Ask HN: Negotiating My Hourly Rate?

Here is the basic theory of negotiation and specific advise for your situation:

Theory: in a negotiation both parties are trying to get a deal that is better than the Best Alternative To A Negotiated Agreement (BATNA). So what you’re trying to do is say if this negotiation fails what am I going to do instead. Theoretically this is where your leverage always comes from because a good BATNA enables you to threaten to walk away.

Practical: in your post I understand what you want, but I don’t understand your BATNA. If your friend refuses, or worse let’s say he fires you right now, what would you do/make instead?

The easiest way to get a win-win is the following: 1) go find other gig offers - compare the price others are willing to pay you (recognizing there’s some risk the next client is not as friendly/easy to work with) 2) Let’s say you get 3 offers at $15,$16,$17. Show these offers openly to your friend and say “look I like working with you and want to continue but the market rate for my work is much higher than what I make right now”. This is actually a win-win because if you’ve done your research right, these are the same offers your friend would have to make to replace you. Now the conversation isn’t about what you want vs what he wants, but what each of you would do if you can’t get to an agreement.

3) Make your offer (say $18) and explain why it is higher/lower than the market avg (you can trust me, you know I do good work, etc).

4) Truly be willing to walk away if it doesn’t work. Not everyone is rational, not everyone will believe your alternative, not everyone wants a quick resolution. Unfortunately this is the hard part with friends, but if it doesn’t work you just must be willing to walk away (try to keep it isolated to your business partnership and not your personal friendship).

Notice, throughout, the premise is: here’s what my alternative is. Without this, you’re just hoping for him to take action out of kindness. It’s certainly possible, but it sounds like you are confident in your skills and value and ready to move past charity to career.

Good luck. Ask questions here if you have them. Let us know what happens.

I think it is simpler than that. The OP is not freelancing. This is effectively a job. He is underpaid but HAS EXPERIENCE! and just needs to find a new job.

> The OP is not freelancing

> > Hi, I am a freelancer from a South Asian country

Still, OP is not freelancing

If negotiation fails, my only alternative is my only client. He doesn't have a lot of work for me right now but it would be enough to put bread on my table. If things don't work out well, I am thinking to refuse to work with him on that cheap rate and devote my time and energy to finding other clients for myself. If I could find a good paying gig that would be beneficial for me in the long run rather than sticking with my friend.

I am shocked to see how adversarial many of these comments are.

It’s ok to negotiate win-win. And in the long run you win from that, because what you want is great relationships with people who feel they can rely on you and respect your work.

If you can do that without being taken advantage of, you will get tons of work for years and make money you are happy with.

Why double your rate right away? Are you happy working for $10?

Can you find new work? Can you increase the rate gradually? Can you say ‘this month it will go up to $12, but in 3 months it will go up to $15’ ...

It’s great if everyone makes money. Are you annoyed your friend is making money? Why are you willing to make $10 from one person but you want $18 from another?

You don’t want to work too cheaply, but you also want to maintain relationships. This is how you get more work for years and years and build a career.

Also it’s good practice.

>Are you annoyed your friend is making money?

Not at all, the problem is as others have mentioned is a very big cut he is taking. While I am the one delivering a lot of value to the client. Even upwork takes lesser cut (max 20%) than his.

Maintain 3 gigs simultaneously and drop the lowest paid one on occasion. Or devote fewer hours to it. Negotiation becomes, “sorry I can’t do more hours for you, someone else is paying me more for my time.” This will also mean you don’t have to worry about who gets what cut, just your cut. It means only doing part time and keeping a float of 40-60hour weeks.

It's difficult to have a win-win situation when one of the three sides is getting paid a massive cut continuously without contributing anything. Next time give your friend a one-off finder's fee upfront and deal exclusively with the client from there.

> And I am willing to go as low as $15

So if they offered you $14 an hour, you would drop the project? Despite working for $9 so far and having another client at $10? You'd better be able to walk away from this or your leverage is non-existent.

Getting more leverage would help a lot indeed. Look for some better-paying clients. If you can demonstrate results, prove you can get the job done, you should easily be able to make multiple times that amount for international clients. And once you've got better paying clients, you've got all the leverage you need to ask for more, because you can afford to walk away.

Of course you can still try to cut your friend out of the loop. If he's not providing any value, then working directly for the client will already be a nice boost for you.

> How should I best approach this scenario so there is a WIN/WIN situation for all of us?

In my opinion, when you are negotiating, you should only keep in mind your "win", not of the others.

The other thing is that I would work on improving the "demand" side for my work: if I have 10 potential clients, increasing my hourly rate becomes very easy, something I can do with confidence. On the other hand, if I only have 2 clients, I have to negotiate carefully, because I don't want to lose 50% of my work and income.

This is not correct, as others have pointed out, you need to think of what others consider a "win" when negotiating. You need to put yourself in their shoes and understand their goals, their limit and their BATNA.

I've found it helps if you create a grid with you and your partner as the columns and "Goal", "Walk-Away" and "BATNA" in the rows.

Your goal would be "$18/hr", your walk-away would be $1 less than your current rate (it sounds like) and your BATNA is to find another job that pays more, but accept the risk that you find another job.

For your friend, his goal is to keep you at $9, his limit seemingly would be his own pay or $15/hr and his BATNA is to find someone else but accept the risk that he may not find someone.

Ultimately, most negotiations end between people's limits, so it sounds like if you negotiate you could increase your rate to $12-$13 an hour.

>if you negotiate you could increase your rate to $12-$13 an hour

That makes it 80-85% of the original pay. I will keep this in mind but try to pitch my least acceptable offer be 13.5 (i.e 90%)

One of the key steps in a negotiation is to make the first offer. This is called "anchoring" and its been proven that the person who makes the first offer generally gets more favorable terms. It works because if you set the first offer the negotiation tends to revolve around that number.

To make the best initial offer and anchor it in your favor, you should aim for their limit/walk away price. This would be probably around $17/hr for him since asking him for $18/hr I would believe would be beyond his limit price.

In general you should always make the first offer and make it at the limit of your opposition. How do you know their limit? You have to do your research ahead of time and know your opposition and their needs. This even further proves the OP I replied to was wrong.

>This would be probably around $17/hr for him since asking him for $18/hr I would believe would be beyond his limit price

$15 is his limit. How do i know that?

First this is the amount he is getting from the client, second he won't accept that I get the entire cake while he gets nothing while the fact is that the client is his not mine.

I know him from my school days, he is very careful when i comes to money and I find him tight-fisted. Just to share an experience with him, when I first started working with him he offered me $6, trying to take 60% cut, I told him that this was very low and $9 would be acceptable. At this demand he got irritated and said I worked nights to build this stuff. So I explained him how I would provide value to him and his client and he won't have to worry about my work because I would handle the client directly. After that he came to some sense and accepted that $9 demand.

Email me at my HN username @ gmail.com Maybe I can find some work for you that pays more than you're getting and you won't have to worry about your friend taking advantage of you any more.

Worked nights doing what exactly? It seems that he only did the initial work of finding the customer.

My advice would be to look for exit path and walk away from this situation when it becomes possible. You can easily make more than $9/hr. on freelancing marketplaces once you establish yourself a bit.

To be fair, this is how placement agencies work for contract staff here in Canada, too. The agent maintains separate contracts with the client and the candidate and takes a cut (often 30-40%) for the duration of the contract.

In return for their cut, the agent handles the payments and provides the guarantee that the candidate gets paid on time even if the client pays late.

There's usually a clause in both contracts that prevents them from cutting out the middle-man.

So, does such agencies provide benefits other than salaries to candidates?

Yes, they for example provide access to clients not willing hassle to work with a single individual.

If the candidate is leaving they may provide a different one.

And the client can negotiate several candidates at a fixed rate and the agency can provide different insurances and help with taxes an so on (for both parties).

A good agency would also help with the negotiation towards the client. And find you a new client if the client drops you.

So basically they're paying 30-40% of the salary for a payment insurance service? That seems a little... excessive? Just how often are payments missed to warrant this kind of a premium?!

And in the US, they pay the employer’s side of FICA -7.5% and unemployment insurance.

But 30% is not unreasonable. There isn’t any place that I have worked that hasn’t had a much larger gap between my pay and my billable rate even when I was working full time and we were doing custom work for clients.

Most staffing companies work like this in the US as well. There are a couple of ways they maintain their middle man status. 1) most of the jobs they provide personnel for are not overly specialized and the client is happy to no have to hire for and deal with hr issues around these positions. 2) the staffing firms often oversell their role to contractors in how difficult it is to make sure they get paid in a timely manner/offer “career development” training (e.g. letting the contractor work) 3) staffing firms often do a lot of client wining and dining to maintain favorable status. 4) staffing firms often hire young and attractive reps to distract.

I thought the only service being provided is just basically insuring the income. If they have to deal with finding/maintaining contractors/clients and other kinds of overhead then of course that changes things—I just didn't infer that was the situation in Canada from the comment.

> staffing firms often hire young and attractive reps to distract.

LOL, what? "The only reason we used staffing firms was cuz them reps be dummy thicc".

I worked for a small/medium ISP for a while and did a lot of hiring for entry-level and mid-level roles. If we threw an ad up on Craigslist for DC, NYC, or Baltimore we would get back, easily, 500+ responses.

The signal-to-noise ration was insane. A huge chunk of the responses would be spam or automated-resume-slinging-bots, and like 30-40% would be immediately disqualified for being in different states/countries or being wildly unqualified. Even after adding a few homemade filters and a basic online tech quiz, we'd still end up with like 40 candidates to screen further. The viability of these candidates was... not great... and a lot of them tended to split after a couple years, and several didn't last 6 months.

Then we started using a headhunting firm and they did all of the sorting, vetting, and gave us a great 3-to-6-month hiring window. We could ask them for 3 decent clients -- "decent" was relative sometimes -- and have them in a couple weeks, get them hired comparatively quick, and turn them to full-timers in 6 months if they were good; usually we did.

Some of the hires were for very specialized roles (frame relay/fiber optic types) that often took a while to source or had to be lured out of other places, and they were generally good at doing that too.

I'd never want to be one of the contract-to-hire candidates again (once was enough) but I'd be hard pressed dissuade others from using them.

> provides the guarantee that the candidate gets paid on time even if the client pays late.

This might be the case in large agencies that have their processes right, but it's likely that smaller agencies won't have the cashflow to guarantee that their downstreams get paid on time — even moreso if they have to account for their own staff as well.

The standard cut is 10-20% when the agency is only referring a person to the client and doing nothing.

Working at an outsourcing firm or sweat shop, these can take a 30-40% cut but they do other things besides just referring a person. Often they take care of a full project from start to finish or they provide a complete development team.

> There's usually a clause in both contracts that prevents them from cutting out the middle-man.

Usually that has a fixed expiration date, e.g. placement-to-hire is a 6-month contract. Otherwise you're just a professional services company with contractors, and that usually carries a 3-6 month non-compete or something along those lines.

Can you get more projects on your own? If you get enough money to get comfortable without this project, you can have leverage with your friend and the client. Something like: "I'd like to continue working in this, but I have an offer from XYZ that pays me more."

Also, read whatever patio11 wrote about this.

https://www.kalzumeus.com/2012/09/17/ramit-sethi-and-patrick...

https://www.kalzumeus.com/2012/09/21/ramit-sethi-and-patrick...

>>> Other than that, I communicate with the client directly and manage the work without my friend's involvement.

If your friend has zero involvement and no relation with the client, I don't see how they are getting paid in your place to begin with.

Do you have a contract with your friend? If not, just notify the client to update your bank account details and they will start paying you directly.

The friend is taking a cut because he introduced me to the client and kind of provided me with the opportunity to work.

He is rarely involved. I send him invoice monthly, and if I get stuck on some technical things he guides me a little (this have happened around 3-4 times in the whole year, so to give you an idea). He doesn't even have the domain knowledge of projects I am working on for his client.

"just notify the client to update your bank account details and they will start paying you directly" I don't think this is ethical, especially with your friend. This would result in a bad relationship between us or the end of it. We've been friends since childhood.

Is this person really your friend? If I "provided opportunity" for a friend I would never ask for a commission from his earnings. Actually, I did exactly that twice last month because I want my friends to have work and I trust their work. Even if I did ask for a commission, I'd arrange it so he'd pay me only a percentage of what he made the first month or a single fixed fee. What your friend is doing sounds a lot like pimping. If you've been friends since childhood something like that should not be enough to end your friendship. Of course I'm making many assumptions here, but that sounds abusive. You are afraid you will lose your friend if you ask to receive full payment for a work you put on on your own, with zero input form him. You are doing the work and you should be receiving the money. Even if you two have an arrangement of you paying a fee for the leads he generates to you, his cut should be much, much smaller.

Traditionally in these arrangements you give them 6 months to recoup the cost of introducing you and then you can work directly. But that is when there isn't friendship on the line.

I'm curious to know what value your friend is offering to justify taking the cut. It sounds to me like you're putting in 95% of the effort for 60% of the return.

If your work is good quality, it's almost certainly worth much more than $9 an hour. I would seriously consider:

- negotiating with your friend to reduce his share - as long as it's still profitable to him, he should be willing to move a little.

- trying to find some other freelancing work opportunities so that you don't feel pressured to accept your friend's terms.

Do you have samples of your work? I'm sure someone on here would be willing to pay you more than $15/hr.

I am working on my portfolio, unfortunately even after 5 years in the industry I still don't have portfolio of projects in JS frameworks like React or Angular. Mainly because I wasn't totally focused in my career. But I am very good with building static UI's with intermediate skills in vanilla JS.

But since last year, I have started to take my profession seriously. I quit a good paying job last year and started freelancing because the job was fulfilling for me.

Shortly after quitting the job I started working for my friend's client and that $9 rate was decided back then.

Do not wait for perfection. Just come up with a portfolio. Use Github for that!

You don't have to charge every client the same. A client that is easy to work with gets a discount. A client that has steady work gets a discount (because you can count on them in lean times). A client that does work for a cause you support gets a discount. A client that provides some other benefit that I can't think of gets a discount.

This is a consideration that others haven't mentioned. Don't be afraid to take a different rate from different clients.

I can think of two Options:

You could try getting in touch directly with new clients (costs time and effort) and negotiate a better deal.

You could negotiate with your friend to pay you the full amount but pay your friend a fixed fee instead (applicable if the worktime is not constant). For example if you work 50h/month the client pays 700 - 450 for you. Offer your friend a constant 200$. But try to increase your worktime so you get a better quote and your friend has a fixed income.

The way to set your fee is to decide on a rate that is fair.

Neither too high nor too low. A fee that you think is reasonable.

When someone asks your fee, you say.... “this is my fee. I think it is fair. I do good work. I don’t overcharge. I know there are cheaper people out there but that’s not where I am positioned. You are welcome to work with the cheapest.

If you want good work at a fair price then I am happy to work with you but I cannot discount my rate because it’s not commercially practical for me to do that.”

If you lose the potential client then that is fine . Do not chase them with lower prices. Wait for the clients who agree with you.

When clients insist on some concession, some discount, then give it only in return for something else, like up front payment. Don’t concede discounts for nothing.

"Don’t concede discounts for nothing" This is a great advice. Thank you.

If you're in the Indian subcontinent, please email me with some examples of your work, I can send you some work from time to time - no cut.

You email please

fareesh at itsalive dot in

Just asking out of curiosity, why no cut policy?

because no reasonable cut would be worth the effort

This is a little off the particular circumstances of topic, but highlights it is not always as straight forward as it might seem.

Sometimes the mark-up is for more than is apparent - in Australia there is a 6% payroll tax that kicks in after a certain size payroll is achieved.

Also, big companies often like to "write one cheque" a week/month and not deal with a lot of hassles which can consume a few admin staff continuously.

My current contract was direct for years and they paid a 2.5% "supplier markup" extra to me because that is what the agency charged just for insurance postage and petties etc, at the individual scale it wasn't enough by maybe 2%, just for those issues, esp insurances.

There are more issues, but even though a contractor (hourly pay) almost entirely for my 30+ year working life, I still use the agency at times as the convenience can be worth it rather than going direct and often they can find work you can't, in my circumstances.

Having work vs not having work really lets you consider if you are prepared to pay them a bit to help you out, so it is just the nature of the problem sometimes.

You can negotiate with your friend. You have more experience in general than when you started, and you have more experience with this client. Just keep in mind that if you negotiate, a couple of important "rules" will tend to set practical boundaries: 1. you will have a hard time asking for more than "market value" for your skill level for your programming language in your area, from ANYONE (your friend or client) unless you can differentiate your service 2. if you want your friend to pay you more than the customer is even paying him...guess what... you are really asking your friend to negotiate a higher rate with the customer... so you need to provide the justification and arguments your friend will use to dramatically increase the billing rate

This is possible to do. I've negotiated big increases in the past. But you need to understand what your skills are worth in the market.

You will also find that if you spend time finding new clients yourself, that activity takes times to do. So if your friend has a lot of connections, you may want to consider preserving that relationship if you don't want to worry about the business side.

Nice "friend" you got there. A couple years ago I got my friend a $150/hour contracting gig, and my cut was $0/hour.

Hey, do you wanna be friends? :)

Maybe try to keep a standard hourly rate of 12-14 and charge the same from all clients. And do work of that quality. You should definitely charge more than 9 for the kind of work you are doing, but you don't want to lose this client till you don't have a backup. So tread carefully

In any negotiation the main factors are power, information and time. Does the client have the power to get someone else to do the job or does he need your specific skills and experience with the code? Can you do other work and just walk away if you don't get your asking rate? Knowing the rate your friend charges is good info and it would be good to know what any other client employees/contractors make and also what general rates are available from other employers. Time can help - how soon does the client need the work done - can he afford to hire and get someone else up to speed? Can you hold out for a higher rate or do you have living expenses to pay etc?

If you're interested, could you please summarize your skills and experience? Someone here (including me) might have some work for you depending on that. You could also link to your resume.

nice "friend" - like straight from the mob I guess. I mean, I understand, that he might want some commission for his contacts (and sets up a payment plan), but a permament fee?!

Not sure why you're being downvoted, it's a fair criticism, introducing someone to a client doesn't entitle you to a percentage of their rate forever if you're bringing nothing to the table.

If you are a sub contractor to the company that has the contract then you lose margin to the company. That sounds like the arrangement here.

The multi billion dollar staffing agency business in the United States is built on these layers of comp for labor and finding labor.

He actually doesn't have any legal contract with his client. The client wanted to find some cheaper resources, my friend found this client on a freelancing platform and convinced him that he will make a team of resources in our country for him.

Well yeah but OP mentioned it was his friend, who apparently twiddles his thumbs all day while OP busts his arse for $9 p/h. He has the ability to lean on the fact that this is a friend and should care a bit more about his well being than a multi billion dollar staffing agency.

Other commentors gave good advice about how to negotiate.

In the US, there's an expression called "Keeping up with the Jones'". It means you're trying to match what you see other people getting in income, material goods, etc., often at the expense of your own happiness. Think about the following before you act.

Why is the situation bothering you?

Are you being influenced by another party who thinks you're being taken advantage of?

Are you happy with the work and is it allowing you to enjoy your life?

Any reason you can’t get higher paid gigs online? I’m sure you could beat 9/h. If you can code 40/h should be a minimum then keep negotiating up as you do gigs.

Make a profile on Upwork and experiment with your pricing there. Find more clients.

Read 'Never Split the Difference', great book on negotiating.

+1 recommend it, also there is a Masterclass from the author Chris Voss.

I like it. I’ve not applied it directly to a negotiation, but it helps me edge forward on sticky points. Turn an angry complaint (or more likely for me passive aggressive) into a powerful question to move on. Maybe that is negotiation! But not used it on a high stake thing yet.

You can ask for $18 and not stick to that offer.

If they pay you that, all is good. If not, you go on working with them until you find something else.

OP here: Guys what would be the best medium for negotiation Call, Face to Face or messaging?

Your 'friend' is scamming you, they are basically taking a chunk of your wage for doing absolutely nothing at all.

Can you deal directly with the client and cut out the middleman? Early in my career, I did this with an employment agency who were perpetuating the same scam on me.

They weren't pleased about it, but fuck 'em. These capitalist bastards will grind you down and steal your labour any way they can - and you deserve better!

Anyway good luck with it, whichever approach you take.

I am not sure this is the right road, as the middle man is my good old friend. May be I will try to persuade him, how much value I provide by managing all the client work by myself. I think I can give him a big rate, if he refuses or couldn't convince the client to pay that much then I will stop working for him.

"good old friend" and he is basically profiting of your work for doing nothing? I'm not sure what other qualities he offers in the relationship with you, but leeching isn't something friends do. Don't get sentimental just because you guys know each other for a long time. If the roles were reversed, would he accept the same conditions? I don't want to sound harsh, but when money is involved you should maximize negotiations for your own gain because you should assume everyone else is doing the same. Your friend maximized his and he didn't care about the relationship with you, just about his own gain.