Going for 80-20 Option ? Confused ? Facts to Consider & Question to Ask

Sometime when H1B employee threatens his/her visa sponsoring employer ( H1B employer) that if you don’t give me a salary raise, I will leave. And, employer comes with 80%-20% formula where you get the privilege to keep 80% of your hourly billing rate and rest 20% is kept by your H1B employer.

Are you being offered 80%-20% payment formula but don’t know which option to choose the fixed salary or 80%-20% formula. Are you confused ?

Then you must consider the following factor.

Options to consider

  • Whether your technical skills is in demand ?
  • Do you have a family (means relocating would be a big adventure) or are you living alone in USA?
  • Are you the primary wage earner ( meaning that you are the only one working) in the family ?
  • Do you have kids or parents ( may be on visitor visa) staying with you ( meaning increased family responsibilities) ?
  • Do you have enough savings that would help survive you and your family during bench period ?
  • If you come on bench during slack season ( November/December) do you have enough savings to feed yourself and your family without compromising my life style ?
  • Do you have adequate IT contact(s) in USA to help you find your next assignment very fast?
  • Are you healthy? Because getting sick often means loss of pay!
  • Are you willing to relocate to another city at your own cost?
  • Are you relocating or living in a city where cost of living is high?
  • Whether relocating will be a hassle for you if your kids are in school?
  • Do you have a plan to visit India ( such as marriage ) ?
  • If you need to make an emergency trip to India ( sick parents etc.) would it be feasible ?

Frequently Asked ( or Avoided the answer) Questions to your employer

We wish you best of luck , if you ( employee) get the answer to the following questions from your employer :

  • You(employee) have to make sure that you are not held liable for paying employer’s side of the tax from your own 80%, so get the clarification that who will take care of business side of tax ?
  • Who would be responsible for the health insurance and how much you ( employer) will be contributing each month towards health insurance premium ? Make sure that you are being offered the similar quality health insurance which is offered to the other employee ( including Managers/owners of the company).
  • You must ask your employer to show the proof that what your employer is being paid, most of the time they keep it private and just come up with the some less figure. For example , employer is making $100 per hour out of you and then tell you $70 is the rate we would pay you and we will also pay you during bench ! Now a days the documents being signed electronically, those purchase order and invoices are very easy to forge , hence not only you have to ask for the proof of what your true hourly rate are but also ask your employer to provide you in writing that this is what your employer is making through the particular consulting assignment. This would be test of genuineness of your employer as well. If employer refuses to give you in writing or does some wishy-washy talk it means your employer is hiding. Also, don’t believe the copy of purchase order /invoice even if it is signed one.. Because it is easy to forge.
  • What would be my take home pay ? Please explain in detail.
  • Would you really pay me during bench ? Will it decrease during bench period ?
  • Would you pay me the relocation cost ? If yes, how much ?
  • Would you offer me 90-10 or 95-5 option if I find the consulting assignment on my own ?
  • Would you offer me any referral fee if I find a new business opportunity for you to help place consultant other than me?
  • Would you pay my salary immediately at the end of the month ? Or when you receive the payment for my work from the vendor ?
  • If I start working under 80%-20% formula starting in April 2016 and in May 2016 my project gets terminated because of some budget issue at the client side, would you keep paying my full salary during bench ?
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