What's a fair contract rate for a midlevel product manager?

Considering an opportunity for a 6 month contract with health benefits included. Any guidance from the group on a fair market rate?

4 Replies

Interesting question.

Here is how I would think about this. You are basically going to work for the company for six months and taking on more work (because you have some administrative overhead) and risk than if you were working for them full time. You also have fewer benefits.

But before you get to considering what the percent increase should be due to that, you need to understand what the fair market rate would be if you worked for them full time.

And that would be based on a number of variables including:

  • The size of company
  • The location of the company
  • How long they have been trying to fill this role
  • How much they pay other PMs if they have them
  • Your location
  • The size of the product
  • The size of the product team
  • Your experience

You also need to factor in how interested you are in the role.

So, it is very hard to provide specific guidance without understanding the above. That is why I provided a framework for you to apply against this product management opportunity vs just giving you a very broad contract rate range.

If you want to check out an article on PM salaries you might consider the following Product Management Guide post.

Anyway, I hope my answer is helpful.

My company, the 280 Group, has been in the Product Management contracting business for eighteen years now, so I'll throw in my perspective. A lot has to do with how senior the person is (and the work being done), what area of the world you are in and how long the contract is. In general, as a contractor you should get 2 to 2.5 times your salary in order to cover your costs of not being employed (downtime between contracts, unpaid time spent doing business development, business insurance in case you are sued, additional 15% self-employment tax, additional tax to pay for your half of social security that your employer would normally pay, etc.

So here's are rough calculation using easy numbers:

  • If you would make $150k/year as an employee and there are roughly 2000 work hours per year (there are actually 2080 but let's simplify to make it easy) then as an employee you make $75/hour.
  • As a contractor you should charge $150 to $187.50 per hour (at least) in order to be able to stay in business and be paid a comparable amount.
  • You should increase this if you do not have extensive marketing and business development in place because when the contract ends it will take anywhere from 3 to 9 months to find another six month contract, so I would say the final number should be between $200 and $250 per hour for a firm six month commitment on the client's side.

NOTE: Contract positions often end earlier than the stated term, due to budget cuts, changes in the economy, internal politics, business cycles that affect that particular client, etc. Don't be surprised if they are promising you a long time in the agreement and then things end (sometimes rather abruptly) - contractors are the first to go when things get tough. It doesn't matter what agreement you have in place with them - clients will end it if they have to and the cost of taking any kind of legal action to attempt to recover anything specified in the agreement is so high that you would never go after them.

Here are additional Product Manager Salary Statistics on our blog.

This is just my opinion, but it is based on being in this business for a LONG time and watching many contractors take rates that seem attractive but in reality don't work out for them

Hope this helps!

Brian Lawley

CEO & Founder, www.280group.com

Author, Product Management for Dummies and five other Product Management books

Thank you Brian(s), your answers are very helpful. Will use these frameworks and context to support my proposal.

Thank you, Brian,

I wish thst I had known this 5 years ago! Thanks for sharing your expertise!