a risk of being unemployed for a period of time then you're free to raise your price. But this guy has a family. He's working at the same spot. Suddenly he cost x3? If I was the employer and that was the offer on the table I would let him go.

And I do know what goes into it, that's why I opened up on it.

Re: Retainer / Part Time ID

Postby Scott Bennett » December 13th, 2012, 11:16 am

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Even recent grads around here want $50/hr.

Also, 10% for benefits is too low, it's usually closer to 30% when you figure your employer pays 7.5ish% of your payroll tax (SS and Medicare). If you're going to a contractor arrangement, they save that, along with health insurance, workers comp, 401K, unemployment insurance, paid time off, etc. It's a lot. (http://www.bls.gov/news.release/ecec.nr0.htm)

Re: Retainer / Part Time ID

Postby johnAM » December 13th, 2012, 11:28 am


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Scott,

Did you even read the link you included? From the first line: Employer costs for employee compensation averaged $30.80 per hour worked in September 2012, the U.S. Bureau of Labor Statistics reported today.

Look the guy has a specialized degree and works in a special field I get it, he'll get paid more. But the numbers being tossed around don't line up with either the coroflot survey results, or the BLS report you linked to. The advice being given in this thread is bad because it seems largely unsubstantiated.

Maybe I'm a little more conservative with my money that you guys. Even websites like glassdoor don't jive with the numbers you all are mentioning especially given the 'rural midwest' qualifier.

Re: Retainer / Part Time ID

Postby rkuchinsky » December 13th, 2012, 12:06 pm

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Ok, a primer on fees, salaries and rates-

I've been working freelance for 5 years and corporate for 6 and have both negotiated salaries, hired for corporate and paid consultants. I am currently working with several different clients on a retainer basis.

1. Working corporate.
You are getting paid based on the principle of a fixed exchange. They pay you X amount, you do Y. Your X includes a minimum number of hours expected, no matter the workload. If the office is busy, you may have to do unpaid overtime, if not busy, you stay at your desk and look busy, or do "research". Your compensation includes benefits, taxes, the office overhead and job security.

Corporate jobs have some security as the employer can fire you, but normally has to pay some amount of wages to do so, and hiring someone will require they invest some time/$ into training, typically 1-2 months until they are fully up to speed, depending on the position. Plus, depending on the position there may be additional costs like relocation, signing bonus, headhunter fees, etc.

2. Working Freelance/Consultant.
You are doing X for Y. X is the deliverables. Y is your rate multiplied by the hours in your estimate. You may roll this into a fixed cost per project, or provide a breakdown. Two important things with Y: A)both rate and hours are important. Charging $500/hr and quoting for 1 hour of work is equal to charging $50/hr and 10 hours. B)How many hours you quote may or may not be the same as the number of hours it takes you to do the work. Managing rate and hours is an important thing for all consultants and there are many factors and strategies to consider.

As a consultant, you have no job security. You may or may not have work next week or next month. You have to spend time to do business development, accounting, etc. You have to assume the costs of running the office, paying utilities, new computers, etc. Assuming we are talking about a single person here, you are likely not doing 40 hours of billable hours a week. If really busy and efficient, maybe 30.

A consultant's rate is normally much higher than the calculated (salary divided by 40/wk) corporate rate as there is a premium for the one-off job (no hiring/firing/training expenses), and you are subsidizing the non-billable hours and overhead needed to provide the availability of the consultant. As well, it is normally the case that the consultant offers a greater level of skill and experience which allows him to be a consultant, vs. a hired employee.

As a consultant, you can also write off a lot. While you may not have benefits, you can write off typically around 30% of your gross income, which lowers your taxes and increases your net compared to a salaried employee.


3. Working with retainer contract as a freelancer
A retainer is a guarantee of work. As a consultant, this guarantee mitigates a lot of the time/expense needed in normal business development, and provides some security which is worth piece of mind (and cashflow). It also offers the client "priority" and availability. A good freelancer may be so busy they turn away work. A retainer avoids this for the client and ensures they are available. Typically, a retainer allows for a set number of hours at a discounted rate. This discount depends on many factors. Essentially the consultant needs to determine the opportunity cost for their time. If you are so busy you don't need the security there would be less opportunity for discount as you could be working on something else at full rate.

Now to the specifics -

Rates as well as salaries all depend on the location, job and the designers experience.

the rates Iab quoted are within reason.

The coroflot or any other salary survey results are pretty much worthless as there are so many factors (experience, position, skill, etc.)

The OP's question is pretty simple. Firstly, it depends on your position and how important you are to the company, and how much the company needs you. If it's a full time job and you want to work part time, the likely result is the company will just look for your replacement. If anything, they are doing you a favor. Working part time, I would expect the company at best would keep your current rate and offer no benefits in exchange for the inconvenience of having to deal with part time work at a set number of hours.

If you are freelance, you have to account what value you bring the company. If they can just hire a replacement, why would they pay you more to do the same work?

Think of the problem from the company's perspective and it's much easier.

R
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Re: Retainer / Part Time ID

Postby johnAM » December 13th, 2012, 12:36 pm


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Richard I think the last two paragraphs of your post outlined clearly what I was inadequetly trying to explain, most specifically this:

If it's a full time job and you want to work part time, the likely result is the company will just look for your replacement. If anything, they are doing you a favor. Working part time, I would expect the company at best would keep your current rate and offer no benefits in exchange for the inconvenience of having to deal with part time work at a set number of hours.


My point about IAB's suggestions for compensation was that it went against the grain of the question. Because his situation is known to his employer on so many levels it is disadvantageous. The only way it may work out is if the company places a lot of priority on fostering family environments and understands that OP is trying to do what's best for his family and the company and is willing to strive for a balance, I've seen that in some foreign companies.

At the end of the day, business will go on with or without OP. What if he died in an accident? Does the company go belly up? Probably not. So unless you are that amazing at what you do, you can price yourself out of a job in this situation. This isn't getting a new client, this is retaining an old one that knows a lot about you.
Last edited by johnAM on December 13th, 2012, 12:55 pm, edited 1 time in total.

Re: Retainer / Part Time ID

Postby TaylorWelden » December 13th, 2012, 12:37 pm

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This breakdown should be saved for future reference, as this topic regularly comes up. And because it is so well executed. Spot on.

Very well done, R.
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Re: Retainer / Part Time ID

Postby iab » December 13th, 2012, 2:13 pm


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First and foremost, the numbers I quoted were based on consulting work. If anything, they may be down as I have been out of the consulting game for several years now.

But I would seriously question whether the OP should stay at the same rate. There is no doubt his costs will go up, just based on FICA and overhead alone, and the employer's costs will go down (FICA costs and benefits). There is also a very good benefit for the employer using a long-time employee as there is no uncertainty that you get with any new employee. Even if the new employee is as good as or better than the OP, which there is no guarantee, there are always short-term training costs incurred.

I will also say the other terms of the contract matter. If the employer is guaranteeing a year of part-time employment, that only works well for the OP. Most consulting work is 2-6 weeks. Then you have to track down new work. A year-long job would have a lot of weight.

But if you had to nail me to a number, I'd try to get 1.5x current rate for a 1 year commitment. I would not take less than 1.3x. At that point, I would hussle other business. And of course, I would be hussling other business while I was working part time.

Re: Retainer / Part Time ID

Postby yo » December 13th, 2012, 2:56 pm

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iab wrote:Disclaimer: I never worked on retainer, never told a client my hourly rate and never told a client the time involved. I only gave them a price per project.


I've always done it the same as iab, I learned this early on from the first place I worked. The first thing is to establish an hourly rate that includes living expenses, operational costs, equipment, IT costs, and profit margin. Divide that by hours per year and establish an hourly rate. Then estimate how long the job will take, add 30% to cover overage (always happens) and meetings and phone calls (those are hours too) then establish a flat rate that is the value for the project. I never, ever disclose my rate, but it is higher than all the above examples. Bill half up front, half on completion.

Here is an example. I'll use round numbers for the sake of argument.
80k (salary)
40k expenses (facilities, equipment, IT, operations)
30k profit
_______________
$150k per year

divide $100k per year by 1000 hours (the average work year is about 2000 hours, but figure half of that is going to biz dev, marketing or in between time if on your own):

$150,000/1000= $150 per hour

That was just a simple round number example. Play with your salary, expenses and profit numbers and run the math again and you can see how the ranges develop. To develop an accurate expenses number you need to be good about tracking capital expenditures and applicable monthly bills.

Anyway, to your question on the retainer. I only did it once, for about 2 years. I did the same formula as the above, and just estimated how much time I would spend per week, knowing some weeks I would be over, some under. I tended to do well on average. You may apply discount if it is lets say a year contract and as such, guaranteed work, which minimizes your biz dev time.

iab wrote:But I would seriously question whether the OP should stay at the same rate. There is no doubt his costs will go up, just based on FICA and overhead alone, and the employer's costs will go down (FICA costs and benefits). There is also a very good benefit for the employer using a long-time employee as there is no uncertainty that you get with any new employee. Even if the new employee is as good as or better than the OP, which there is no guarantee, there are always short-term training costs incurred.


This is all very true. When thinking about your current compensation, think of not your salary, but what is called "Total Compensation" which is your salary, plus bonus (if any), what your company pays in insurance, social security, and all other backside payments on you. That number is much higher than your salary.

Re: Retainer / Part Time ID

Postby Scott Bennett » December 13th, 2012, 3:17 pm

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johnAM wrote:Scott,

Did you even read the link you included?


Did you? I was posting it solely as a reference to the typical non-salary compensation percentage. The non-salary portion of your compensation is around 10% even if you work at Walmart and get no benefits. For most white collar workers with average benefit packages, your salary represents about 70% of your employer's total expense to employ you. Not sure why that would cause offense.

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