Today many consulting companies have multiple ways of paying their vendors. While a flat global rate is common, tiered rates based on skill sets, levels of experience, location-based, size of contracts etc. play a part in it.

Global rates work well for a large IT outsourcing engagement where companies pay a flat rates irrespective of where the resources are. They do agree to maintain a particular ratio of onsite and offshore to help drive the price advantage and monitor it closely to make sure no party is losing.

Smaller engagements call for tiered rates to benefit from getting the right resources matching the needs while bigger engagements where staff augmentation is the key abs it benefits to have a pool to choose from with some checks and balances on the quality of the resources.

Rates due fluctuate for a variety of reasons ranging from rising inflation on the other side of the globe, forex fluctuations, qualified and niche skill sets where the demand is more, location, experience levels etc. it is wise to lock down rates atleast for a year so as not to negotiate every time. Even though long-term contracts helps, it almost always provides for rate revisions every year.

I have had lots of inquiries on advantages of tiered vs. flat, and to be honest I always recommend using what is good in a given situation, Both have their own merits and demerits. Don’t get locked down in long-term contracts, allow for revisions, and negotiations. My personal preference is to have tiered rates – again just a few up to three is recommended, you don’t want more than three which leads to disputes as to where the resource could fall every time you are trying to hire.

Keep in mind rates differ widely depending on type of work. for example call center operators or KPO resources are paid much less than technology resources. Management resources or consulting one command a premium.

Negotiating is the key. Dont rush into signing contract wihtout thorough due diligence. Rates could swing due to various reasons. Read in between lines the contract to make sure there are no compromises for the rates to be lower.

Roping in a specialist consultant would be of immense help as well to get a second opinion if not first. Talking to other clients and making a reference check is a great idea.

Ultimately there is no cookie cutter rate recommendations, it is all based on specific scenarios.