Hi, the second question’s explanations in this Quiz Break #6 indicate that a designer’s status as an employee or an independent contractor does not directly affect their billing rate. However, my understanding of independent contractors is that they are typically paid a higher hourly rate because they cover their own indirect expenses. Since hourly rate x net multiplier = billable rate, my reasoning is that their employment status would directly affect their billable rate. Or if independent contractors are being paid a lump sum for their services on a project, then it seems like their fees / wages would be evaluated as pass through consultant fees and not as part of the Architect’s total billings. Either way seems to have a direct effect on their billable rate. I do understand the point the explanation makes that the net multiplier is universally determined for the office and then applied to each team member but I don’t understand how that eliminates employment status as directly impacting billable rates. Can you help clarify this please?
@mlb082600 This is a great question. The net multiplier applies the same way to all internal labor, so employment status doesn’t change the method of calculating billable rates (the amount that the client pays). What can change is the raw hourly rate the firm pays the person—contractors often cost more per hour as you’ve pointed out. If the contractor is paid lump-sum, then they’re treated as a consultant and aren’t included in the multiplier at all. So employment status affects cost, but not the billable rate formula itself.
Kiara Galicinao, AIA, NCARB
Product Coordinator
Black Spectacles