It’s all ’bout the money (well, almost)
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Money may not buy you love but it sure comes in handy when you need to pay those bills and automo’bills.
Although money in itself is never the ultimate motivator, receiving recognition in the form of a good monetary compensation is important when it comes to tasks that require some serious skills. If you ask our rocket scientists, it’s not all ’bout the money – they also love what they do.
Here, we’re going to focus on the lucrative aspect and especially on Rakettitiede’s salary model, in which half of the amount invoiced ends up in the developer’s pocket.
The salary’s great and the model’s simple. – Perttu, Rocket Scientist #43
The salary model is fair and transparent. – Viktoriia, Rocket Scientist #54
The money’s good. – Jyri, Rocket Scientist #17
What does this mean in the end and where does the rest of the money go? Is it all too good to be true?
EDIT: On 1 November 2022, we’ll be introducing an alternative to our classic salary model. Read more below.
Show me the money!
In Rakettitiede’s salary model, the gross amount paid to the developer is 50 percent of the invoice charged to the client. To put it in the most beautiful language in the world, numbers:
If the billed hours amount to 158 hours per month and
the hourly rate is €95, the salary is €7,505 per month,
the hourly rate is €100, the salary is €7,900 per month,
the hourly rate is €105, the salary is €8,295 per month,
and so on.
The average hourly pay also determines the payment for annual leave as well as holiday and sickness allowance. In other words, taking holidays and sick leaves into account, the consultant receives approximately 60 percent of the invoice charged to the client.
In 2022, the average annual salary of a rocket consultant with full holiday compensation was about €91,500 (2021: 94k).
75 percent of the wealth that finds its way into the Rocket is spent on consultants’ salaries and salary-related expenses, and the remaining 25 percent covers sales, marketing, recruitment, tools, office walls and a few annual festivities.
Incentives for the company and the employees are aligned: when the company makes a profit, it’s also a win for the employee. – Lauri, Rocket Scientist #25
Is it possible to affect the price tag?
Our hourly rates are negotiated by sales, but the expert has the final word. The rates are based on the skills and competence level required as well as the role of the consultant and the length of the commission. Rocket consultants occasionally take on lead or architect roles, which means a more substantial price tag compared to that of a so-called basic senior developer.
When the Rocket’s outstanding sales team pairs up with developers whose skills are in high demand, the developers are able to earn more than they would in other companies. In addition, they gain valuable experience in working at a consultancy. — Viktoriia, rocket scientist #54
If the offered pay doesn’t sound appealing, the consultant is free to take on another project or learn something new. This is a personal choice – the consultants can decide whether they want to put emphasis on their hourly rates, how interesting the job is or some other parameter entirely.
The fairness of the salary model is definitely a plus: as long as you accept the original proposal, there’s no risk of either party feeling cheated at any point. That means no more awkward and stressful renegotiations. – Lauri, rocket scientist #25
Consultants can also affect their pay level by developing their competences so that clients may be more willing to cough up a bit more than they normally would.
How can we afford this?
Our pay is higher than the average salaries in the industry – and you don’t have to work overtime. Achieving this doesn’t mean that the CEO and office staff only need to eat at Mickey D’s.
The better than average salaries are reflected in the company’s profit margin. Unlike some of our competitors, our operating margin doesn’t rise above 20 percent.
We don’t want to cut down on our excellent benefits. Our most important employee benefits include comprehensive, specialty-level medical expenses insurance, conversational psychological support (Auntie) as well as the telephone, home internet and lunch benefit.
Our model is valued by those who want to choose their own benefits instead of receiving a lower monetary compensation and a big range of benefits aimed at the “majority” by the company.
Competence development
The purpose of the salary model is to offer a fair pay, and also to give the employee significant autonomy in their time management. As a rule of thumb, everyone’s working time is flexible – but they can of course work and bill full hours if they want to.
Our salary model is suitable for people who trust their skills and want to keep them up to date and easily marketable. Most of our scientists are able to develop their professional competencies in their client projects. Allocation provides flexibility for the billable work in case the consultant wants to study something but can’t do so on the client’s time.
In companies that pay their employees for taking part in training sessions, the salary is typically lower than in the Rocket model even in situations where participating in a training might cause the consultant to lose a billing opportunity. However, for some, a momentary decrease of pay may be a bigger deal psychologically than an overall inferior pay check.
This is a key challenge the model presents to someone who’s accustomed to traditional salary models. People who are more entrepreneurial may have easier time grasping our concept, because freedom and responsibility go hand in hand.
History of the salary model
We don’t trick our consultants with unnecessary hype and ball pits because, in the end, pinball machines and company parties can't make up for a pay check that’s too small in relation to the difficulty of the task. Our top developers have witnessed both functional solutions and the pitfalls of the industry first hand, which means they have considerable experience under their belts. This experience also ensures quick results, which is in the best interest of the client.
Our good experiences and the fact that many of our competitors have adopted the salary model as well serve as proof of the power of the model. The model has remained the same since the founding of the Rocket in 2011. In creating the model, we were inspired by the salary model of our then small but feisty competitor (today they’re big and feisty).
Already in the early days, the company recognised that the model had the following advantages:
The salary is based on what you do, not who you are. In consultancies, the salary is always paid by the clients, regardless of the model.
Fairness and transparency are maximized. Information on hourly rates is also openly shared within the firm, so the consultants know what everyone else is charging.
Freedom to manage one’s time – without unnecessary paper work.
Bench warmers
Our model means a significant pay rise for many but can also make those accustomed to the traditional salary model feel uncertain about themselves: What happens if I end up spending time on the bench? How much bench time should I expect?
Even if there are breaks between projects, we will pay a guaranteed salary, also known as a base, minimum or bench salary.
During the trial period (6 months), the bench salary is €5,000 per month. Afterwards, the bench salary is €3,000 per month.
There are hardly ever any breaks, though, due to the high demand of talent. Our sales rate is 97%, which translates to very little bench time. If a client for one reason or another suddenly decides to bring a project to a halt, it is usually possible to find the next one within the period of notice.
The consultant’s priorities also have an effect on the breaks since everyone gets to choose the projects they want to work on – matching the task with the right developer results in a better outcome. If our developers were forced to work on projects, the end result would suffer.
How to use your bench time
For those months during which the billing-based salary is higher than the bench salary, the pay is based on the hours charged to the client. If the salary based on invoiced hours is lower than the bench salary, the consultant will be paid the bench salary.
If there are no billable jobs, bench time is spent studying, participating in in-house projects and offering support to sales, marketing or recruitment.
Those trying to decide between becoming a sole entrepreneur or a Rocket consultant often choose the Rocket when they want not just a good salary but also some extra security for times when they are sick, on parental leave or when there are no client projects available. The consultant is also backed up by a work community and a powerful sales team that is on a constant lookout for the best and most attractive client projects.
An alternative salary model
Our classic 50 per cent salary model is flexible and simple. Since the Rocket wants to support its worker ants in all situations in life and seeks to eliminate uncertainty and stress, we now offer a more stable alternative to the fifty-fifty model.
The alternative model offers a fixed monthly salary of EUR 5,000 plus 7% of the invoice charged to the client. In light of last year’s (2021) figures, this amounts to approximately 85% of the pay of the classic model. In other words, the salary is lower than in the classic model: but the more risks you’re willing to take, the more dough you can make.
The classic model will remain the default salary model. However, every new and old rocket scientist can opt for the alternative model if they wish. Changes are inevitable, though – the alternative model needs to be reviewed once a year.
A few words on buying shares
Each Rakettitiede employee has the opportunity to buy themselves a piece of the Rocket in an annual private placement. The first issue was conducted in 2017 when the Rocket was a young and energetic 6-year-old. About half of the staff joined in. At the moment, approximately 40 percent of the staff have shuttle shares in their bank vaults and desk drawers.
What does this mean in financial terms? The growth of the company increases the value of ownership, and the dividends paid mean an annual return on the investment. This allows our consultants to scale their work beyond their billable hours: helping recruitment in a technical interview for a few hours or assisting sales in securing a new client allows them to enjoy the value generated through shareholding.
Our ownership strategy includes an objective related to everyone’s personal development: “Everybody is better off after working at Rakettitiede, professionally and financially.”
Updated 8 Feb 2023
Want to smile all the way to the bank? Come work for us!
Read more:
Stocking up on shares – many Rocket Scientists are also shareholders