Congratulations! You’ve received an offer from a Microsoft vendor. Before you accept, consider two important decisions. First, be careful before signing a non-compete agreement, and second, don’t take the first compensation offer.

In my last column, I described the basic differences between Microsoft’s agency temp (referred to as A– and pronounced “ay-dash”) and vendor positions, which are called V– or “vee-dash.” Other companies such as Expedia have implemented very similar practices, although the mandatory break in employment for an A– contractor at Expedia is only 60 days compared to Microsoft’s 100 days.

Many Microsoft vendors, such as Volt, try to get their new hires to sign a non-compete agreement to restrict you from working with another Microsoft vendor within a typical range of six to 18 months. Most candidates, excited about their new offer, don’t read the fine print and sign such contracts. While it’s questionable whether such non-competes are enforceable in Washington state, they make you a less desirable applicant when you try to find new contract opportunities at other Microsoft vendors.

As with any contract, you don’t have to accept the default agreement. Vendors will play the “it’s part of everyone’s agreement and we can’t change it” card, but you can negotiate this. I always counsel my clients to tell vendors they won’t accept the agreement unless the non-compete clause is removed. In each instance, vendors have removed those clauses. The key takeaway is that you have to ask for it to be removed, or it will haunt you later.

As for the salary, this is where it gets shocking. Most vendors try to offer the lowest possible hourly rate they can get away with, and most desperate job seekers accept the offer for fear of losing out on the opportunity. A typical vendor, for example, would bill a program-manager position at $80 and try to pay you $40 or less. The lower the vendor pays you, the more they get to keep.

One of my former Microsoft colleagues, who had a master’s degree from a top computer-engineering university, was being paid $19 an hour, while other technicians with lesser qualifications were being billed for $33, simply because my colleague had failed to negotiate his salary.

Microsoft vendors typically have three compensation packages:

Package A: Lowest hourly rate, but full benefits (medical and dental, with vision in some cases), holiday pay, vacation and a retirement plan. Since many vendors require you to work a full year before qualifying for holiday or vacation pay, shorter three- or six-month contracts would exclude you from such benefits, so don’t pick this package in those instances.

Package B: Medium hourly rate, but with some benefits (medical and dental, with vision in some cases.) Holiday, sick pay and vacation pay aren’t included in this package. If you want a higher hourly rate with some benefits, this could be a good choice.

Package C:
 Highest hourly rate with no benefits. This is a good choice if you have insurance coverage through a working partner.

For example, the rate could be $35 an hour with full benefits, $40 an hour with some benefits or and $45 with no benefits. That $10 per hour difference could translate to more than $20K annually, more if you work overtime.

Microsoft vendors typically have a 30-percent to 150-percent margin on rates, meaning that they can generally pay you more than they initially offer you. When a typical candidate asks for more money, vendors may say that they would have to go back to the Microsoft hiring manager to ask for more money, which won’t look good for you. This is a scare tactic to discourage you from asking for more money.

In one instance, a client of mine was offered $50 an hour. We asked for a rate near $75 an hour, and they said the highest they could pay would be $62 hour. One email resulted in a $12 an hour increase in pay. Not everyone will be successful negotiating rates that high; however, everyone should be able to get between $3 and $6 an hour extra without having any negotiation training. Annually, that would translate to $6,000 to $12,000 extra, a significant amount for most professionals.

Talk to current or recently departed contractors in similar roles about their rates to use as a base to start your salary negotiation. Remember, they’ll likely use scare tactics to retain as much profit as possible.

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One Response to Understand contractor compensation before accepting the role

  1. Theo says:

    Great tips! Thank you for sharing.