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Contract Employee's Newsletter
Helping Contract Professionals
Manage Their Careers
Vol. 3, No. 3
January 17, 2003
Edited by James R. Ziegler
A Companion to:
The Contract
Employee's Handbook
www.cehandbook.com
Sponsored by:
P.A.C.E. - Professional
Association for Contract Employment
www.pacepros.com
About The Contract Employee's Newsletter
The Contract Employee's Newsletter is a free e-mail publication
for technical and professional contractors containing news, commentary,
tips, links to useful resources, nuggets of wisdom submitted by
readers, and anything else that seems appropriate at the time. The
CENewsletter is distributed bi-weekly or whenever issues warrant
and time allows. The subscriber list is confidential and will not
be disclosed outside this organization.
In This Issue
Read recent
issues of The Contract Employee's Newsletter.
Kudos and Testimonials
What People Are Saying About The Contract Employee's
Project
We at P.A.C.E. gratefully acknowledge the following cad from Jessica,
who lists her role as Personal Fulfillment & Community Relations
Consultant.
Thank you Dr. Ziegler for this update. I've enjoyed reading,
and have put into practice much of what I've read of yours.
Your optimism, liberally laced with practicality, closely
resembles my own attitude toward my work, and it's appreciated!!
Thank you, Jessica. Validation like yours is just the greatest.
Return to Table of Contents.
From The Trenches
Subject: Regarding Recruiters
[Note: I recently received the following e-mail which
I am posting as is. It speaks for itself.]
I had to chuckle after reading the note about recruiters in your
latest issue. That reflects my own experience.
If you haven't already, please read my "Important Note to
Recruiters and Contract Agencies" at: http://www.goingware.com/notes/recruiters.html
I would be stoked if you linked to it from one of your newsletters.
I put the page up at the height of the dot-com boom, when the persistent
phone calls and emails from recruiters would not allow me any peace.
When the economy turned sour, I did start talking to recruiters
again, but did not feel that they had any value to offer either
myself or my clients, so I have returned to refusing to speak to
them again.
I find it more worthwhile to do the necessary work to find my own
clients. The marketing handbook that Janet Ruhl sells at http://www.realrates.com/
has been very helpful to me.
I have also found it very helpful to build a website that draws
a lot of traffic, by writing articles that are interesting or useful
to the people who visit. This has gotten me ranked highly in the
search engines. Other consultants who want to find clients through
their websites may be interested to read my article "How to
Promote Your Business on the Internet" at: http://www.goingware.com/tips/usefulcontent.html
It has been my experience overall that I find about two-thirds
of my clients through referrals and the rest from potential clients
who visited my website. In the five years I've been consulting full-time,
I have taken only one job through a recruiter.
Best,
Mike Crawford
--
Michael D. Crawford
GoingWare Inc. - Expert Software Development and Consulting
http://www.goingware.com/
crawford@goingware.com
Tilting at Windmills for a Better Tomorrow.
Return to Table of Contents.
Ask Dungaree Dan
Contractor Wants to Market Other Contractors to
Companies
Q: Dear Dan -- I think that P.A.C.E. is a great solution
for contractors, and I recommend P.A.C.E. to every contractor I
meet. I was wondering, does P.A.C.E. pay something to contractors
who refer other contractors to P.A.C.E.?
Also, I know a lot of contractors, and I am pretty good at marketing
my own consulting services to companies. What I would like to do
is market other contractors as well. I was wondering, can I charge
contractors a marketing fee if I find gigs for them? What's a reasonable
percentage, and if the contractors invoice through P.A.C.E. can
P.A.C.E. collect the money and pay me? -- Signed: Always Thinking
of Something.
A: Dear Thinking -- The answers to your questions are "Yes",
"Yes", "Not more than 10% of revenues", and
"Yes".
P.A.C.E. Referral Rebate Program
If you are simply working as a contractor or team
leader and you are not actively recruiting contractors
for compensation (in other words you are merely referring a friend
or acquaintance to P.A.C.E.), then P.A.C.E. will issue a 1 percentage
point referral rebate against your 5% P.A.C.E. service fee for each
contract professional that you actively encourage
to join P.A.C.E. You will continue to receive the 1% referral rebate
for as long as both you and the individuals you refer are invoicing
through P.A.C.E. There is no limit to the number of 1% referral
rebates you may earn.
P.A.C.E. does not pay the 1% referral rebate to marketing agents
(see below) who are charging a fee for marketing contractors directly
to companies. The referral rebate is only for Contract Professionals
who refer their friends and colleagues to P.A.C.E.
Here is a link to a page in the P.A.C.E. Web site where you can
read more about the P.A.C.E.
Referral Rebate Program.
Marketing Fee
P.A.C.E. also has a program that supports an ethical and evenhanded
alternative to the placement services of ordinary staffing firms.
We call it the P.A.C.E. Certified Marketing Agent (PCMA) Program.
If you are working as a marketing agent, and you actively market
a P.A.C.E. Division Manager to companies, then that person's Division
of P.A.C.E. will pay you a marketing fee (never greater than
10% of billings) out of the Division's revenue stream. How
much you charge as your marketing fee is between you and the P.A.C.E.
Division Manager, and each Division Manager must be agreeable to
the charge.
It is important to note that you may not charge a marketing fee
to contractors who are referred to your team by the client. In this
regard, P.A.C.E. does not condone kickbacks to the project lead
for hiring a Contract Professional, even though we are aware that
this practice is common in some technical environments.
P.A.C.E. operates on the principle of full disclosure. We believe
that full disclosure of charges and the true nature of relationships
is the best policy in staffing situations.
Here is a link to a page in the P.A.C.E. Web site where you can
read more about the P.A.C.E.
Certified Marketing Agent Program.
Additional Team Leadership Fee
If you actively recruit and market workers to the client, AND
you function as their team leader then P.A.C.E. will
pay up to an additional 5% of billings above the marketing
fee. Again, this additional 5% is paid out of the P.A.C.E.
Division Manager's revenue stream and the Division Manager must
be agreeable to the charge. As the marketing agent it is your responsibility
to make sure that the billing rate that you negotiate for the contractor
is high enough to justify your marketing fee and team leadership
fee. It is imperative that the Contract Professional understands
the fee structure, and is in agreement with your charges.
If you market contractors to clients, whether or not you actively
serve as their team lead, I would expect that you would establish
an ongoing working relationship with the contractors such that you
market them aggressively to clients once the current contract is
over. In this regard, you would function more like a talent agent
than a recruiter, and your primary loyalty would be to your team
of Contract Professionals who you have committed to keep gainfully
employed through your marketing efforts.
Now, let's examine the overall costs to the Contract Professional
and the earnings potential to you from this arrangement.
Total cost to a Contract Professional compared with an ordinary
staffing vendor.
Ordinary staffing vendors (temp agencies, recruiting firms) almost
always take at least 35% of the billing rate in return for marketing
you to a company and processing your payroll. In return, the agency
offers little or no benefits and a condescending attitude.
By contrast, the combination of using a P.A.C.E. Certified Marketing
Agent (never more that 10%) plus the overhead of P.A.C.E.'s employer
of record service (5% service fee plus the employer's share of actual
payroll taxes, or approximately 15% of billings) will never exceed
25% of the total billings. In return, the contractors on your team
receive dedicated and personalized marketing services from you and
the best benefits package available to any Contract Professional
anywhere in the USA.
If you also serve as the contractor's on-site team lead the total
cost to the contractor would increase to no more than 30% of total
billings.
As you can readily see, the contractors on your team would receive
a far better marketing service and better benefits at a significantly
lower cost than going through an ordinary staffing agency.
But I think that the really big savings to the contractors you
market would be the reduced downtime between contracts. Downtime
is expensive to a Contract Professional, and you could
easily justify a 10% marketing fee by significantly reducing the
downtime between contract assignments and keeping the members of
your team gainfully employed on challenging projects.
Earnings potential to a Marketing Agent
The obvious question at this point is, "Can I make a decent
living by marketing Contract Professionals to companies?" And
the answer is an emphatic "Yes".
Let's assume that you can keep 20 contractors in gigs at any given
time, and that each contractor invoices $10,000 per month (The average
P.A.C.E. Division Manager invoices $10,000 per month). If your marketing
fee is 10% of billings you would earn $1000 per month from each
of your 20 contractors. That amounts to $20,000 per month.
What does it take to keep 20 contractors in work at any given time?
Well, if the average duration of a contract is four months, then
you would have to place five contractors a month. This would not
be an easy task during an economic downturn, but during periods
of economic growth placing four contractors a month is quite feasible.
Longer contracts would require fewer placements per month for the
same earnings.
As you can see, if you are good at marketing your own consulting
services, and you want to market the consulting services of other
contractors, you can make a very good living as a Marketing Agent.
What makes this proposition so attractive is this: P.A.C.E. signs
the contract with the company so you don't have to carry General
Liability Insurance and Errors & Omissions Insurance. In fact,
you don't have any back office responsibilities because P.A.C.E.
handles everything. And, provided the contractors
you are marketing use P.A.C.E. as their employer of record, P.A.C.E.
will pay your fee out of the contractor's collected revenues every
time it cuts a payroll to the contractor. That way you don't even
have to worry about collecting your marketing agent fees.
And here is the icing on the cake. If you, yourself, use P.A.C.E.
as your employer of record the entire process is handled internally.
This is something that you can do on the side for a few friends
and colleagues while you continue to work on your own contract assignments.
Or, if you are really ambitious, you can go all out an grow into
a full-service marketing agency for Contract Professionals with
lots of marketing agents working for you. The possibilities boggle
the mind.
The concept of a talent agent is well accepted for authors (literary
agent), entertainment (actors agent), music (manager), and professional
sports (contract advisor or sports agent). The P.A.C.E. Certified
Marketing Agent program expands that concept to the area of knowledge
workers. And you could be one of the first of this new breed of
talent agents serving Contract Professionals. -- Signed: Dungaree
Dan
Questions for Dungaree Dan
Send your questions about contract employment to Ask
Dungaree Dan. We will try to answer all of your questions, and
we will publish the most interesting ones in The Contract Employee's
Newsletter.
Return to Table of Contents.
Contract Employee's
Glossary
Terminology For Contract Professionals
More terms from Appendix
B: Glossary of Terms for Contract Professionals of The
Contract Employee's Handbook.
Keogh plan
A Keogh plan is a federally approved, defined-contribution retirement
savings program that permits small-business owners and self-employed
workers to set aside savings on a tax-deferred basis. Keogh plans
have higher savings limits and more administrative requirements
than other retirement plans commonly available to small-business
owners and self-employed workers. The maximum contribution for 2003
is 25% of gross earnings (gross wage) up to $41,000 a year. This
is essentially the same maximum contribution as a 401(k) retirement
savings plan.
Kill fee
Also called rejection fee. A kill fee is partial compensation given
to a Contract Professional for work that the other party does not
use, or to compensate a Contract Professional for the premature
termination of a contract assignment. Also, an early termination
penalty.
Labor load
Labor load consists of all the overhead costs associated with the
care and maintenance of an employee. For fully benefited employees
in a mature company the labor load can easily reach an amount equal
to 30% to 50% of gross wage. In other words, if your annual salary
is $100,000 per year, it is likely that your employer must pay a
total of $130,000 to $150,000 to support you as an employee. The
fully loaded labor cost is your gross wage plus the labor load.
The labor load for a Contract Professional is simply the billing
rate charged to the client by the contractor or the contractor's
agency.
Leased Employee
Leased employees are co-employed by the company where they work
and also by an employee leasing company that processes their payroll.
Essentially, the company outsources the HR function to an outside
party, such as a Professional Employment Organization (PEO), to
provide recruitment, payroll, and benefits administration for an
entire block of the company’s regular, full-time employees
on an open ended contractual basis. In this regard, leased employee’s
differ from agency temps and contract employees who work individually
for the client under separate contracts or purchase orders that
specify a limited duration of employment.
Return to Table of Contents.
The Contract Employee's
Project
The Contract Employee's Project is the larger context under which
the following interrelated vehicles operate to promote and defend
the interests of Contract Professionals:
Copyright and
Publication Info
Copyright (c) 2003, James R. Ziegler. All rights reserved.
You may copy or forward this free publication provided it is left
intact with all links and this notice unchanged. Any unauthorized
duplication, including republication in part or in full for commercial
use, is an infringement of copyright.
Published by:
P.A.C.E. - Professional Association for Contract Employment
1355 Willow Way, Suite 244
Concord, CA 94520
USA
http://www.pacepros.com/
Editor:
James R. Ziegler, Ph.D.
Executive Director
P.A.C.E. -- Professional Association for Contract Employment
(925) 680-0200
CENewsletters@pacepros.com
Return to Table of Contents.
Disclaimer
The Contract Employee's Newsletter is designed to provide information
in regard to the subject matter covered. Use is granted with the
understanding that the publisher and authors are not engaged in
rendering legal or financial advice. If expert assistance is required
you should seek the services of a competent professional.
The purpose of this information is to educate and entertain. The
publisher and contributors shall have neither liability nor responsibility
to any person or entity with respect to any loss or damage caused,
or alleged to be caused, directly or indirectly, by the information
contained in this Newsletter or by information contained in any
web site or resource referenced by citation or hypertext link within
the pages of this Newsletter.
Return to Table of Contents.
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Sign-off
I hope you have found the information in this newsletter to be
interesting, informative, and provocative. I encourage you to share
the CENewsletter with your friends, colleagues, coworkers, clients,
and agency recruiters.
Why clients? Because you need every ally you can get. Why agency
recruiters? Because they need to know the jig is up.
Wishing you success in your contracting career,
James R. Ziegler, Ph.D.
Executive Director
P.A.C.E. -- Professional Association for Contract Employment
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