First, let me clarify what I mean, in the title of this post, by “security.” I’m referring to the money you will have to pay your bills and take care of your family. There are many reasons to join a consulting firm as an employee. Typically, joining a consulting firm due to the perceived security of bench-time pay is not one of them.
I talk with many consultants who tell me that they feel most comfortable receiving a salary + benefits and knowing that when their project comes to an end, there’s paid bench time in the event that there’s no assignment immediately available.
As a consultant, you can be paid an hourly rate or you can be paid a salary with bonuses and paid bench time. If you have the option to either take a one-year project on a $10,000/month salary or an $85/hour rate, which would you take?
The salary will pay you $120,000 and the hourly will pay you $160,000.
[Related: Healthcare Consulting 101 GUIDE]
The key here is being able to manage your money. If you took the hourly rate and saved the extra money you earned, you would have the after-tax pay for four additional months. So the key here is, if you took the salary with potential for bench pay, how long will the company you join pay for you to be on their bench?
If the company has a policy that they will pay bench time for up to six months, then the salary and bench time would be more stable. But if they are not willing to guarantee at least four months of bench-time pay, then, in this example, you would be better off — financially speaking — taking a project for the higher hourly rate.
People tell me that joining a consulting firm as a salaried employee would be the best thing for them, because the firm pays bench time and they feel that they need the security. If these people equate security with having money to pay their expenses, then you can see from the example above that the salaried path does not always provide more security.
There may be many reasons why you feel a consulting firm is a better option than performing consulting engagements on a contract basis. But you cannot make an educated decision in this area until you:
- Do the math and compare how much you will be earning by doing a project on salary, compared to doing it on an hourly basis.
- Are clear as to exactly what the consulting firm will be able to commit to, in writing, for bench time.
Once you have this information, simply do a comparison like the one above. If you’re going to join a consulting firm because you’re being told that it will provide more security, run the numbers and evaluate the bench-time policy to determine for yourself if that’s truly the case.
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