Starchitect Shigeru Ban posts a job listing for its NY office on Archinect but instead of listing salary ranges, they instead ask applicants to "Please include salary requirements and availability (applications without comment on salary requirements will not be reviewed)."
Always a tricky Q to answer during interview as well . I was once asked how much I currently earned at the current firm , which I politely declined to answer.
Nov 26, 23 8:13 pm ·
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ivanmillya
Maybe this is a shitty thing to do, but I always gunned for a raise right before I planned to quit. Then if it was brought up during a future interview, I'd just tell them whatever that boosted salary number was.
Note that asking a job candidate about their salary history is illegal in NYC. This is not the same as asking about salary expectations though which is ok.
The employers want to know your current pay and/or desired pay at the new job in hopes that you say a number lower than they were expecting/budgeting for.
A candidate should never provide the opening salary number.
There's too many variables anyway like health premiums, PTO policies, overtime policies, retirement plans, and fringe benefits that can drag down a high salary or pump up a low one. A compensation offer can only be fully evaluated when all of these things are disclosed. Compensation is a holistic thing beyond just "We're gonna pay you X dollars per year."
As of September 17, 2023, all employers in NY are required to disclose salary range with job listing. If Ban is not doing this for an advertised NY position, he is violating the law.
"applications without comment on salary requirements will not be reviewed"--sounds like a good opportunity to comment that not providing the salary range is illegal in NY. You are showing that you can follow instructions and that you understand the law.
Sneaky way of trying to bypass the NY rules. Disappointed in Ban's firm for trying to do this.
Nov 27, 23 11:17 am ·
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natematt
Doesn't the legality of this depend on the size of the company?
Edit: Someone pointed this out right below me, should have kept reading :)
Nov 27, 23 12:22 pm ·
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monosierra
I'm pretty sure they have more than 4 employees in the NY office ... unless there's a huge amount of turnover i.e. employees senior and junior get replaced wholesale
Companies of a certain size are not required to post salary ranges. You can generally assume:
Junior Architect Salary (0-5 years of experience): $40-60k in NY depending on Experience
Job Captain Salary (6-10 years of experience): $65-85k
Project Architect Salary (10-15 years of experience): $90k - $110k
Project Manager Salary (15+ Years of Experience): $115-$130k (or higher depending on the firm and how high-profile the project is and the relevant experience with that client / project type)
Generally bigger cities have a bigger hiring pool, and so firms generally can afford to be a bit more reserved in their offers. Smaller cities / towns (with some very expensive areas being expectations) generally pay like shit because there isn't enough work to go around.
Shigeru Ban is a smaller firm with a HUGE following and so not only are they competitive to work for, but they are also not a Gensler where they have a gazillion projects. So you need to adjust your salary expectations. These starchitects will try to sell you on working for less in exchange for experience in a "renowned" office. Not worth it. And keep in mind: the office is at heart a Japanese office... more hard work than many Americans are used to. So if you are hired at $40 an hour, the amount of time you actually spend in the office will work itself out to about $15 an hour, all in the name of "good" design.
Any employer with more than four employees must follow the guidelines of the New York City Human Rights Commission. The four employees include the owner of the company, and all four do not have to work in New York; as long as one is based in the city, the company is subject to the measure.
ok - I didn't realize his office was 22 people. my bad. speaking of following practice, is Shigeru's office registered as one of the 5 entities allowed to legally offer architectural services in NYS?
More to the question in the OP, yes they can ask you to provide your salary expectations and they can also probably use that to screen applicants ... I'm not sure any of that is illegal. However, they do need to provide the salary range for the posted position ... not providing that in their posting seems to be illegal.
FYI, I just updated the blog post to include a few more jurisdictions (New York State, Hawaii, and Illinois) that have passed salary transparency laws since it was originally written.
I hadn't looked outside the US when searching, but if you have some information, post the info or link to a website in the comments to the blog post and I'll update as needed.
As I am considering adding Architects as members of an LLC (likely a subsidiary LLC that will be dedicated to projects that would require licensed architects that would be properly registered with the states of Oregon & Washington), I have an inquiry:
* As we are likely an LLC with pass-through taxation but could be taxed like a corporation, the principals would likely get something akin to a salary called a "guaranteed payment" that would be tied to work performed based on hours worked.
What would be considered an appropriate level of salary (or guaranteed payment) per hour for a firm principal?
Assuming they are paid based on work performed but hour (more or less) unless workload and account receivables are sufficient for amount sent per month. The specifics and details to be determined so the aswers need not address all those but give a fair sense of what principals should be paid. Salary and basic hours a year. If possible, also provide an idea of typical unpaid overtime. As salaries are often for your 2080 hours a year or a number like 1920 or 2000 hours if you take out hours for days off for vacations and the pay is the same even if you work 2800 hours a year for example. The info can give a fair figure. I know pay varies in different regions so cost a living differs but I'll consider them under advisement on a general level as data points.
I know a lot of data is for regular EMPLOYMENT positions, not for business owners. This would make sense to how much of Billed fees I retain for myself for the work done as well.
Please take into consideration smaller towns not just big cities. So a town like Astoria and others in the area with a fair comparison to places in a similar-like context. Knowing, NYC rates would be probably irrelevant or marginally relevant to how much to pay people in a smaller town. This doesn't mean the data point isn't a valid data point.
My core question is in bold.
Nov 27, 23 9:05 pm ·
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luvu
you once said ( probably this year) you had ZERO live project…. hmm / and now you want to hire architect(s)
I don't recall specifically saying that but if I did say anything remotely like that, it might have been in-between projects. As to bringing in business partners, this isn't a decision being made in a rush, and partners selected immediately with careful consideration. There is due diligence in that process. The info requested is ahead of any such decision.
I'm also looking into 2024, with a number of potential client contacts in Spring of 2024 when during winter, new prospective client contacting us seasonally slows down during Winter holiday season. This does not mean to not be forward looking. Related subject matter was brought up. It doesn't hurt to plan ahead even months ahead and inquire info.
Nov 28, 23 5:28 am ·
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natematt
luvu More reasons to bring in someone who has live projects :)
natematt is correct that that would be more reasons to bring in someone who has live projects. Even if I have live projects, when, it would be reason for prospective partners to be able to bring in projects. The license alone opens doors for pursuing projects that, I (a building designer) would have to decline and refer them. Where as a business, we can pursue those projects BUT anyone seeking to be a partner in a firm should have something akin to what lawyers call a "portable book of business" that a list of prospective clients that they can bring with them and connections. They are to replicate me and what I do but what they add and bring to the business. Yes, it helps that they can and have work experience related to things I do at my business like historic preservation and residential & light commercial but more than that. These are qualities that I am looking at as a factor. Not just someone seeking a paycheck, (although we all want money, right?). Being a business partner is more than just working to collect a paycheck, luvu. For a regular employee, I totally agree with you, there should be live projects to support hiring employees. However, before hiring employees, I need to have at least a couple or so business partners (ideally licensed). With the new changes in the laws and administrative rules, ownership percentage rules are no longer going to be required. So I am paying attention to the new rules and the set up for compliance with it in Oregon, as well as Washington. I want to have licensed architects on the team in the partnership level. This way, if we hire employees, they can get AXP training hours that they may need.
With live projects or not, how many projects I can procure and take on would be limited by practical reasons. I may have live projects but even they may sometimes go through periods of "wait for the client" moments. This happens frequently during this time of the year. Whether I have live projects is not something I need to disclose with anonymous persons to whom I know nothing of their intent, for good or ill intent. On the other hand, when new partners comes to a firm, especially small ones, they would be generally expected to bring in work. Existing partners may have existing projects but they'll be booked up to their capacity to deliver. They don't generally take on more projects than they can handle so there isn't always an overflow of projects. Adding business partners can take time to first, interview (especially bringing in people outside the firm) and may be months. There are cases where it is quick but it isn't always the case. For smaller firms in less urban environments, it often takes longer. Not as desired. It takes time, sometimes for them to move (if they aren't immediately living in the area). Often prospective clients won't wait for that. They just move on to others until they find someone. The real world is unfortunately, inconvenient. Sometimes, things time right for a project coming. Until we have an architect or two or whatever number with at least one licensed in Oregon (and ideally in Washington)... or at least able to quickly get licensed, we can't be prematurely offering architectural services for projects in places where a license is required prior to it. In Oregon, firms are required to register with the board. That is existing laws/rules and also true with the new updated statutes and rules. There are just some minor changes for more flexibility in firms getting registered without having to have some specific number of owners representing a certain level of ownership. Modernizing with modern practice. I supported that change which is fairly similar to Washington's "registered professional design firm" requirement.
The reason for potentially 2 or 3 Architects licensed in these two states and potentially elsewhere would be redundancy so if one person's license gets inactive for whatever reason, we can maintain an active lawful licensed practice as a firm. It would be unlikely I would have that many projects on my plate for 3-4 of us to work on full-time for a year upon their arrival. That would be running me ragged like hell to run be running the project workload of 100 hours a week plus another 20-30 hours a week of non-billable hours a week. That would be ridiculous. I generally try to have something around 20-30 billable hours a work a week and not exceed that too much. If you understand that I also have to be working to procure the next project. You might say, hey, "I do more than 20-30 hours a billable hours a week. As a professional/technical design staff like a project architect/designer with a utilization rate of 70%-90%, I can understand that but you are likely not involved in procuring work for the firm which is not billable hours. Some of the colleagues here in the principal level or similar role in firms understands what I am talking about in that respect. Those seeking that kind of role must consider that being part of what their responsibilities would be at any firm.
If your direct to indirect expense multiplier is 3 (for example), I would suggest the principal's billable rate (not actual rate) is 3 times that of the highest-paid employee. But this is kind of a weird way to go about it in general... the profit distribution is always an incentive... hence why there are PARTNERS (partner in profit and loss) ;) I feel like a lot of people believe that being a partner means that he/she are just partners in the PROFITS of a company...
Of course there be potential arrangement for profit/loss sharing. I think getting paid for billable work. Part of initial profits would be retained earnings of the firm for building capital. An uneasy task. For right now, I'll look at the figures above as a guide as well as other data points. The direct (actual) rate is key starting point. The goal would be to obtain a sustainable 3x to 5x multiplier but at the same time, the direct rate be respectful and fair. The multiplier of 3.5x to 5x would potentially allow room for retained earnings and build staff and reserve funds knowing the cyclical nature of boom and bust cycle. I think as a firms, employees should be decently paid while at the same time, the academic institution should prepare them for entering the profession but learning doesn't stop there. There are weak spots on that end. I can see the benefits of salary range transparency. I just haven't got into asking questions about profit/loss sharing. Part of what I am thinking, is, they get paid from projects they work on throughout the year for their hours worked as close to being on payroll so they aren't stuck with only an annual payment. Guaranteed payments in this fashion can be a tax deduction.
Nov 28, 23 2:46 am ·
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Bench
Hey BB, ignoring rick's diatribe, is the principle 3x multiplier rule something you typically calculate, or is this a general rule of thumb you've used for a while and find it works well? any insight into the rational behind it?
$150 - $250 an hour billable rate (depends on where your practice is)
If you use the idea that partners should bill 3x the highest employee . . . .
$50 - $85 billable rate for your highest paid employee.
Assuming you’re using a 2x overhead multiplier then your highest paid employee makes between $25 and $43 an hour. ($52k - $89k a year). That seems rather low pay for your most experienced employee who would typically be a senior PM or junior partner.
Nov 28, 23 11:27 am ·
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BulgarBlogger
The net multiplier is different for every firm, but 3 is pretty common. Generally, the bigger the multiplier, the more the overhead OR the profit. Think of it like this: Firm A with 200 people has a marketing department of 10 and an accounting department of 12 that it needs to support. Its multiplier is 3. Firm B with only 5 people does not have full-time marketing or accounting staff, so it's multiplier is 2. You see how when the direct expenses are multiplied by the respective multipliers, that the fees generally end up higher. Now- this is not always true; theoretically the smaller firm can take more time to do a project than the bigger firm and then the fees for the same project for the smaller firm would end up being bigger than the fees for the bigger firm, but I am making the point that this net multiplier is meant to account for overhead and profit, and this overhead and profit tends to generally be higher in the bigger firms. Again - lots of exceptions, but I hope you can read between the lines of my generalizations.
I think its dumb not to incentivize the owner/principal/partner by offering a base salary + percentage of profit as bonus. Typically the owner's salary is low with the expectation that he collects a big chunk of change on the back end of the year through profit distribution. So 3x the billable rate of the highest-paid employee, seemed like a reasonable assumption if no percentage of profit distribution was offered. I think Rick thought that by paying a salary to an employee rather than a partner, he could somehow bypass the state's mandate of having a licensed architect be the owner. Idk- i got lost by reading his long post
I agree that partners should be paid more. What I don't understand is that the partner’s billable rate needs to be 3x higher than the highest paid employee.
If your highest paid employee is making $100k.
They bill out at $120 - $145 an hour (2.5 – 3x overhead multiplier)
That would mean your partner would need to bill out at $240 - $290 an hour.
I simply don’t see a partner being able to bill out that much an hour and not destroy every project budget they working on.
Nov 28, 23 12:43 pm ·
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BulgarBlogger
LOL my last firm billed out PM's at $250 an hour, with Principal's at $400 an hour.
You're in NYC. As you said before, the numbers will be deferent depending on where you live. A quick look at average pay for architects throughout the US, ignore the super costly metro areas like NYC, and you'd get the numbers I'm referencing.
Take CO for example. Denver the average pay for my level of experience is around $130k a year. I make $100k. The cost of living is 4x higher in Denver than where I live though. My new house cost around $330k. In Denver that same house would go for around $1.4 million.
BulgarBlogger, to clarify a possible misconception.
Possible misconception: "I think Rick thought that by paying a salary to an employee rather than a partner, he could somehow bypass the state's mandate of having a licensed architect be the owner."
Clarifying: There is no bypassing ownership of an architect. Hence a subsidiary LLC (which the architect partners would have ownership interest) - which would be the entity licensed with the state. This way, this wouldn't effect the parent entity. In the subsidiary LLC, hypothetically named: Astoria Building Design - Architecture Studio, LLC (ABD-AS, LLC). The ABD-AS, LLC would be 50.01% to 60% owned by parent, for subsidiary status but the remaining be owned by the Architect partners.
As for profit sharing, the parent my retain a portion of the profits but may be an agreement made so the parent doesn't such up 60% of the profits or losses. Ideally, the subsidiary LLC would be independently managed from the parent entity for the purpose of rendering the architectural services.
What I propose or would propose is along the lines of what you said here: "incentivize the owner/principal/partner by offering a base salary + percentage of profit as bonus."
Unless an LLC is taxed as a corporation, the term "base salary" or salary, technically, does not apply. It is legally called a "guaranteed payment" and can be disbursed like a salary and tax deducted similarly. Since owners are not technically employees unless taxed as a corporation when it comes to LLCs. Technically, the term is members not partners but substantially close enough. So I would propose a "guaranteed payment" essentially like a base salary with profit/loss sharing that goes with being an LLC member.
Architects wouldn't simply be hired as an employee. At least not the "partners" but there could be later employed staff that are. I am looking at the base salary figures as hourly figure for which we can appropriately bill clients and they get paid while working on projects not once a year after all revenue for the year and disbursed in the form of a "draw".
"Denver or my area" should read "Denver and my area". I think Blythe would be a closer comparison. Doxxing not intended and is easily ascertained from your profile, Chad. Smaller town, would equate to a closer RE valuation and similar cost of living conditions although not the same but similar.
Nov 28, 23 5:34 pm ·
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"Salary Requirements"
https://archinect.com/jobs/ent...
Starchitect Shigeru Ban posts a job listing for its NY office on Archinect but instead of listing salary ranges, they instead ask applicants to "Please include salary requirements and availability (applications without comment on salary requirements will not be reviewed)."
Is that even allowed in NYS?
Makes sorting for them easy. By the same token it tells you how they view this position and what an applicant can expect.
I hope the person that is hired takes a lot of dumps on company time.
Always a tricky Q to answer during interview as well . I was once asked how much I currently earned at the current firm , which I politely declined to answer.
Maybe this is a shitty thing to do, but I always gunned for a raise right before I planned to quit. Then if it was brought up during a future interview, I'd just tell them whatever that boosted salary number was.
Option 1) don't tell them
Option 2) tell them your current
Option 3) just tell them what you want to be paid + $10k
i always add 15k to the current
Note that asking a job candidate about their salary history is illegal in NYC. This is not the same as asking about salary expectations though which is ok.
https://www.nyc.gov/site/cchr/media/salary-history.page
The employers want to know your current pay and/or desired pay at the new job in hopes that you say a number lower than they were expecting/budgeting for.
A candidate should never provide the opening salary number.
There's too many variables anyway like health premiums, PTO policies, overtime policies, retirement plans, and fringe benefits that can drag down a high salary or pump up a low one. A compensation offer can only be fully evaluated when all of these things are disclosed. Compensation is a holistic thing beyond just "We're gonna pay you X dollars per year."
As of September 17, 2023, all employers in NY are required to disclose salary range with job listing. If Ban is not doing this for an advertised NY position, he is violating the law.
"applications without comment on salary requirements will not be reviewed"--sounds like a good opportunity to comment that not providing the salary range is illegal in NY. You are showing that you can follow instructions and that you understand the law.
Excellent point.
Sneaky way of trying to bypass the NY rules. Disappointed in Ban's firm for trying to do this.
Doesn't the legality of this depend on the size of the company?
Edit: Someone pointed this out right below me, should have kept reading :)
I'm pretty sure they have more than 4 employees in the NY office ... unless there's a huge amount of turnover i.e. employees senior and junior get replaced wholesale
Companies of a certain size are not required to post salary ranges. You can generally assume:
Junior Architect Salary (0-5 years of experience): $40-60k in NY depending on Experience
Job Captain Salary (6-10 years of experience): $65-85k
Project Architect Salary (10-15 years of experience): $90k - $110k
Project Manager Salary (15+ Years of Experience): $115-$130k (or higher depending on the firm and how high-profile the project is and the relevant experience with that client / project type)
Generally bigger cities have a bigger hiring pool, and so firms generally can afford to be a bit more reserved in their offers. Smaller cities / towns (with some very expensive areas being expectations) generally pay like shit because there isn't enough work to go around.
Shigeru Ban is a smaller firm with a HUGE following and so not only are they competitive to work for, but they are also not a Gensler where they have a gazillion projects. So you need to adjust your salary expectations. These starchitects will try to sell you on working for less in exchange for experience in a "renowned" office. Not worth it. And keep in mind: the office is at heart a Japanese office... more hard work than many Americans are used to. So if you are hired at $40 an hour, the amount of time you actually spend in the office will work itself out to about $15 an hour, all in the name of "good" design.
Any employer with more than four employees must follow the guidelines of the New York City Human Rights Commission. The four employees include the owner of the company, and all four do not have to work in New York; as long as one is based in the city, the company is subject to the measure.
22>4
ok - I didn't realize his office was 22 people. my bad. speaking of following practice, is Shigeru's office registered as one of the 5 entities allowed to legally offer architectural services in NYS?
1. PC
2. PLLC
3. DPC
4. LLP
5. Sole Proprietorship
Ok, he's good there.
DPC = Design Professional Corporation (NYS-specific) and means that up to 25% of owners don't have to be licensed architects.
Self-promoting a blog post I made that is related to all of this. NYC isn't the only place to require employers list salary with job postings.
Salary Transparency Laws
More to the question in the OP, yes they can ask you to provide your salary expectations and they can also probably use that to screen applicants ... I'm not sure any of that is illegal. However, they do need to provide the salary range for the posted position ... not providing that in their posting seems to be illegal.
FYI, I just updated the blog post to include a few more jurisdictions (New York State, Hawaii, and Illinois) that have passed salary transparency laws since it was originally written.
EA, there is movement in my area (Ontario) for the same.
I hadn't looked outside the US when searching, but if you have some information, post the info or link to a website in the comments to the blog post and I'll update as needed.
EA, see here: https://www.cbc.ca/news/business/pay-transparency-1.7027826
links to similar movements in other provinces.
Updated the post, thanks NS
As I am considering adding Architects as members of an LLC (likely a subsidiary LLC that will be dedicated to projects that would require licensed architects that would be properly registered with the states of Oregon & Washington), I have an inquiry:
* As we are likely an LLC with pass-through taxation but could be taxed like a corporation, the principals would likely get something akin to a salary called a "guaranteed payment" that would be tied to work performed based on hours worked.
What would be considered an appropriate level of salary (or guaranteed payment) per hour for a firm principal?
Assuming they are paid based on work performed but hour (more or less) unless workload and account receivables are sufficient for amount sent per month. The specifics and details to be determined so the aswers need not address all those but give a fair sense of what principals should be paid. Salary and basic hours a year. If possible, also provide an idea of typical unpaid overtime. As salaries are often for your 2080 hours a year or a number like 1920 or 2000 hours if you take out hours for days off for vacations and the pay is the same even if you work 2800 hours a year for example. The info can give a fair figure. I know pay varies in different regions so cost a living differs but I'll consider them under advisement on a general level as data points.
I know a lot of data is for regular EMPLOYMENT positions, not for business owners. This would make sense to how much of Billed fees I retain for myself for the work done as well.
Please take into consideration smaller towns not just big cities. So a town like Astoria and others in the area with a fair comparison to places in a similar-like context. Knowing, NYC rates would be probably irrelevant or marginally relevant to how much to pay people in a smaller town. This doesn't mean the data point isn't a valid data point.
My core question is in bold.
you once said ( probably this year) you had ZERO live project…. hmm / and now you want to hire architect(s)
I don't recall specifically saying that but if I did say anything remotely like that, it might have been in-between projects. As to bringing in business partners, this isn't a decision being made in a rush, and partners selected immediately with careful consideration. There is due diligence in that process. The info requested is ahead of any such decision.
I'm also looking into 2024, with a number of potential client contacts in Spring of 2024 when during winter, new prospective client contacting us seasonally slows down during Winter holiday season. This does not mean to not be forward looking. Related subject matter was brought up. It doesn't hurt to plan ahead even months ahead and inquire info.
luvu
More reasons to bring in someone who has live projects :)
natematt is correct that that would be more reasons to bring in someone who has live projects. Even if I have live projects, when, it would be reason for prospective partners to be able to bring in projects. The license alone opens doors for pursuing projects that, I (a building designer) would have to decline and refer them. Where as a business, we can pursue those projects BUT anyone seeking to be a partner in a firm should have something akin to what lawyers call a "portable book of business" that a list of prospective clients that they can bring with them and connections. They are to replicate me and what I do but what they add and bring to the business. Yes, it helps that they can and have work experience related to things I do at my business like historic preservation and residential & light commercial but more than that. These are qualities that I am looking at as a factor. Not just someone seeking a paycheck, (although we all want money, right?). Being a business partner is more than just working to collect a paycheck, luvu. For a regular employee, I totally agree with you, there should be live projects to support hiring employees. However, before hiring employees, I need to have at least a couple or so business partners (ideally licensed). With the new changes in the laws and administrative rules, ownership percentage rules are no longer going to be required. So I am paying attention to the new rules and the set up for compliance with it in Oregon, as well as Washington. I want to have licensed architects on the team in the partnership level. This way, if we hire employees, they can get AXP training hours that they may need.
With live projects or not, how many projects I can procure and take on would be limited by practical reasons. I may have live projects but even they may sometimes go through periods of "wait for the client" moments. This happens frequently during this time of the year. Whether I have live projects is not something I need to disclose with anonymous persons to whom I know nothing of their intent, for good or ill intent. On the other hand, when new partners comes to a firm, especially small ones, they would be generally expected to bring in work. Existing partners may have existing projects but they'll be booked up to their capacity to deliver. They don't generally take on more projects than they can handle so there isn't always an overflow of projects. Adding business partners can take time to first, interview (especially bringing in people outside the firm) and may be months. There are cases where it is quick but it isn't always the case. For smaller firms in less urban environments, it often takes longer. Not as desired. It takes time, sometimes for them to move (if they aren't immediately living in the area). Often prospective clients won't wait for that. They just move on to others until they find someone. The real world is unfortunately, inconvenient. Sometimes, things time right for a project coming. Until we have an architect or two or whatever number with at least one licensed in Oregon (and ideally in Washington)... or at least able to quickly get licensed, we can't be prematurely offering architectural services for projects in places where a license is required prior to it. In Oregon, firms are required to register with the board. That is existing laws/rules and also true with the new updated statutes and rules. There are just some minor changes for more flexibility in firms getting registered without having to have some specific number of owners representing a certain level of ownership. Modernizing with modern practice. I supported that change which is fairly similar to Washington's "registered professional design firm" requirement.
The reason for potentially 2 or 3 Architects licensed in these two states and potentially elsewhere would be redundancy so if one person's license gets inactive for whatever reason, we can maintain an active lawful licensed practice as a firm. It would be unlikely I would have that many projects on my plate for 3-4 of us to work on full-time for a year upon their arrival. That would be running me ragged like hell to run be running the project workload of 100 hours a week plus another 20-30 hours a week of non-billable hours a week. That would be ridiculous. I generally try to have something around 20-30 billable hours a work a week and not exceed that too much. If you understand that I also have to be working to procure the next project. You might say, hey, "I do more than 20-30 hours a billable hours a week. As a professional/technical design staff like a project architect/designer with a utilization rate of 70%-90%, I can understand that but you are likely not involved in procuring work for the firm which is not billable hours. Some of the colleagues here in the principal level or similar role in firms understands what I am talking about in that respect. Those seeking that kind of role must consider that being part of what their responsibilities would be at any firm.
Not less than any other employee...
If your direct to indirect expense multiplier is 3 (for example), I would suggest the principal's billable rate (not actual rate) is 3 times that of the highest-paid employee. But this is kind of a weird way to go about it in general... the profit distribution is always an incentive... hence why there are PARTNERS (partner in profit and loss) ;) I feel like a lot of people believe that being a partner means that he/she are just partners in the PROFITS of a company...
Of course there be potential arrangement for profit/loss sharing. I think getting paid for billable work. Part of initial profits would be retained earnings of the firm for building capital. An uneasy task. For right now, I'll look at the figures above as a guide as well as other data points. The direct (actual) rate is key starting point. The goal would be to obtain a sustainable 3x to 5x multiplier but at the same time, the direct rate be respectful and fair. The multiplier of 3.5x to 5x would potentially allow room for retained earnings and build staff and reserve funds knowing the cyclical nature of boom and bust cycle. I think as a firms, employees should be decently paid while at the same time, the academic institution should prepare them for entering the profession but learning doesn't stop there. There are weak spots on that end. I can see the benefits of salary range transparency. I just haven't got into asking questions about profit/loss sharing. Part of what I am thinking, is, they get paid from projects they work on throughout the year for their hours worked as close to being on payroll so they aren't stuck with only an annual payment. Guaranteed payments in this fashion can be a tax deduction.
Hey BB, ignoring rick's diatribe, is the principle 3x multiplier rule something you typically calculate, or is this a general rule of thumb you've used for a while and find it works well? any insight into the rational behind it?
Managing partners:
$150 - $250 an hour billable rate (depends on where your practice is)
If you use the idea that partners should bill 3x the highest employee . . . .
$50 - $85 billable rate for your highest paid employee.
Assuming you’re using a 2x overhead multiplier then your highest paid employee makes between $25 and $43 an hour. ($52k - $89k a year). That seems rather low pay for your most experienced employee who would typically be a senior PM or junior partner.
The net multiplier is different for every firm, but 3 is pretty common. Generally, the bigger the multiplier, the more the overhead OR the profit. Think of it like this: Firm A with 200 people has a marketing department of 10 and an accounting department of 12 that it needs to support. Its multiplier is 3. Firm B with only 5 people does not have full-time marketing or accounting staff, so it's multiplier is 2. You see how when the direct expenses are multiplied by the respective multipliers, that the fees generally end up higher. Now- this is not always true; theoretically the smaller firm can take more time to do a project than the bigger firm and then the fees for the same project for the smaller firm would end up being bigger than the fees for the bigger firm, but I am making the point that this net multiplier is meant to account for overhead and profit, and this overhead and profit tends to generally be higher in the bigger firms. Again - lots of exceptions, but I hope you can read between the lines of my generalizations.
I'm quite aware of the overhead multiplier. Typically it's in the 2.5-3x range for medium firms.
What I'm still a bit confused about is your statement:
'I would suggest the principal's billable rate (not actual rate) is 3 times that of the highest-paid employee.'
I think its dumb not to incentivize the owner/principal/partner by offering a base salary + percentage of profit as bonus. Typically the owner's salary is low with the expectation that he collects a big chunk of change on the back end of the year through profit distribution. So 3x the billable rate of the highest-paid employee, seemed like a reasonable assumption if no percentage of profit distribution was offered. I think Rick thought that by paying a salary to an employee rather than a partner, he could somehow bypass the state's mandate of having a licensed architect be the owner. Idk- i got lost by reading his long post
I agree that partners should be paid more. What I don't understand is that the partner’s billable rate needs to be 3x higher than the highest paid employee.
If your highest paid employee is making $100k.
They bill out at $120 - $145 an hour (2.5 – 3x overhead multiplier) That would mean your partner would need to bill out at $240 - $290 an hour.
I simply don’t see a partner being able to bill out that much an hour and not destroy every project budget they working on.
LOL my last firm billed out PM's at $250 an hour, with Principal's at $400 an hour.
You're in NYC. As you said before, the numbers will be deferent depending on where you live. A quick look at average pay for architects throughout the US, ignore the super costly metro areas like NYC, and you'd get the numbers I'm referencing.
Take CO for example. Denver the average pay for my level of experience is around $130k a year. I make $100k. The cost of living is 4x higher in Denver than where I live though. My new house cost around $330k. In Denver that same house would go for around $1.4 million.
BulgarBlogger, to clarify a possible misconception.
Possible misconception: "I think Rick thought that by paying a salary to an employee rather than a partner, he could somehow bypass the state's mandate of having a licensed architect be the owner."
Clarifying: There is no bypassing ownership of an architect. Hence a subsidiary LLC (which the architect partners would have ownership interest) - which would be the entity licensed with the state. This way, this wouldn't effect the parent entity. In the subsidiary LLC, hypothetically named: Astoria Building Design - Architecture Studio, LLC (ABD-AS, LLC). The ABD-AS, LLC would be 50.01% to 60% owned by parent, for subsidiary status but the remaining be owned by the Architect partners.
As for profit sharing, the parent my retain a portion of the profits but may be an agreement made so the parent doesn't such up 60% of the profits or losses. Ideally, the subsidiary LLC would be independently managed from the parent entity for the purpose of rendering the architectural services.
What I propose or would propose is along the lines of what you said here: "incentivize the owner/principal/partner by offering a base salary + percentage of profit as bonus."
Unless an LLC is taxed as a corporation, the term "base salary" or salary, technically, does not apply. It is legally called a "guaranteed payment" and can be disbursed like a salary and tax deducted similarly. Since owners are not technically employees unless taxed as a corporation when it comes to LLCs. Technically, the term is members not partners but substantially close enough. So I would propose a "guaranteed payment" essentially like a base salary with profit/loss sharing that goes with being an LLC member.
Architects wouldn't simply be hired as an employee. At least not the "partners" but there could be later employed staff that are. I am looking at the base salary figures as hourly figure for which we can appropriately bill clients and they get paid while working on projects not once a year after all revenue for the year and disbursed in the form of a "draw".
Simply put, I am not seeking to be a dick to architects.
If I recall, Denver or my area are fairly close in cost of living average so the numbers are in fair ballpark, I think.
"Denver or my area" should read "Denver and my area". I think Blythe would be a closer comparison. Doxxing not intended and is easily ascertained from your profile, Chad. Smaller town, would equate to a closer RE valuation and similar cost of living conditions although not the same but similar.
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