Negotiating Salary For a Contract Job – How to Ask for a 2-Month Bonuses

As a contract staff in Malaysia, there is a tendency for you to get a raw, take-it or leave-it job offer from the employer which is incomparable to the permanent staff. My friend Hamizi has written quite a useful article on some differences between permanent and contract employment or staffing in Malaysia. He is right.

Funnily enough, many Malaysian contract staff (not all) working in their own country here often have to settle with lower pay, less benefit entitlements and less annual leave, compared to the permanent staff working in the same company. Sometimes, the contract is a 1-year contract without any bonus clause at the end of the year.

The case is somewhat different for contract workers working in developed nations like UK, US and others. Over there, contract staff are highly regarded and due to the shorter term of employment and less entitlement for benefits (e.g. medical, leave, loan facilities and so on), they are offered higher salary package.

Similarly, if a foreigner is to be offered a contract job in Malaysia, you will see their compensation will be much higher compared to Malaysian counterparts. Some years back, a close friend of mine worked as a contract Software Developer for a major bank in Malaysia. At the same time, the company also hired a few Software Developers from India on a contract basis doing exactly the same job. The difference was, their salary was twice as much as his, and the clause even came with sponsored accommodation! He left the company and joined another out of frustration.

As a simple tip, if you’re in the middle of negotiating a contract job, often find a way to maximize your compensation and take home pay.

So what if you want 2 months bonus for a 1-year contract?

One thing you need to understand about contract job is that, due to lower job security, the turnover rate is high. Contract staff will leave whenever they get better offer some where else. When this happens, every one will be on the losing end. The employer will be unhappy with their investment. You will also lose in the sense that your loyalty and reliability will be questioned by future employers. You may also get black listed by the employer (it gets worse for you if the niche is small and employers know each other). And if the contract is handled by outsourcing company, the 3 parties will find themselves in a triangular war.

That being said, if the employer and the contract staff reach an agreement that is satisfactory for every party, there’s a high chance the staff will honor the contract until the completion of the work.

Back to the question again; how do you ask for 2 months bonus for a 1-year contract? Here’s how.

2 months bonus may sound a lot to an employer especially when a lump sum amount is involved, but if we break it down into some progressive payment scheme, you will see that this is a win-win formula.

First, ask for the 1 month bonus to be paid upon the completion of the contract. This is not at all impossible. So now there’s a another 1 month bonus to be paid over a period of 12 months. How? By slotting the payment every 4 months (i.e. 3 times of payments over a year) on pro rated basis. For example, if your monthly salary is RM3000, and your contract starts on January (in the calculation we do not take into account if there exists any OT, allowances as well as EPF/Socso contribution and other parameters to make calculation easy). So here at the end of the each four months you work, you will get additional RM1000 (RM3000 divided by 3).

“Why 4 months?”. You ask. “Why not prorated it every month, or every 2 months?”.

If you understand how retention scheme works, you will notice that a bonus prorated every month or every 2 months is less appealing than when it is prorated into a 4 months period. Therefore, you will feel ‘sayang’ to leave before ending the first 4 months, the second and so on because of the presence of the ‘carrot’. Before you know it, you’re already at the end of your contract (with a further 1 month bonus waiting).

Furthermore, which is better for you. RM1000 (every 4 months) or RM250(per month)? You will only choose the latter if you don’t believe in a ‘delayed gratification’.

Now that you have gone through the numbers, and using the facts above, here are some questions for you.:

1. What would be your total pay for the contract job when you leave the contract on March?

2. What would be your total pay for the contract job when you leave the contract on August?

3. What is your total accumulated bonus if you work up to November?

A word of advice. The negotiation will work particularly well for highly specialized positions, and when the number of positions available are not many. For example, a technician post handling the troubleshooting of PCB boards for electronic components can simply be filled up by many local Politeknik graduates, hence any attempt to negotiate your contract may result in you being thrown off the window. But if the position needs someone with a CCIE (Cisco) certified engineer, or someone with extensive experience in developing programming the latest Oracle software, then you’re in a position to hold talks.

Last but not least, ensure that in your contract offer, there’s no clause saying that if you were to leave, you will need to pay a 3-month salary (or the remaining of your uncompleted months). Otherwise, you will remain as a slave for the rest of your contract. Maybe later I’ll upload a sample of a contractual job agreement that you can use as a reference.

Leave a Reply