Anyone with experience converting to salary from full-time contract?

I’m converting from a full-time (W2) contractor to a full-time salary role. Does anyone have any experience with this? I’m trying to determine what a formula for a fair salary is. I’ve heard that one should expect to lose about 15-20% in hourly pay in such a conversion, which then gets made up for in benefits. Does that seem about right for people with experience in this?

How’d this come about? The company wants to bring you on full time, and they asked you for the salary?

Just getting prepared for discussions. I work for an agency, and I’ve been with them in a contract capacity for a couple years. I am currently on a project where I am considered very difficult to replace, because the client we work for is highly technical in nature, and I am the only person on the team who understands the technology at play, and can translate it into terms the rest of the team can understand. Consequently, I earn an unusually high hourly rate for my ostensible title, which could potentially cause salary band issues during conversions. I have an initial discussion with a recruiter in the company tomorrow (this is how the process is handled within the company), and I just want to make sure I have a decent understanding of how these costs shake out from a business perspective so I’m in a good mental space for the negotiations.

Generally speaking an hourly contractor should prepare to lose pay when transitioning to FTE status due to bennies. However, unless this is a transition you were actively campaigning for, I wouldn’t accept MUCH in the way of a cut. If they want you in a more permanent role than they should be prepared to start seeing their total cost for you to go UP!

The exact amount of cash compensation decrease should be based on how much benefits you are getting and whether they are worthwhile benefits. Things I’d watch out for personally:

  1. Attempts to use stock options, non-guaranteed bonus plans, or other equity based compensation to reduce the cash payments. That’s a trap, don’t fall for it. Employers love that shit because it reduces cash compensation but isn’t something they are liable for if they decide to jettison you in six months. Ask specific hard questions about when they must pay such things, under what circumstances they can deny them, etc. Do a follow-up email to verbal questions to create a paper trail. Don’t let a well-meaning but ill-informed manager misinform you and then take a bad deal that the company won’t stand by later.

  2. Same message around PTO/vacation time. Unless it’s guaranteed (can’t be denied, must be paid out on resignation) it is NOT the same as cash and should not be evaluated in such a way during salary negotiations.

  3. Low-value benefits. Some employers have a bunch of “razzle dazzle” benefits that they like to lean on to convince people to take lower cash comp. I’m talking about things like gym memberships, free lunches in the office, etc. That stuff shouldn’t really move the needle on the cash you need.

A lot of employers use a “total compensation” calculation where they show a prospective employee not only how much the employee pays for a benefit but also how much the employer pays. Ask for that kind of information to make sure they aren’t just using this as an excuse to get you for less total payout.

Good advice, thanks. I’ve got a wife and a kid and work 100% remotely, so razzle-dazzle perks have never made any impact on me. I’ve also laughed countless HR managers out of the room in the past for offering me “unlimited” time off (which I’ve pointed out is utterly imaginary as a perk), so I’m in good shape there. Nor do I particularly care about stocks, unless those have immediate cashable value.

For me, I’m currently paying roughly 20% of my take home for insurance. So roughly, that seems like a fair calculation: what you’re paying me now, plus benefits, but minus 20%. I’m primarily interested in converting for security, since I will otherwise have to do a cool-off period in five months. (I’ve been bitten by this problem at the agency before.) I did “campaign” for this, but only in the sense that I told the leader of my team that unless the wheels started rolling on this, I would be putting out applications, which prompted him to instantly light a fire under the asses of the powers that be. But at no point did I suggest weakness of negotiating position.

Do you have an idea on what the upper end of the pay band is for the new FTE position? Like if the business was hiring somebody from outside.

You’ve found a minimum you’d be happy with, but it sounds like the business really needs you and this might be an opportunity to get compensated for that.

Definitely push for more compensation than whatever you think is ‘break even’. You have proven that you have valued skills. If you left they would eventually find someone but it would cost them time, money, and focus.

I think that a good rule of thumb is to think about what you think would be too much for you to be worth and then ask for some more than that.

This right here. I would definitely not go into the discussion already conceding that my pay would need to decrease by some percentage because I was converting from contractor to an employee. If it’s a good gig, then my floor (which I would not disclose) would be to keep my gross pay the same but add the FTE benefits (assuming they are good concrete benefits like a solid insurance/401k matching contribution), but in reality I would expect a pay bump unless there are extenuating circumstances that make it impossible (and it is almost always possible, especially if you are critical to their business). Be nice about it, but don’t be afraid to stand your ground on what you are worth, and of course let them reveal their number first.

Negotiate for your current rate, if not a little higher. Don’t forget the agency takes their cut off the top.

The last time I did this, I actually came out ahead on salary.

I know nothing about this, but sounds like they need you. Leverage that. Doesn’t matter what average is if you aren’t average.

Having worked for a temp agency, this is the other thing I was thinking.

To clarify: I contract for a marketing agency, not a temp agency. And this is all good advice which I have lived my professional career to date by. The numbers I asked for in my post at the beginning were to establish my mental floor.

I dunno that the first conversation was super encouraging. The only perks they had to offer outside of core medical and 401K matching (which wasn’t bad) were bullshit perks like “unlimited time off” with no real value. They kept asking me to name my floor, and I told them I’d need a more accurate breakdown of the value of the benefits in play to give them any idea of that, but that I also expected “rough parity or better” to convert. The number they floated as typical was 40% less than what I currently earn, which is obviously a nonstarter. So we’ll see.

There’s two issues here that make this a little different than usual conversion talks. The first is I negotiated myself an extremely high hourly rate at the beginning of my contract, which likely makes me one of the highest paid people on my team, even though my ostensible title has very little organizational prestige. So I think I’m hitting salary band issues, where if they want to convert me at my current ostensible title, they are limited without promoting me.

The second is that the nature of working in the marketing agency business is that you’re a slave to annual contracts and tempestuous clients whose needs shift according to the global economic headwinds. In fact, this organization just had a big lay off a few months ago for over hiring in anticipation of existing work streams continuing, so the security on offer here in a salary role isn’t what one might consider typical. It’s better than being month to month, but not by much. So that cuts both ways: it makes the conversion team conservative, but also devalues whatever “security” a full-time conversion is worth.

We’ll see. I can always say thanks, but no thanks if we don’t come to a deal, and finish out the next few months.

Anything stopping you from going to work for that client directly if the negotiations don’t pan out?

We protect ourselves from that now in our contracts, but years ago we had a couple clients poach our developers by offering them more than we paid (which was still way less then our rate)