What am I worth? 1

[FrankyEng]

Quick Background:

I am an Engineer in Training with 3 years of experience, 1 year was pre-grad and 2 are after graduation at the same job. I have always enjoyed my work and the people I work with. About a month ago our local Professional Organization released the most recent salary survey. It turns out that I would need over a 25% raise to bring my salary up to the average EIT salary. So, I'm in my 4th year out of 4 years as an EIT and I am in the lower quartile for salary. I realize I need to take these surveys with a grain of salt and that I also need to consider that they consider multiple disciplines in multiple fields of work. But still, something doesn't seem right. Money isn't everything to me but at this point in my life that extra 25% of my salary would be extremely helpful. I work for a small company with <10 employees.

With all that said, I don't want to walk into my boss' office waiving a survey around asking for more money. I would rather try to figure out what I'm worth to them and compare that to what I am paid.

I know the answers to these questions will vary by region and discipline etc...but I'm hoping to get some general answers.

My questions:

How much profit does an employer expect to make from their employees? Is it a percentage of their salary?

What is the true cost of an employee? I know what my salary is and I know how much my health/dental costs them but there must be other costs involved. Can this be estimated as a multiplier of my salary as well?

I'm not worried about talking to my boss about a raise but I want to make sure that I have at least the slightest clue as to what I'm talking about.

I appreciate all responses but would really like to hear from the guys (or gals) that run their own business and deal with these numbers in real terms regularly. Thanks in advance!

 

[HornTootinEE]

I was a utility employee, but the concepts of employee costs and overhead are the same as a consulting firm, just from a different angle. For labor cost on a project, I always calculated an employee was an annual expense of 150% their annual salary, which included vacation, health, dental, 401K contributions, etc. That extra 50% is a little high and varies depending on the actual salary (higher salary=lower percentage due to benefit costs being very close per employee), but a good round number. I would assume if you are a consultant your employer would charge that amount plus a margin for his overhead plus a little to make money for himself on your labor. For example, If you are getting paid $20/hr, you cost your employer $30/hr, but he may bill you out at $50/hr, with the extra $20/hr going to him, the business, your chair, your computer, your software, training, etc. etc. etc.

Point being, it may not hurt to know your billable rate (if applicable) but it certainly doesn't hurt to have a rough idea of how much you cost, and if there is a way you can show you are worth that 25% more because you work 25% more efficiently, you bring in $X amount of business which covers the added expense, etc. that will help your case.


I tried that at the utility I worked for and got some line that "HR's matrix and your job classification doesn't allow blah blah blah" but hey, it was worth a shot!

Financial arguments seem to make better than "I'm this good and have been working hard"

 

[Hoaokapohaku]

Rather than use any kind of external data, I would just focus on your increased value to your own company when compared with your own starting salary.

How much supervision do you require as compared to before? How much does a supervisor's time cost?
What money-making assignments can you do now that you couldn't do before? What is the value to the company of those added assignments.
Have you built relationships both in and outside the company that have current and/or potential value?
Do you provide input to management that reduces risk (a cost) or makes projects more profitable? Provide specific examples and estimate of value to company.

If you use outside data, use it only to confirm that the value that you have demonstrated by your accounting of the value of your performance is in line with what persons of similar education, qualifications, and experience are making elsewhere.

Express LOTS of appreciation for the opportunity to work for the company, all you have learned, the great work environment, yada, yada, yada. Make the boss feel great for running/owning such a great company.

 

[ajack1]

The short answer is something is worth what someone is prepared to pay for it.

That really doesn’t matter if is an individuals wages or a company producing a product or offering a service any business owner understands that or at least any that will still be around in six months time do.

Beyond that there are just so many variables. A company might work on high turnover low margins or low turnover high margins either can succeed or fail. They might outsource work to where wages are lower but add extra transportation costs.

They might offer fantastic benefits like pension plans, bonuses, company cars, training, health care, holiday entitlement and you might sit in a plush office with the latest equipment or everything could just be the bare minimum allowed all these and more will affect the company’s profit margins.

There are just so many variables no one can give a multiplier that applies across the board, or at least not in my opinion, but there are many debates about that on various threads on this site and others.

The value of something has nothing or very little to do with the cost of producing it, that is a basic error many people make. If a house will sell for £200K if you can build it for £150K you will make good money if you produce it for £210K you will go out of business, but it will not affect the selling price, at least in the short term.

So are you over or under paid? Well if you can walk out the door tomorrow and get an extra 25% then you are underpaid, if you can walk out the door tomorrow and take a 25% cut then you are overpaid. If you walked out the door tomorrow and nothing else is on offer then it does not matter what you think.

 

[SteelPE]

It is probably best not to get wrapped up in "what am I worth". I know from first hand experience that thinking about what someone else is getting paid can be a little distracting. I was recently laid off from a DB steel fabricator and on the way out the door I found out that laborers in the shop were making more money than a registered engineer with a masters degree and 12+ years of experience. I just chalked it up to one of the reasons why the went out of business.

In the end the joke was on them because I learned to live off the money I was making and once I was let go it wasn't to large of a shock to go forward unlike some of my fellow coworkers.

Right now with the economy the way that it is the employers have the upper hand. If you think you can go out and get a better paying job some place else then start sending out your resume. The economy can't remain like it currently is forever.......... or can it???????

 

[CheckerHater]

Old saying is cynical but true:

It’s not what you deserve, it’s what you negotiate.

 

[TomDOT]

As we discussed recently in another thread - most of your big salary increases will come by changing jobs. For some reason, most employers have a very hard time raising salaries for current employees by more than a token amount.

On a personal note - I've started getting recruiter calls again this month after a couple of years of peace. Definite bump in salary beyond what I would see here, but I would have to relocate. The first one was the company which was in the process of buying my former employer when I left. Their initial offer is ~50% higher than they wanted to pay me for staying on, and for effectively the same position. They also offered to pay relocation costs (and this is on the first day - I didn't even start to negotiate!)

Early in your career is typically a good time for relocating - you generally have fewer ties to a particular area (house, wife, kids in school) and less "stuff" to move with you.

I'm actually getting pretty settled at this point - I'm reluctant to move. And I like my current employer.

 

[ajack1]

CheckerHater I don’t think that is cynical that is exactly how it is, that does not matter if you are company negotiating a contract, an individual buying a car or an employee negotiating terms. It amazes me so few people seem to understand this.

I do find SteelPE’s post strange in that they think employers have the upper hand at the minute, if that were true most companies would be making record profits, next to none would be going into administration and share prices would be going through the roof. That might be true where they are but certainly not where I am.

By law in the UK you cannot cut pay to employees but most companies are having the value of contracts cut whilst also facing extra taxes, increases in pension contributions forced upon them whilst also facing large increases in things like fuel and utility bills without the ability to borrow money.

I am not sure how that gives them the upper hand but I guess it must be different in where ever they live.

 

[IRstuff]

The upper hand is simply the fact that it's mostly a buyer's market. However, there are supposedly a few industries where there is still a shortage of workers.

TTFN
faq731-376

 

[ajack1]

Exactly IRstuff, but employers have to sell their products and services just as employees have to sell their services, the only really winners at the minute are the end consumers.

When you are running a business that is just about breaking even and some months you are having to pay (loan hopefully) to keep the business afloat and all your employees are earning more than you it doesn’t feel like you have the upper hand.

Of course that is the risk of running a business and making the right call about when to let people or even the business go is part of that, but I still fail to see how that gives you the upper hand?

 

[moltenmetal]

FrankyEng: one thing is certain- you will not get any more unless you ask for it.

If you're in the consulting industry, you may find that they systematically pay about 10-20% less off the bat than the industry average- that's literally the target salary of some of the consultancies here in Ontario. Here the consultancies can tend to lose employees at that pay rate, so they hire in temporary foreign workers to fill the void. Ghastly situation- glad I'm well shot of it personally.

You get what you negotiate as has been said. Go in with the survey and the value-added calculations that show that you KNOW what you're making for them (include your utilization etc.), and ask for what you feel you're truly worth. Be reasonable and respectful in the negotiation. Recognize and allow for other perks they give you that others may not get, and if they offer you other pay options (profit sharing etc.), consider those fairly. Make a fair comparison to the salary survey including looking at the regional and discipline or industry variation in the average pay rates by years of graduation- that data is usually there for you to look at if you look deep enough, or is available for a few extra bucks if you pay them for it.

If they pay you less than you're worth in fair market value terms, verify your market value by looking for other jobs. If a good opportunity comes along, take it. Some people have luck negotiating a pay rise after holding the threat of a job offer to their employer's head, but most find that to be a poor strategy. Moving jobs when you're young, as long as you don't do it too many times, is a good way to increase your earning potential by increasing your value to future employers.

You've already made the transition from school to entry into the profession, which these days is the hardest part. Once you're in the 5-15 year experience band, you should by all accounts be a valuable commodity. The day you get your license you will be worth quite a bit more in certain industries.

 

[MiketheEngineer]

You could look for a new job and re-negotiate it then??

 

[steellion]

Economic times are tough, which means money is probably tight in a small consulting firm. It's good that you're doing the research, but showing them a piece of paper with an average salary on it probably won't get you very far.

Get your P.E., and then if they are unwilling to give you a big boost at that point, time to start looking for a new job.

 

[TomDOT]

Steellion has a good point - focus on getting your PE. You will be in an excellent position to negotiate and look for other jobs at that point. It's only a year - especially if your employer is supportive and you have good mentoring.

Can you still ask for a raise? Sure. But your career should have that PE as your prime focus at the moment.

 

[Forensic74]

I've always been of the mindset that it's the employers responsibility to make sure their employees are compensated correctly to retain them. Any angle you look at it, if you have to bring up salary, you're probably working for a firm that will mark you for deletion the first chance they get. Even if you say you have a job in hand who's willing to pay $xx more, it will probably backfire on you. So either reason to yourself that you're being fairly compensated or find a new position. I see way too many EIT's afraid to change jobs and work for nothing, which I think is crazy.

 

[PicoStruc]

Will play devil advocate here...

Money is not everything! Some life-quality advantage have value that is not accoounted in the salary. (Proximity, time lost in traffic, DO YOU TRUST YOU COWORKER/BOSS from engineering standpoint, Do you have good relation with your co-workers, responsability level) ?

In my POW, When I decide that the salary is really an issue that require discussion with management, it means that I must be ready to leave !

 

[GregLocock]

and how would that noble sentiment work in an economy where real inflation is running at 4 % for the last 6 years?

Cheers

Greg Locock


New here? Try reading these, they might help FAQ731-376

http://eng-tips.com/market.cfm?

 

[Forensic74]

I think it would factor into any educated decision. For example, there is a value to having a 5min commute vs a 60min commute.

 

[FrankyEng]

Thanks all for the responses. I used the 150% employee cost to estimate my cost to the company and compared that to another estimate I did of my total earnings for the company. My net earnings for the company are about the same as my total cost to the company...so basically I'm pulling in about twice as much as I cost. This is based on 150% which HornToontinEE says is a high end number and I was conservative on my earnings. I'm not sure where this leaves me...is there a typical target of what an employer would like to get out of their employee.

I have considered looking for another job, but the engineering market here is fairly small and everything is word of mouth...If I start looking around for work they will know about it. And also, I know money isn't everything and I would be willing to stay where I'm at for slightly less than average pay...but not significantly less. My commute time is about 30-50 minutes depending on traffic, but that's not going to get any better anywhere in my area.

 

[SomptingGuy]

Somewhere I used to work used a simple formula: Chargeout = salary + salary*2.4 + profit. 2.4 was the "overhead".

- Steve