Ask HN: Does the contract rate rule of thumb still apply? | Hacker News Reader

Ask HN: Does the contract rate rule of thumb still apply?

18 pointsfaster9 comments

The rule of thumb when I started contracting was that your hourly rate was your annual salary divided by 1000. For example, a $150k/year salary would translate to a contracting rate of $150/hour.

After seeing a post[0] saying that some leaked Microsoft developer salaries were between $40k and $320k, I am curious how many people are billing $150-320/hour for software development work, and what skills you provide that make companies value your work at that rate.

[0] https://onezero.medium.com/leak-of-microsoft-salaries-shows-fight-for-higher-compensation-3010c589b41e

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Generally yes. I see rates between 100-250/hr and I know (in person) a number of developers with higher rates.

However, hardly anyone will talk about them publicly, especially online. Part of the reason is there's almost no value to gain from discussing rates in public and a lot to lose.

To answer the second part of your question, I have a large and varied skillset covering nearly every part of starting, growing, and operating small and medium sized businesses on top of twenty years of software development experience and (most recently) a significant body of practical machine learning experience. I can comfortably step in for mid to senior level UX, marketing, strategy, development, and ML roles.

In turn, clients simply describe business problems to me and I deliver entire solutions for them, employing a mix of those skills.

These problem definitions generally reduce down to something like "make me $1,000,000 with 100 hours of work and a 25% chance of success". When you look at it from that vantage, it's not difficult to see how high hourly rates can be justified. I can charge $250/hr and be a highly efficient choice compared to alternatives.

Obviously I also use those skills on my own products as well. But consulting provides interesting experiences and additional streams of revenue.

I'm looking at rates in my part of the US lately (Austin, TX) - mind sharing what part of the world you're reporting from?

Consulting rates have nothing to do with annual salaries unless you're strictly doing commoditized staff augmentation type of work.

From what I've experienced, the difference in rates is more dependent on soft skills and positioning than tech chops. There are exceptions (FAANG engineers, popular open source authors), but generally it's folks with sales and marketing skills coupled with coding capabilities that rake it in.

When you charge a straight up hourly rate it's very difficult to get lawyer rates ($200+ p/h). If you do project or retainer pricing, your effective hourly rate can be quite high if you're experienced and efficient.

The other thing is company type, and whether you're close to revenue-generating activities. Large companies will shell out for tools that help with sales, lead gen, marketing automation, etc. Much more so than saving them money behind the scenes with HR systems or whatever.

I've been consulting a long time and have learned a lot of this the hard way. :)

I've always gone with the maxim, a product shouldn't be priced at what it's worth, it should be priced at what people will pay for it. In development this is best seen in Fortran salaries.

You should hear about the COBOL guys.

> product shouldn't be priced at what it's worth

I think you mean "at what it costs". At least, I've always understood "worth" to be defined as what people are willing to pay for it. "Cost" is what refers to the amount of work that it took to make it or otherwise obtain it.

So, what you probably meant to say is that a product shouldn't be priced at what it costs, it should be priced at what it's worth.

My rule of thumb is closer to 2x-4x full time salary. Partly because full time jobs tend to come with a lot of opportunity costs and few benefits. If you're in a world where company health insurance is very valuable, or get good working conditions and lots of paid leave, the multiples should be much higher.

Also if you're considering quitting a comfy Microsoft job to freelance, you better be charging a lot.

I've been charging $300/hour as my going rate for a number of years now, so yes, it still applies AFAICT. As another poster mentioned, getting to this level requires a mix of good salesmanship, references, and actual coding ability to back it up.

Never heard of this "annual salary divided by 1000" rule but I calculated and it works out about right for me.

I am in a third-world country though, so rates are much, much lower than $150-320/hour

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