Salary as a subcontractor employee

[AraEng]

Hi,
I'm a structural engineer who's worked for a local firm in Washington DC area for the last year and a half. Soon after I was hired I was asked to work for another company as a subcontractor on a challenging project. Today, I accidentally found out that the company I work for charges the other company twice as much as they pay me, while they had unofficially told me that they only charge 10% more than my salary. I'm paid $35/hr and thought it's not too low to start with. Now I'm really confused about how much I'm worth. Do you have any idea what's happening here? I can use some good advice.
Thanks

 

[oldestguy]

You really need to take a check on all costs involved. Routinely my experience is that the client gets charged at least three times my direct cost to the company (salary, income tax, etc.) to cover all sorts of other things, such as health insurance, vacations, profit, advertising, office space "rental", Equipment, repairs, etc. The other company is getting a deal and quite likely your local salary should be significantly higher in that area.

 

[IRstuff]

EVERY company has costs that are amortized through contract charges. The "wrap" rate is the multiplier that accounts for non-direct labor costs.

How did you think your company pays for the rent?

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[TheTick]

So go into business for yourself and write your own invoices. And pay your own overhead. And find your own customers. And hire your own help. And do your own collections...

 

[Ron]

arashsang...the other comments are right on target.

If you are working as an employee of a company, that company needs to charge between 3 and 4 times what they pay you so that the can cover all the internal and external costs.

If you are working as a subcontractor, YOU set your rates (negotiable, of course). What they charge their client is of no concern to you. You should only be concerned about what you get paid by them.

If you are selling your time to a company, as a subcontractor, for $35/hr, you are seriously undervalueing your services. You are probably getting no benefits and you expose yourself to personal liability.

When you sell your services too cheaply, whether salaried or subcontracting, it is a disservice to all engineers and the profession in general.

$35 per hour is relatively low, even for a salary, if you are licensed and an experienced engineer. That's about $70,000 per year. It is way too low if you are a subcontractor having to provide everything for yourself.

We start subcontractors at 67% of our charge rate and it can go as high as 80%.

 

[CWB1]

Cost often doubles as you progress along the value chain and IME projects with <30% margin often cost the business money in the long term thanks to incidentals like future legal fees, freebies/warranty, etc. Regardless, I would not be concerned with what your employer is charging their customer, I would focus on getting the job done on-time and on-budget. Depending on the area, niche, responsibilities, and non-monetary benefits $XX/hr or /year might be great or it could be terrible. The various professional societies usually publish annual surveys/reports to help answer these questions and there's all manner of others out on the net by less reputable sources, I would recommend reading a few of these to judge your own worth. When doing so do not short change the cost/value of non-monetary benefits like good health insurance, for me that's worth ~$20k annually.

 

[oldestguy]

One thing not mentioned so far is what you are worth as time goes on. If this is your first job, or early in your career maybe the salary is OK. If early on you still need some form of guidance from more experienced engineers, hopefully your boss. Without that guidance, both the employer and the other firm are risking some in not doing that. Also, it may take you longer to do the job that a more experienced engineer would take. Needles to say, it really is none of your affair as to what the boss charges the other firm. Don't follow the path you seem to imply in your post. Just find out where you stand in the current salary situations for other engineers in your area, tied to experience and education. Those with more responsibility may be somewhat above the crowd.

 

[AraEng]

Thanks everyone for your great inputs. I was not exposed these aspects of a contract.

 

[HamburgerHelper]

If you are comparing your hourly contract rate to salaried position, divide it by 1.3. 0.3 is about how much benefits amount up to (employer SS contribution, insurance, vacation, ect). That doesn't include how contractors get paid a premium for being temps or easily let go.