My personal rule of fairness is that 1/3 of the direct-value an employee brings to the company is probably the most that can safely be paid directly to that employee without hurting the health of the business and its indirect-value employees.
But if the employee is getting less than 1/4, they have a good reason to look for employment elsewhere. At least in software dev.
At 1/18th, the employee should probably be interviewing with competitors as often as they are billing hours. If that does not work out, it should be possible to go independent and undercut your former employer and their colluding competitors by charging only 9 times your former salary, giving yourself 1/3 of that, and investing the rest into growing the new business, such as by poaching former colleagues and business development personnel, and offering them 1/4 to 1/3 of what they bring in.
It seems very dishonest to me to bill at near-partner rate for junior associate work. If the latter aren't that useful, making the client pay a rate as though they were doing vastly more or better work than they really are getting done is very unethical.
>My personal rule of fairness is that 1/3 of the direct-value an employee brings to the company is probably the most that can safely be paid directly to that employee without hurting the health of the business and its indirect-value employees.
I personally don't think it would be fair if 1/3 of a supermarket's revenues went to the cashiers. Just because you're bringing the revenue in for a business doesn't mean your labor is irreplaceable.
I cannot comprehend the confusion of ideas that led you to believe that retail cashiers are direct-value employees.
In a grocery store, the direct-value employees are the procurement employees--the people who purchase the goods that go on the shelves. If they can negotiate a good wholesale buying price, the store can make a profit on reselling individual units. If they buy at a bad price, the store takes a loss when reselling.
You can measure the direct value that employee provided by adding up the final sale prices from the items in their buy, and subtracting the initial purchase, optionally adjusting one or the other with a TVM calculation. If you bought a ton of pineapples for $X, and they were all sold or discarded by the next month, bringing in a total of $Y, that's $(Y-X) in direct value. It is very reasonable for 1/3 of that number to go to the individual employee responsible.
The cashier might be able to boost $Y by ensuring that no one who would have bought pineapple walks out without one, because the check-out lines are too long, but that effect is not measurable. The produce manager and stockers might boost $Y by arranging the pineapples in an attractive way, and by pricing them to encourage them to sell before they rot, but that effect is not (easily) measurable (without testing and statistical analysis).
The procurers are responsible for $X. Many other employees are responsible for $Y, along with other unpredictable factors, such as whether or not the customers actually want any pineapple this week. Maybe some cooking show featured it in their latest episode, or maybe Dole decided to run a coupon in the latest Sunday newspaper. Maybe some scientific study reached a conclusion about bromelain, and it trickled out past the scientist-journalist barrier. It's hard to say why $Y was that number, but the purchasers can use it to inform their bargaining to get the next $X, a number more predictably under their control.
Nevertheless, a cashier is not responsible for the magnitude of the cash in their till at the end of a shift. They just ring up what the customers chose to buy. And the number in the till also includes the procurement cost of the food that went out the door. The cashiers are necessary for the business to operate, but they are not directly responsible for the revenues coming in. They are counting up the dollars, not delivering value to the customers. I don't go to the grocery store to chat up the cashiers; I go to buy a variety of foods in less-than-wholesale quantities. A store with robot cashiers is still able to function, whereas a store without food on the shelves is completely pointless. The cashiers are therefore responsible for the slight preference I have for human cashiers over robot ones. I might choose to pay $5 more on a $250 grocery order, to have a live person ring it up for me, and that's the value the cashier provides, not the whole $255. But the grocery store doesn't know how much I'd pay for cashiers. I keep it secret, because if they knew, that's what they'd charge me for it, and I'd lose the value that I currently enjoy from getting that included in the price of the food. So that value is not measurable. The store would rather pay the cashiers a fixed rate, and price their added value into the cost of the food.
The oil-driller is not responsible for the price of the oil that was pumped that day. They are responsible for the cost of the holes and pipes between the reservoir and the surface, and the cost of the workplace injury insurance, and the cost of environmental damage. Those numbers can be measured. A great safety record is worth a measurable amount of money. Drill bits and mud have a measurable cost, and using less than the predicted numbers translates to an amount of money. Government fines for spills and groundwater contamination are known quantities. The geologist is the one that finds the oil, and the explorer is the one that proves it's actually there, and the refiner distills and cracks it into usable goods. Dividing up the responsibility for each barrel is hard, but counting the cash that comes in when the barrel goes out is easy.
It's not possession of the cash. It's the responsibility for delivering the value, and the measurability of that value.
An employee that brings in a contracted rate for each billable hour is responsible for delivering exactly that much value to the customer. Other people involved in the business may provide value, such as by increasing the rate beyond what the direct-value employee could otherwise negotiate on their own, or by procuring more customers, to increase the utilization rate of the direct-value employee, or in increasing productivity so that it's possible to deliver that much value per billable hour. But that's not as easily measured. The support employees deliver value to the worker that delivers value to the customer.
And that's why the direct employee doesn't ever get all that they bring in, minus the business expenses to support only them as an employee. That number isn't all them. It might not even be mostly them. But they're the ones closest to the number that can be measured. They're the ones that could most easily shed all the dead weight at the company, and strike out on their own, if they had the moxie, sacrificing some of their billable hours to do their own support and development work, to make sure that there is a contracted rate to bill the hours to.
The 1/4 to 1/3 rule is a concession to the fact that indirect-value employees are still responsible for delivering a lot of value, that indirectly increases the revenues of the company. And that represents a good balance in a medium-sized company. Smaller companies have fewer support employees. Larger companies have more dead weight.
Cashiers and oil-drillers are not relevant, unless they are on contract from another company.
I may be confused with regard to the purpose of your response, then. Those of us who can't write more than a handful of posts in a day have to put a lot of words in them, and maybe some thought, because if there is an exchange with multiple posts in it, the system cuts us off for a few hours. I know you don't have that problem.
I remind you that we can't all write 15-word posts that state that there may be a problem with the conversation, but without offering any specifics, or any hints on how to fix it.
Should my response have been in reply to the linked post instead of to yours? Should I have written fewer words or more words? Why is the word count relevant? Was your response in support of the linked poster, against, or neutral? Do you believe that your post added enough to the conversation that my reply should have addressed it specifically, rather than the content of the post it referenced? I understand that there is a complaint, but I don't know why.
I could have been more brief, but I didn't have enough of my own time to waste less of yours. Sorry for that.
I respectfully disagree with 1/3 direct-value payout in tech consulting. My experience is 77% paid to the employee. If you have to consume 2/3 to cover overhead the employees are effectively subsidizing a very expensive business model. This leads me to believe there is a dichotomy between the value of IC and management. eg. top heavy.
It is possible to run leaner, but I, for one, would not want to do my own marketing and promotion, or contract negotiations, if my main job is software development.
But if the employee is getting less than 1/4, they have a good reason to look for employment elsewhere. At least in software dev.
At 1/18th, the employee should probably be interviewing with competitors as often as they are billing hours. If that does not work out, it should be possible to go independent and undercut your former employer and their colluding competitors by charging only 9 times your former salary, giving yourself 1/3 of that, and investing the rest into growing the new business, such as by poaching former colleagues and business development personnel, and offering them 1/4 to 1/3 of what they bring in.
It seems very dishonest to me to bill at near-partner rate for junior associate work. If the latter aren't that useful, making the client pay a rate as though they were doing vastly more or better work than they really are getting done is very unethical.