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I have acquired work in the IT industry for, let's say, $100 an hour. I have a friend who is looking for work that I believe I can subcontract to.

I have a company and infrastructure and did the work to secure the contract which is obviously worth something. At the same time, I won't be providing health, an office, or any other benefits. Assume we have similar skillsets.

I realize this is subjective, but what are reasonable rates to subcontract to him? I guess the fact that we are friends is haunting my conscience, but that really shouldn't factor in, right?

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Are you adding any value other than passing on instructions from the client and invoices from the subcontractor? Do you bring understanding of the client's domain that your subcontractor does not bring? Will you be taking a useful part in design meetings, prototype reviews or other interactions your subcontractor might have with your client? – DJClayworth Aug 17 '11 at 14:41
Skaz has added value by being able to sell IT work. The person he subcontracts to has not sold any work. There is definite value is being able to sell things. – Gary E♦ Aug 17 '11 at 15:00
@DJClayworth - I feel like I have already added value by securing a contract. I will also be taking on the majority of the risk in the situation I think. – skaz Aug 17 '11 at 15:46
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Not intended as a criticism, but as a way to determine a reasonable rate for your services. They would be more if you were bringing additional expertise to the situation. – DJClayworth Aug 17 '11 at 16:43

3 Answers

up vote 2 down vote

The contract recruiters I have worked through (i.e they have the job and client connection and they sub contract work out to me) charge between 10% and 20%. For that they turn my invoices around in less than 14 days (I work a month, invoice at month end and receive money in my account in less than 14 days).

So to offer the same type of service to your friend is worth between 10-20% without any guilt on your part.

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up vote 1 down vote

10-20% seems reasonable. Don't forget to cover yourself with appropriate insurance, depending upon the circumstances.

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up vote 0 down vote

You could do as many agencies do and package up the opportunity as a full time W2 (pseudo-permanent) job It is conceivable that many candidates will prefer a far lower W2 salary that is packaged like a traditional job.

In the US a salary may be 1/2 to 3/4 of the contracted (billed) rate. After expenses, you could retain the remaining as profit. Example - you could pay the person $85,000 per year for salary, while the contracted rate is more like $200K per annum.

Obviously you are taking on extra obligations if you were to do this: supplying unemployment insurance, processing payroll, and making tax deposits.

I concur with the others - the brokering of an existing opportunity has a lot of value and you should not just hand the opportunity over.

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