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Want more pay? Come back as a consultant

October 16, 2008

Is it true that companies pay you more when you’re on the outside than when you’re on the inside?

I think so, especially after we’ve had ex colleagues come back as consultants. Ironic isn’t it.

I am actually a living example. When I left my 2nd job in Singapore, the department I left went into a bind. We were in the middle of a project with a major Sg bank so leaving my seat vacant any longer than a week would cause a serious backlog and get some bigwigs into trouble. Even if they hired a new guy tomorrow, it would take him 2 weeks to learn enough about the system to be of any use. And I was adamant about leaving.

So the company reluctantly asked could I take a week off, come back and spend a month with them as a consultant to keep the backlog under control and help train the new guy. They were willing to pay me 1.8 times my normal salary.

I initially refused as I had planned to take a break in the US but eventually I said okay. Not because of the money but because Singapore is a small place and I don’t fancy being famous for the wrong reason.

So why do companies pay you more when you’re an outsider?

Simple. In my case they took my normal salary. Added the statutory deductions and taxes they used to pay on my behalf. That’s about 30% of my basic. Added equipment depreciation and general expenses they incurred when I was staff. That’s another 20%. Finally they added what I call the “desperate tax” which is a mixture of market rate for consultants, risk management and making the deal sweet enough to make me say yes. That was about 30% more in my case.

So it worked up to 1.8 times my previous basic.

So yes they pay more but bear in mind, as a consultant you’ll have to pay your own statutory expenses, taxes and stuff like rent if you had your own office. Many of us don’t realize the hidden expenses our employers pay for us. Gross income is just a perception. Its net income that matters.

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2 Comments leave one →
  1. October 16, 2008 10:20 am

    I think the same thing goes for those who wanted to start their own business. They think that they can earn a lot more (in a sense, yes), and they can do the things they like (not exactly) and they will be mostly trouble-free. But the thing is, our company actually helps us to solve a lot of troublesome issues without us knowinng it. 😛 And when we’re on our own…….we’ll know that there will be a lot of minor things that we need to look at.

    Yeah. That explains why some try their luck outside, get hit by reality and then run back in. Greener pastures isn’t all that green when you realize its a septic tank at the bottom.

  2. October 16, 2008 6:04 pm

    Yes. It is true also. From now on, I must be careful of each steps that I made. 🙂

    No pain no gain. Just be careful the pain won’t be permanent. 🙂

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