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Billing Rate & Salary

Sep 5 '10 42 Last Comment
wideflange
Sep 5, 10 2:40 am

Hi Everyone,

I was recently bumped up to Project Mgr. with my billable rate increasing by 40%. I'm planning on meeting with the partner to discuss a corresponding salary adjustment. Are there any reasons why they wouldn't adjust my salary to the typical 1/3 of my billing rate? It would seem like a win win for both me and my employer to make the adjustment but I'd like to know if there are any variables i haven't accounted for.

thanks

 

creativity expert
Sep 5, 10 6:34 am

well one thing pops up The Economy.

dblock
Sep 5, 10 12:14 pm

"Are there any reasons why they wouldn't adjust my salary to the typical 1/3 of my billing rate?"
Its called the Architecture profession... I wanna live in YOUR world where our salary is affected by the billable rates... Its win win if both you and your employer adjusts your salary but its win win win for him/her if they increase the billable rate and don't adjust your salary... I have been promoted many times over the years with promotions without pay increases not even taking current economic conditions into account. 40% damn is this a small or large firm?.. Sorry but let us know if this works out because I've never heard of it.

wideflange
Sep 5, 10 12:50 pm

I'd also like to add that I've been with the office for eight years and have been the best of employees. I've worked with everyone and they have nothing but great things to say about me. I'm asking for only 13% of the 40%. I know that the math is more complicated than that but from a managerial POV wouldn't it make sense to retain aforementioned employee by throwing him 13% of the additional 40% he'll be bringing in rather than re-educate a new employee. I'd also like to add that I'd essentially be doing the same job as veteran managers making 10k more than I would even with my desired pay increase. I'm still at the bottom of a managers payscale within our office.

b3tadine[sutures]
Sep 5, 10 1:32 pm

WF, if as you say you are the best employee, then why have they not come to you and explained to you the reasons for increasing your salary? it would seem that they want all the benefits and you get none of the rewards.

outed
Sep 5, 10 1:52 pm

wf -

very fair question you've asked and i'll try to offer my limited perspective as the principal of a small firm:

ideally, yes, a bump in the billable rate should factor in a salary increase. i don't know if your 1/3 number comes from the firm having a 3.0 multiplier they use, but will assume so. even so, don't automatically assume that percentage is a direct salary number - firms vary wildly in their ability to manage internal costs.

i'll just throw out some of the reasons a salary increase might not be automatic:

first, the principals in the firm might be spending close to 100% of their 'normal' time on non-billable activities, ideally on marketing and proposals. all of us right now are probably not winning work as easily as we once did - those 20-40% 'hit' rates are probably closer to 10-20% for most firms. if a principal was at least 20% billable, their own salary would be more self supporting. same for marketing staff. however, if they're 100% non-billable, then everyone else's fees have more to make up.

second, health insurance increases this year were disproportionately brutal. ours was 12%. so, i've got to pay more to just hold on to the same. money has to come from somewhere.

third (and this may be the biggest contributing reason), most of us are increasing the hourly rates because we don't want to get screwed on add-services on the backside. clients have pushed down basic services so much that firms aren't making nearly as much on them (margin wise) as they used to. unless they're just shortcutting the process. putting in a stiffer hourly rate offers some protection (that is, if you can get a client to agree to add services as an hourly - most want each task as a lump sum).

finally, yes you may be getting a title bump and hopefully it really is a reflection of your increased value, responsibility, etc. however, it could be just a desire to make you more 'important' to the clients to justify why they won't have you spend more time on a project. which may or may not be related to the above.

don't be afraid to ask for a raise, but personally, i'd base it more on what the other staff is doing, what you're doing, and why the salaries should be more reflective of that. basing it solely on the rates is ripe for being shot down.

wideflange
Sep 5, 10 3:07 pm

Thanks Outed,

That definitely helps me understand the situation.

I do believe our multiplier is 3. And I think the bump in title is genuinely reflective of them recognizing that I can be a very capable manager.

I recently learned that someone else in our office with half the experience and half the seniority who's also a newly minted manager is now earning 28% off that same managerial
billing rate, exactly what I'm trying to achieve. Is that a good indicator?

wideflange
Sep 5, 10 3:20 pm

I had hoped to go into the meeting,

By first thanking them for the promotion.
And essentially saying,

"My earnings have not changed in a long time. I think there are reasons for this, but I need to start changing that. With my billing rate increasing 40% I'm hoping the office can justify a substantial increase in my salary."

What do you mean by substantial?

"Well I do believe I have a range I belong in based on level of experience, quality of work and previous performance as project manager on "x", but I'd like to understand from you what's fair based in my goal of bringing in 40% more into the office."

Do you guys think my approach is reasonable? Cost of living in my city is really killing me so I really need an adjustment. And though I loathe whining working even harder now as a manager at the same salary is crushing my morale.

Distant Unicorn
Sep 5, 10 3:53 pm
wideflange
Sep 5, 10 4:06 pm

Well yeah I am on the verge of balling but seriously I initiated the promotion and they gave it to me, I even asked for another project and now I have 2 projects I'll be managing. If they've extended out to me this far what do you think my chances are of receiving an additional 10k a year? We're a medium sized office with about 50 employees and I'm certain the overhead for rent is low because our offices are shacks.

Distant Unicorn
Sep 5, 10 4:11 pm

See:

This is the problem.

You're looking for conventional, logical career/human resources advice about how to make sound negotiations in advancing your own personal interests within the confines of an business organization.

But you're looking for said generalist career advice in an architecture forum.

Everyone knows there's only about 7 actual architecture firms that run a business with any variety of logic or general business sense.

Phillip CrosbyPhillip Crosby
Sep 5, 10 4:18 pm

i haven't read the whole thread yet, but one thing to consider...

your new billable rate will only bring more money to the firm if you are working on projects whose fee is determined on an hourly basis... on projects with a lump sum fee your new billable rate will actually mean that you have less time to do the same job that you were doing yesterday, before your promotion...

that said, a promotion in name (and billable rate) alone seems like a waste of time for everyone involved... if your firm values your contribution and is willing to promote you, then a bump in pay shouldn't be out of the question...

wideflange
Sep 5, 10 4:30 pm

Thanks Phillip,

That gives me hope.

Keep the comments coming guys I'm finding all of this really helpful and will undoubtedly be useful when I do sit and talk with the VP.

Barry LehrmanBarry Lehrman
Sep 5, 10 6:51 pm

Another thing that impacts PM's ability to negotiate a higher salary, is how well they can get their clients to pay on time. While you don't select the client, and might not even negotiate the contract, accounts receivable is on your head.

What, you're not the person signing off on the invoices and making the persuasive calls to get the checks in the mail? Then you have less of a chance to get paid by the PM salary schedule.

Pre-bubble, PMs seemed to be starting about $70k (10yrs in the industry) and going up to at least $125k with 20-years of PMing under their belts. Don't know if these numbers have fallen with these tough economic times, but that was where the major cities were at. Check indeed.com and then aim for the lower number as a newly minted PM.

good luck!

wideflange
Sep 5, 10 7:15 pm

We laid off several people last year but since then have rehired a few and even taken in a couple of new employees. We've seen an upturn of high end residential work (we primarily do high end res. and hospitality) so we're busy . The client on my previous project which was my 1st trial run managing had trouble keeping up with the invoices so yes I understand how that can be a problem.

No one in our office has received an annual adjustment in over a couple of years so discovering that another persons salary was bumped up to a third of their billing rate was a surprise. Does that bode well for me or did the other person just beat me to it?

wideflange
Sep 5, 10 8:29 pm

And does the specific project you're managing influence your salary adjustment or are adjustments absorbed through the office as a whole. The current project I'm managing is for SD-DD. It's commercial and pretty high profile so I have no doubts that the client will pay on time. Additionally I'm pretty efficient so I should be able to crank this out and hand it over to the arch. of record also on time. There are 2 separate contracts, one for SD which the client has already signed off on which was for T&M and the other for DD and a lump sum. Should I worry that the contract for DD has yet to be signed? We're proceeding with work without a contract and only on an understanding that our work now would be part of the package. There's about a months amount of work left to complete DD.

I'm hoping the contract for the other project they're handing me gets signed soon thereafter. It's a tenant improvement hospitality project that's more substantial.

Given this am I in a better position or worse for asking a salary adjustment that's commensurate to my responsibilities?

jmanganelli
Sep 5, 10 10:48 pm

i have a question --- with your new title and increased rate, will your non-billable hours increase as well? If so, your new rate may not mean that you are bringing more into the firm directly or that not in proportion to your current billable percentage - this should be considered.

Also, instead of asking for a bump based upon the new title, ask for a raise based upon performance on the next couple projects in your new capacity. Perhaps you could raise the issue as follows: if you perform to a certain level in this new capacity (you define the metrics very clearly), you'd like them to seriously consider raising your salary to $xxxxx, though $xxxxx is negotiable ... and ask to revisit this in 3 (or 6 or 12) months.

This should:
- 1 -
make them pay close attention to your performance over the next several months so they are in a great position to judge whether to give you a raise and if so, how (i.e., do they agree but ask you to also take on an extra responsibility --- this offers them flexibility in assessing the situation and what they expect for what you are asking)

- 2 -
benchmark your request to the additional responsibility and performance expectations, not the new title or rate

wideflange
Sep 6, 10 11:09 am

In the past during my probationary period as project manager all my hours were billable. And though I worked more than 40 hours a week I indicated only 40 on my timesheet to avoid running out of fee. Consequently before the job was put on hold I was ahead both on schedule and fee.

my response if they come back and say, well let's see how you do in the managerial position first before bumping your pay would be,

I believe I've demonstrated that I can handle the higher responsibilities on the "x" project can we make the salary adjustment now and if I don't perform as desired we can talk again."

Urbanist
Sep 6, 10 11:31 am

the one case for not giving a proportional salary increase (thereby preserving a constant multiple) would be if your billability went down as a result of your promotion. This wouldn't happen in a large organization with constant overhead multipliers, but I can see a smaller firm doing it. Otherwise, he's just being unethical.

Urbanist
Sep 6, 10 11:38 am

Also.. unless your boss plans to lie about your multiplier and thus your salary in client billing, I'm not sure how he can get away with increasing your billing rate 40% whilst keeping your salary constant. Most of the time, the client requires disclosure of the constant multiplier and government clients have policies on what that multiplier can be. Multipliers can differ by function but there has to be some logic for it. They do this to make sure your firm isn't exploiting them on profitability.

So, in other words... if your salary is $50/hr, your disclosed total overhead multiplier is 2.0, and your contracted profitability is 20%, then your client had better be getting a bill for $180 an hour or someone's doing something fishy.

wideflange
Sep 6, 10 12:25 pm

I'm hoping by saying,

"I do have a salary range that I feel I belong in considering my level of experience, quality of work and past performance as a project manager, but I'd like to understand from you what's a fair adjustment based on my goal of bringing in 40% more into the office."

That they'll explain how adjustments in salary are made. I just don't know if they're willing to reveal the inner workings of their accounting.

wideflange
Sep 6, 10 2:21 pm

Another question,

If you are upper management and you have a very good employee whose only concern for the past 8 years has been the success of the office and you discover that he's dissatisfied and is considering leaving your office are you less or more likely to make an adjustment to his salary in hope that he'll stay?

Barry LehrmanBarry Lehrman
Sep 6, 10 2:51 pm

*sigh*
you should never under-report hours worked on a project. This is why architects don't make as much as lawyers (or doctors). We give away too much.

Distant Unicorn
Sep 6, 10 3:01 pm

I would only give away things for free if I specifically stated during a client consultation that I was doing something of my own free will fore free for them and if they were okay for that.

You know, a super special touch that was more of my interests than theirs.

OTHERWISE, PAY UP BITCHES. UNICORN NEEDS 'DEM BALMAIN HAND PAINTED TEE SHIRTS.

aquapura
Sep 8, 10 1:55 pm

Wideflange, how did it go? Have you talked to the principals yet? One thing you never mentioned is your professional development. Are you registered, etc? I've known firms to take that into account with giving raises. Have known several PM's that aren't registered and they usually didn't command the same status/premium as the ones with a stamp.

As for your last question, threatening to leave is tough, even in a good economy. Right now I'd advise against it. There are three options I see and none are positive. 1. You get let go on the spot - have worked for an Architect that did this (not to me). 2. You get the raise but are resented by management for essentially threatening your way to a raise. 3. You don't get the raise and you still have resentment from management. And besides, the job market isn't such that a threat carries much weight right now anyway.

wideflange
Sep 8, 10 2:56 pm

Aqua. I wasn't going to threaten quitting. I'm pretty sure that they're aware that I am looking for more from the vibe of dissatisfaction I'm giving off. Just wondering if that vibe is helping my cause or not.

I sent our VP an e-mail requesting a meeting to discuss performance and compensation last wed. I haven't heard back yet. I'm planning on reminding them in person either tomorrow or Friday.

aquapura
Sep 8, 10 5:15 pm

Well, at least be happy that you are getting a "promotion" even if it's hollow. Right now I have no chance of promotion given the current economic conditions. Was looking at some good advancement opportunities in 2008, but much has changed since then. Now we joke that sr. management needs to either retire or die, the latter being more probable.

wideflange
Sep 8, 10 5:55 pm

I hear you. And the situation here is eerily similar. Best of luck to you.

987654321
Sep 8, 10 8:25 pm

WF,

How are you billing the time you spend on this forum?

wideflange
Sep 8, 10 9:20 pm

Hourly additional services.

creativity expert
Sep 9, 10 1:18 am

I just am getting back from LA, why does archinect have hundreds of jobs for california ? And new york? Maybe if u go there or threaten to go there your threat will not be ignored? I don't know if I can take the heat out there though

wideflange
Sep 9, 10 1:34 am

So it's been a week since I requested a "review" and I haven't received a response from our VP. What I did receive was a request to "help out" a very difficult senior project manager who no one is willing to work with (poor communicator). Our office is actually looking to hire someone just to help this guy.

Since the current project of mine wraps up in a month and the contract for the second project has yet to be signed (still uncertain) do you guys think I could propose a managerial role under this troubled PM, bill at the managerial rate and request an adjustment that would be higher than my original proposal yet still cheaper than a more experienced PM?

wideflange
Sep 9, 10 1:50 am

My original goal was at least a 15% adjustment from junior arch. to PM. Having worked with this troubled PM in the past I'd ask for a 21% adjustment. Yes, it was that difficult and I'd also present some conditions such as I be the contact for all consultants and the GC while he handles the client. He's notorious for not informing you and then holding you accountable for changes.

Or is this proposal just too ballsy and I should wait for the other project to pan out and hope things pick up to sustain any salary adjustments.

I hope you guys find all this entertaining. I'm finding it highly therapeutic. Not stuff you can air with those in the office. And all your feedback is certainly helping.

creativity expert
Sep 9, 10 5:02 am

I don't know sounds to me like u are still considered a junior, I've heard of architects complain of other architects poor com skills, and 99% of the time itis the case that he or she does not rubb elbows with the vps or partners but they need him, and at the very least it sounds to me like they want you to learn from him, and maybe they can replace him with you, get it? We're still hunter gatherers even after millions of years baby

jplourde
Sep 10, 10 4:01 pm

I think that if neither of two points were not satisfied, you would have never been offered a promotion: 1 That the office has the increased work 2 That your superiors think you are capable of performing that increased responsibilty.

Therefore, logic dictates your pay should be commiserate with that increase. [Though, I have heard of firms not conforming to logic.]




However, as to your second point about the difficult colleague: On one hand, I don't believe that negative comments about a coworker is a good strategy to leverage a pay increase. On the other, is it at all possible that with your increased involvement [taking care of consultants and GCs as you say] you might edge him or her out over time? Is it possible that the office leaders are already looking for a replacement, and they might be considering you? If that's the case, then I think you should let your performance speak for itslef, indulging in politics can backfire.

Urbanist
Sep 13, 10 11:24 am

"How are you billing the time you spend on this forum?"

Causes your overhead multiplier to go up, didn't you know?

whistler
Sep 15, 10 8:11 pm

If you make the firm money on your "new" projects and can justify a raise then approach them for a bump in salary but just because the title on your business card changes shouldn't automatically mean a raise in salary. My guess is that if you take care of making the firm money the praise and financial rewards will follow. If you walk around with your hand out the only thing I'd show you is the door!

Urbanist
Sep 15, 10 8:28 pm

again guys, the relationship between base pay, disclosed overhead multiplier and profitability is fixed. If you make $50/hr, you have to cover 2x your pay in office overhead and your advertised rate (or negotiated one with the cilent) gives the firm 20% profitability, you had better be billing $180 a hr. In this system, there really isn't a whole lot of room to say your billing rate goes up 40% whilst your base pay stays constant, without doing something highly dicey with the disclosed overhead rate. Any private sector client suspecting those sorts of shenanigans would fire your firm, any public client would fire your firm and turn the contract over to their auditors and any Federal client would probably refer your firm to nasty people with badges and dark glasses.

Therefore, the only way way you can raise your advertised or negotiated billing rate by 40% whilst keeping your salary constant would be if they changed your multiplier (in other words, have an internal policy, that is acceptable to your clients, that seniors have more overhead than juniors do, since they must bear the cost of marketing). Unless such a policy exists and is reflected in your published advertised rates (as disclosed to your clients), badness will ensue (for your boss).

aquapura
Sep 16, 10 9:15 am

Urbanist - I hear what you are saying, especially in terms of something like a 40% bump. Then again, in better times when people were getting annual raises of 2, 3, 5, even 10% firms didn't automatically bump up their hourly billing rates with each annual salary adjustment.

I wish it was that easy for a firm to raise their fees but you and I both know no client would accept a higher fee just because the architect they hired wanted to give out pay raises.

What I've seen is that few people actually get wages that are = to their multiplier. So the $100/hr production person at a firm using a multiplier of 3 probably isn't getting paid $33.33/hr. Instead that person might be making $25/hr and the position has a built in margin for roughly a 25% pay raise.

I've found this practice common over large firms, although most production staff employees aren't privy to the accounting numbers used. To move beyond said "pay scale" one needs a promotion, i.e. a new title like Project Manager.

jmanganelli
Sep 16, 10 10:37 am

aquapura's response is closer to my experience

younger/less experienced staff at the lower end of the pay scale had larger multipliers than senior people --- I think mine was around 3 to 3.5

gibbost
Sep 16, 10 12:58 pm

younger/less experienced staff at the lower end of the pay scale had larger multipliers than senior people --- I think mine was around 3 to 3.5


this is the way i've always known it. in overly simplistic terms, you figure how much the firm needs to bring in in revenue to cover all expenses and profit, then divide by the number of employees. to further simplify, everyone is considered an equal 'pull' for the expenses--ie. insurance, rent, utilities, marketing, admin. and then, based on the average for each person, their multiplier was adjusted accordingly. so, the intern taking home $15/hour net would require a larger multiplier then the principal making $60/hour net. typically, interns had a 4-5 multiplier and the principals more like a 1-2.

Aquapura's response seems accurate. you build in margins for annual pay increases by setting your hourly fee accordingly. this will usually work fine over the life of an average employee that stays in the office for 3-5 years--which seems typical--without cutting into your profit margins too much. staying past that point, means the office will be required to increase your billable rate just to keep up. (which is why offices should be nudging you to get licensed if you're not already--also why all the old-timers that were just drafters in the office all lost their jobs--too much overhead for a relatively lower billable rate--I can only keep increasing your salary so much if you continue to always bring in the same amount!)

a significant 'jump' in your billable rate [due to a promotion in title] will be to 'reset' the margins and allow for them to give you a modest pay raise--however, they must also figure that you are now a bigger investment for the firm with longevity--that billable rate must counter your potential pay increases over time, not to mention potential higher insurance premiums if you're licensed.

finally, in theory, if their billable rate goes up, so too should your pay. however, sometimes it's necessary to bump your billing rate simply to cover new expenses that have come up--ie. more marketing--not pay increases. fierce competition in the market will not allow for billable rates to increase by the severe margins you're suggesting.


Urbanist
Sep 16, 10 1:47 pm

I think we're all saying the same thing. Here the multipliers are linked to business line and not by pay grade, but I can see some organizations choosing to do so differently. This being said, manipulating overhead multipliers can only go so far. If clients are used to seeing seeing designers bill $80-100 a hour, sr designers bill $110-130 a hour and PMs/project archs bill $140-200 a hour, then they'd only get upset if they saw something different all of a sudden. In my experience, most clients have a pretty good idea what they should be paying each level of designer.

Dazed and Confused
Sep 17, 10 12:59 am

wideflange - let us know what happens . . . but I'd listen to the low-elev. - high lat. ski dude. The government is looking to collect a 40% bump from someone but it is still unclear if it will be you or your boss or plucked from the CO-2 rich air we breath.

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