mon petit blogue sans importance...

Damn Consultants

Consultants have a bad reputation with salaried workers, who see them as overpaid and stealing the best work. So they don't always understand why those consultants get to do work in their company. Conversely, many of those salaried workers want to become consultants so they can make the big bucks, but as i'm setting out to show you, it's actually nowhere near as much money or fun as what most people think. Here's a look at the pros and cons of consulting, from the point of view of a consultant and that of a company giving them a call.

The first section deals with you as a current employee who's either pissed off that your company hires consultants, or is thinking that he'll make the jump to consulting so he can make the big bucks (here's the spoiler: don't). The section after should be required reading for any company who thinks consultants are expensive or not worth it.

Future Contractors

So you're looking at others who are doing the consulting thing, and heard they're earning 50, 60, 70 dollars an hour and more. You look at your paycheck and figure "wow, that's almost twice what i'm earning! i want in!". Not so fast. It just doesn't work that way.

Look at your pay slip. Add up these charges the employer must pay:

• the employer's contributions to your RRSP
• the employer's contributions to taxes (in Québec, CSST, EI, ... - you have deductions on your pay for those, but the employer must also pay his share, which you don't see)
• the employer's share of your insurance premiums, which is usually much much greater than your share
• reimbursement of certain perks: parking, internet, cell, books

Now think about the cost of:

• your computer
• the office internet
• office coffee
• office snacks
• books
• the christmas party
• the company offsite
• those times the boss paid for lunch
  
• anything else you can think of which your employer pays for you

Then, think about this past year at your job and how you spent your time. Add up all the hours spent:

• on sick days
• on vacation
• on holidays
• in meetings that weren't related to your job directly, but to the company (such as an all-hands meeting)
• at a paid training, internal or external
• at a conference
• filling out an expense report, or a timesheet (in large companies i've worked at, this added up easily to a hour a week)
• in certain companies, you have paid time to take care of family issues (kids home sick and such)
• reading up on new technologies relevant to your job
• ...

Alright, got all those numbers??? Now, over the year, add to your total gross annual salary the total amount of all the perks, RRSP, taxes, office equipement costs, coffee, snacks, transportation, insurance - everything your employer pays for you. Don't forget to add any bonuses you got. You have the total cost to your employer of having you as an employee, and it's probably much higher than your gross salary.

Now, take all the hours you've tallied up above which aren't directly related to specific project work and add them up for a year. Deduct those from your total hours - we want to get only the hours you spent strictly working on specific projects.

Now, divide the total cost by that number of project hours. You now have the hourly cost to your employer of one hour you spend on a productive task. I am quite certain that it'll be more than double the base rate you see on your pay slip. Yet that's what it costs your employer to have you as an employee. When you're comparing your base hourly rate to that of a consultant, that's just not the right numbers to compare.

If you decide to quit and become a contractor, you will now be shouldering all those costs yourself. You'll still be spending time being sick, or on vacation, and if you have a family they won't let you work on holidays so you'll be taking those off as well. Any time you spend training, reading up on your field, creating invoices, chasing contracts - all that time that used to be paid is now unbillable. If your job pays you 1.5 times your normal rate for overtime - awesome. Consultants get the same hourly rate however many hours they work, if they're lucky enough to have contracts for more than a normal work week.

You must now pay the employer's share of many tax contributions. If you want insurance, you'll have to pay the whole thing. Of course many of those expenses are tax-deductible (but not all), but that doesn't mean you get reimbursed for them - you just get a portion of it back.

To be able to pull in the same net money you are pulling in now, you'll need to work at the very very least 30 hours a week of billable time even with a rate that's much higher than your current rate of pay. Almost invariably, you'll therefore need to work, on average, more than 40 hours, because of all the unbillable time. Just taking into account 3 weeks of vacation, 9 holidays and 5 sicks days a year, that adds up to 4 hours a week of unbillable time, right there. There's lots of exceptions, of course. Some people are totally awesome and can charge 150$/hour so they don't need many hours per week to make up the salary they would make if they were employed at a big company - but that's probably not you.

So here's the conclusion:

• think twice before you jump, and don't jump simply because you think you'll be making the big bucks - you most likely won't, and you'll lose a lot of sleep
• stop bitching about the consultant your boss hired to give your team a hand. He might be higher-paid per hour than you are, but that doesn't mean much - he probably can't afford anything more than you. His big plus is that he now gets to choose which laptop to buy. w00t.

The reasons i became a consultant?

• i have a 16-months old, and a baby who's due any day now - flexibility is good for me, and if i were at a 9-to-5 job i don't think the employer would like me very much, whereas now i can work odd schedules, and if there's a baby emergency i won't bill my time to my client, and will get the work done later in the night. Employers sometimes support flexible schedules but, usually, even if they say they do, it's within very strict bounds. For some reason they're more accepting of this when if comes to consultants even though in my opinion they should support it just as much for their very senior employees.
• i have a couple of startup projects, which means, sometimes, a meeting in the middle of the day, and it's very difficult to do that while working a "normal" job - again, flexibility is good for me right now
• although any client i work for can count on me in the long run to give them follow-up hours to fix something or just chat with their new team member to get him up to speed on code i wrote, for me i hope this will be a temporary thing (as in, a couple of years, not 5-10 years - i don't mean i'm doing this only for a few months either), until i either get a killer job or i get to work fulltime in my startup

But i did not do this for the money, and i can tell you after about 6.5 months of consulting (and i've done another bout of consulting earlier in my carrier) that i'm making less money now monthly even though i generally am able to charge 50-75% more per hour than my previous salaried base rate. I don't like it. I wish i could get more consulting hours, i wish i could get better rates, i wish i could get financing for my startup, but for now that's just the harsh reality, and sometimes it keeps me up at night and i hate that. I love the actual work i get to do, but i hate the downsides. But i'm doing it for the longer-term, for the various projects i get to do, for my family, and for my own personal projects, and i sincerely believe i can help my clients and i'm cheaper for them for certain specific tasks, and i wish more companies would get consultants - see below why they should.

Company

So you're a company and a consultant approached you, or an employee asked you if he could use a consultant, and you're thinking "i'm paying my guy 30$/hr, and i would pay this consultant 70$/hr to do something similar because... why?"

Firstly, about the money itself, if you didn't read the section above, do read it. On a per-hour basis, i'm quite certain the consultant is not more expensive than your employee. On top of what i wrote above, there's another factor: many times, an employee won't be feeling exactly great one morning, but not totally sick either. He will come in, though, but, trust me, will be working at a much less productive rate. Some companies realize that and encourage real flextime - where an employee can actually send an email to his supervisor and not come in and not be penalized (trust me, he makes it up). But that's probably not your company. If i feel like crap and i'm just staring at the screen, i won't be costing you a cent while i gaze into nothing - i'll stop the clock and try to do something else, and then come back and get your work done properly.

But don't use consultants instead of employees, in any case - that's just stupid. You do want to keep the expertise in-house, and you do want to be a good employer. In general, if your need is constant over at least the next year, you should be employing someone, not hiring consultants.

There are many cases where i think the consultant makes more sense, however:

• you need something complex done that requires knowledge your staff doesn't have, and which they don't have the time to learn right now -> this is an urgent project

  • if your consultant is any good and you make this clear to them, he'll make sure to ramp up your employees on the technology at the same time, you get training and a project done
    

• you need something complex done that requires knowledge your staff doesn't have, and which you just don't usually need; for example, you have a piece of code that's written in some obscure language, and you need a bugfix and you need that code documented so you can keep working and transition away from it. It makes no sense to have an employee learn that tech just so you can move away from it - hire someone for 2 months who knows it already. He'll fix and document it properly, and when you rewrite it with what your people know, he'll help you.

• your team is overloaded right now, and you have some bugfixes, performance enhancements, code porting, complex feature, boring feature - whatever, you have pieces of work that just keep getting delayed but are important, just never as important as what your guys are doing right now. Hire someone for 2 weeks, 1 month, 3 months, and have that consultant just get that thing done. Think about the tasks you keep delaying right now, and sit down and figure out whether it would be worthwhile to get them done, if you had an extra employee. If the reason you're not hiring that person is because you're in a hiring freeze or you don't think you can occupy that new employee beyond those tasks because the normal workload doesn't require him, then a consultant makes a ton of sense - so why haven't you picked up the phone and called me??? :)

• you have work that requires very specialized skills and you just aren't able to hire someone senior and specialized enough. In that case it can make sense to have consultants working long-term with you. Even if they work 12 hours a week, they'll probably get more work done than a junior or intermediate employee you hired in desperation, thinking they'll just learn the technology. There's a 10x productivity difference for programmers.

Conclusion

I really wished employees and employers had a better understanding of consultants and contractors. Sure, there are evil over-billing consultants who earn way too much for what they give back, and are only getting paid by your boss because they golf with him every sunday. But there are lots of other consultants around who are excellent folks, who will help your team accomplish so much more, and will give you incredible value for your money, commitment-free.

So help me pay my mortgage and baby diapers, and give me a call if you need someone who knows linux, python, django or overall complex systems :)

by wiswaud on 17 November 2009
Tags: consulting, english, hiring