Consulting/Contracting vs Full Time Employment

[slugg]

I know this isn't much of a programming question, but it's directed at us programmer types. I figured it would fit better here than in ATOT, where I'd likely be told to buy a box of fruit loops and tour the country in a cheap car.

... anyways!

I've long turned down many interesting opportunities because they're contract positions, not full time positions. Contracting seems really uncertain, which is pretty scary. So I'm asking - is it as scary as it sounds?

 

[purbeast0]

I'm one of those people who doesn't even consider contract positions. I have a family and am the bread winner. I also have free health insurance for my family through my employer. My 401k is pretty great (7% without me even contributing). Then I get paid to take 27 days off a year. My salary is also very good.

I just prefer that stability over just having a big pay check. I take a lot of vacations and am usually in the negative or right around break even after a planned vacation, so that would be 27 days a year I'm not getting paid if I wasn't full time. Then I'd have to figure out a way to save for retirement on my own (which I already do but I'd have to figure out more). Then I'd have to figure out what to do with insurance.

Sure the rates are probably higher (but like I said I still make great money) but you are also taxed more so you have more taken out.

It really just comes down to personal preference. I prefer stability over not knowing what I'm going to do for a job after 6 months is up.

 

[KB]

Contracting can turn into full-time employment with a firm; however I would have to see a salary bump-up of nearly 30% to consider it. Healthcare costs outside of an employer covered plan are unbelievably expensive. From some contractors I hear 2000+/month for a family.
Plus add in an additional SS tax, additional tax filing issues, no paid vacations... on second thought make that 40%.

 

[you2]

For younger single folks contract isn't horrible esp if you like to move around a lot; I personally always preferred full time as I tended to stay put and a bit conservative when it comes to benefits (esp health care). My brother always prefer contract and some of them were in exotic locations. I don't think there is a right answer but generally speaking you make more cash with contract but it cost the company less (due to benefits - and they have less obligation (can pretty much get rid of you on a sneeze)).

 

[Tweak155]

Even with contract positions you can have health insurance (PTO, 401k, etc), seems like some people aren't aware of that? I did contracting for a few years when I had to move a few times. I don't think it's much less "secure" than if you sucked at your full time job. If you're good at what you do, the company will want to find a way to keep you around.

My first contract was for 3mos, I stayed for 5 before deciding to leave, and my last was a 7mos contract that I stayed at for over 2 years. It's all about providing value, so it's really how much confidence you have in yourself.

As far as paying extra taxes, again, not all contract positions are 1099 (which is generally what people are referring to when you pay extra taxes and are not provided health insurance). And even when they are, the extra tax is not a lot (but the health care will likely take a toll). You could also find deductions that you don't get from working full time for business expenses.

Overall though, the contract position most definitely needs to provide the higher compensation incentive, otherwise there is not much of a point. While you are not provided time off necessarily (I had 27 paid days off at my last contract position), the higher rate should more than compensate for any time you want to take off. At least 30% more is a fair number as someone suggested, but I would aim for higher.

 

[purbeast0]

Even with contract positions you can have health insurance (PTO, 401k, etc), seems like some people aren't aware of that? I did contracting for a few years when I had to move a few times. I don't think it's much less "secure" than if you sucked at your full time job. If you're good at what you do, the company will want to find a way to keep you around.

My first contract was for 3mos, I stayed for 5 before deciding to leave, and my last was a 7mos contract that I stayed at for over 2 years. It's all about providing value, so it's really how much confidence you have in yourself.

As far as paying extra taxes, again, not all contract positions are 1099 (which is generally what people are referring to when you pay extra taxes and are not provided health insurance). And even when they are, the extra tax is not a lot (but the health care will likely take a toll). You could also find deductions that you don't get from working full time for business expenses.

Overall though, the contract position most definitely needs to provide the higher compensation incentive, otherwise there is not much of a point. While you are not provided time off necessarily (I had 27 paid days off at my last contract position), the higher rate should more than compensate for any time you want to take off. At least 30% more is a fair number as someone suggested, but I would aim for higher.

If you're getting benefits you're not contracting. You're working through some sort of agency and not directly for the customer. You simply don't get paid days off if you are a direct contractor. You only get paid for when you are working.

I'm not saying you didn't have those benefits or anything, I'm just clarifying the difference between actual contract work and what you're talking about. I almost landed a job like you're saying with Tek Systems but opted not to take it for other reasons.

Right now I work for a company that has contracts and I work on those contracts. I'm also considered a contractor in the space I work. But I am not doing direct contract work personally do I don't consider it a "contract position". I work for my company and they pay me and give me benefits, and the customer pays them an hourly rate for me.

 

[Tweak155]

If you're getting benefits you're not contracting. You're working through some sort of agency and not directly for the customer. You simply don't get paid days off if you are a direct contractor. You only get paid for when you are working.

I'm not saying you didn't have those benefits or anything, I'm just clarifying the difference between actual contract work and what you're talking about. I almost landed a job like you're saying with Tek Systems but opted not to take it for other reasons.

Right now I work for a company that has contracts and I work on those contracts. I'm also considered a contractor in the space I work. But I am not doing direct contract work personally do I don't consider it a "contract position". I work for my company and they pay me and give me benefits, and the customer pays them an hourly rate for me.

That is still a form of contracting, I'm not sure why you'd exclude it? I've also been offered contracts where I decide how I get paid... 1099, B2B or W2, with benefits or without benefits, etc there are a lot of flexible options.

Ultimately the "risk" here is that you can be cut off without some due process. If the company I went through stopped getting a check from the ultimate source of my income, I would have been "let go", not moved to some other position or continue to receive a check from them since the source of funding has been eliminated. Just because a middle man is involved does not mean it is not effectively the same thing. You're adding a caveat that doesn't exist in the original post, perhaps he should be more clear to specific scenarios if he has limited options.

 

[purbeast0]

That is still a form of contracting, I'm not sure why you'd exclude it? I've also been offered contracts where I decide how I get paid... 1099, B2B or W2, with benefits or without benefits, etc there are a lot of flexible options.

Ultimately the "risk" here is that you can be cut off without some due process. If the company I went through stopped getting a check from the ultimate source of my income, I would have been "let go", not moved to some other position or continue to receive a check from them since the source of funding has been eliminated. Just because a middle man is involved does not mean it is not effectively the same thing. You're adding a caveat that doesn't exist in the original post, perhaps he should be more clear to specific scenarios if he has limited options.

My point is the OP isn't talking about having a full time job with a company that puts you on contracts, he's asking about doing direct contracting and consulting. He specifically says full time positions vs. contract work, and having a job with a company that pays you salary and gives you benefits even if they put you on contracts is not the same as working directly on contracts and being paid hourly with no benefits.

 

[Tweak155]

My point is the OP isn't talking about having a full time job with a company that puts you on contracts, he's asking about doing direct contracting and consulting. He specifically says full time positions vs. contract work, and having a job with a company that pays you salary and gives you benefits even if they put you on contracts is not the same as working directly on contracts and being paid hourly with no benefits.

Where did he use the word "direct"? Please quote. You're narrowing the field arbitrarily and self-admittedly have 0 experience in it. I've even done work for such small companies where I've received "paychecks" that are just like personal checks.

Without the OP being more specific, you're no more right than I am.

 

[purbeast0]

Where did he use the word "direct"? Please quote. You're narrowing the field arbitrarily and self-admittedly have 0 experience in it. I've even done work for such small companies where I've received "paychecks" that are just like personal checks.

Without the OP being more specific, you're no more right than I am.

He said it in his last paragraph.

I've long turned down many interesting opportunities because they're contract positions, not full time positions.

Not full time positions. What you're talking about is full time positions with a company (lets call it company A) where you're on salary and you get benefits, that puts you on contracts that their company has been awarded by the customer. Then there is being a sub contractor where company A will pay a contractor hourly with no benefits to work on the contract and the sub has absolutely no job stability for the most part. Then there are contractors where they are being paid hourly from the customer. There are also temp-to-hire positions that are a little bit more complicated, where you can start out as a contractor (or work full time for a company that has a short contract) and then can go as a full time employer with the customer.

To the customer, if you aren't a full time employee, you are considered a contractor. They don't care if they are paying you personally or a company that is in turn paying you, they just care about paying the hourly rate for work to be performed.

But I thought it was pretty damn obvious from the OP's post that he's talking about from the side of the person getting paid to do the job, not the customer's point of view.

Just because I personally haven't taken a contracting job doesn't mean I don't have experience in it. I've been in the contracting world for 7+ years now. I know exactly how it works.

EDIT:

Another big differentiating factor is that with contract work, you have a designated length of the contract work you are doing for X months or years, and after that, you're either out of work or they offer you a new contract. Whereas if you are full time, you're working there indefinitely until you decide to get up and find another job or get fired. If you're working full time with a company getting benefits and stuff, you don't have to worry about getting a job after that contract expires, unless your company is garbage and doesn't have more projects lined up.

 

[Tweak155]

He said it in his last paragraph.



Not full time positions. What you're talking about is full time positions with a company (lets call it company A) where you're on salary and you get benefits, that puts you on contracts that their company has been awarded by the customer. Then there is being a sub contractor where company A will pay a contractor hourly with no benefits to work on the contract and the sub has absolutely no job stability for the most part. Then there are contractors where they are being paid hourly from the customer. There are also temp-to-hire positions that are a little bit more complicated, where you can start out as a contractor (or work full time for a company that has a short contract) and then can go as a full time employer with the customer.

To the customer, if you aren't a full time employee, you are considered a contractor. They don't care if they are paying you personally or a company that is in turn paying you, they just care about paying the hourly rate for work to be performed.

But I thought it was pretty damn obvious from the OP's post that he's talking about from the side of the person getting paid to do the job, not the customer's point of view.

Just because I personally haven't taken a contracting job doesn't mean I don't have experience in it. I've been in the contracting world for 7+ years now. I know exactly how it works.

EDIT:

Another big differentiating factor is that with contract work, you have a designated length of the contract work you are doing for X months or years, and after that, you're either out of work or they offer you a new contract. Whereas if you are full time, you're working there indefinitely until you decide to get up and find another job or get fired. If you're working full time with a company getting benefits and stuff, you don't have to worry about getting a job after that contract expires, unless your company is garbage and doesn't have more projects lined up.

So no quote using the word "direct", gotcha.

 

[purbeast0]

So no quote using the word "direct", gotcha.

Eh I never claimed that he actually said "direct" it's just very obvious from his post that is what he meant.

 

[Tweak155]

Eh I never claimed that he actually said "direct" it's just very obvious from his post that is what he meant.

Well even a major job site like Monster seems to think the position I've described is a possible way to interpret "contracting", so like I've said already, until OP provides more clarity there is no point in debating. Worst case he finds my input to be of no value and moves on.

 

[slugg]

Direct or not, W2 or 1099 doesn't really matter. I was asking more along the lines of being a full time employee of the company (company benefits, company salary, company career) vs not (being hired for a specific role and paid hourly).

The main issue I have with it is job security. And people say "but if you're good, they'll keep you." Two of my friends we're on contract to hire positions with a 6 month contract. They were both very good. They instead just got their contracts renewed; neither of them got hired. This happened several times.

I think I'm going to continue to pass on these kinds of positions. It's a shame - there are some cool ones, but the companies absolutely refuse to actually hire anyone.

 

[magomago]

i'm not a programmer, but money money money is what would make me do contracting. unless pay is atleast 30% higher, its often not worth it. even back in 2008 i knew programmers who wouldn't work less than 100 bucks an hour.
Even with a great job, i've seen situation where its genuinely not about temp-to-hire, but a contract with specific scope and obligation.

if you have multiple contract positions, i'm surprised that all really just have a specific scope. if your friends, several times, don't get hired after doing "very good" then either they aren't actually as good as you think (which could either that they suck, or they are too smart for their position), or they had no idea how to get visibility for their good work.

 

[Tweak155]

Direct or not, W2 or 1099 doesn't really matter. I was asking more along the lines of being a full time employee of the company (company benefits, company salary, company career) vs not (being hired for a specific role and paid hourly).

The main issue I have with it is job security. And people say "but if you're good, they'll keep you." Two of my friends we're on contract to hire positions with a 6 month contract. They were both very good. They instead just got their contracts renewed; neither of them got hired. This happened several times.

I think I'm going to continue to pass on these kinds of positions. It's a shame - there are some cool ones, but the companies absolutely refuse to actually hire anyone.

i'm not a programmer, but money money money is what would make me do contracting. unless pay is atleast 30% higher, its often not worth it. even back in 2008 i knew programmers who wouldn't work less than 100 bucks an hour.
Even with a great job, i've seen situation where its genuinely not about temp-to-hire, but a contract with specific scope and obligation.

if you have multiple contract positions, i'm surprised that all really just have a specific scope. if your friends, several times, don't get hired after doing "very good" then either they aren't actually as good as you think (which could either that they suck, or they are too smart for their position), or they had no idea how to get visibility for their good work.

Additionally sometimes the company is just not ready to hire anybody for the departments, politics could be involved. At the end of the day though, it is a risk you'd have to be aware of if your end game is just to go right back into full-time. That would indicate to me though that contracting isn't for you.

There is a sense of security with a full time position that a lot of people prefer (I think most people do) and that's fine. But I also take the view that pretty much any job has a risk to it, some more, some less - so keep a balanced view as to the risk as a whole, not just the type of position (contract vs full time).

Generally with most risks like this, there are rewards as well. The obvious here being the higher rate. But to give you a personal example that literally just happened yesterday, I know a guy currently contracting at this company who complained to his agency that he was bored. That agency had a discussion with his supervisor at my company. The message was relayed back to my friend that the supervisor would do ANYTHING to keep him around, and he is first in line the minute a leadership role opens and she can get him one. And, she will work on getting him more interesting work.

Had he not taken the agency role, he would not have had that exposure to this supervisor. So even if he can't get a job in the near future, even if he left, it's likely she'd reach out to him when a position does open.

At the end of the day though, there are no promises either way.

 

[urvile]

I have been working as a contractor for a couple of years. Where I live (not the US) there is a lot of federal government work to be had. The money is very good but there is no job security at all because government is particularly and notoriously fickle. There are no paid holidays either. On the plus side these positions are budgeted which means no over time. I come from a high pressure multi-national corporate background and not having to work from home and on the weekends to hit deadlines is a bonus.

As a contractor it goes both ways. If I am not at work I don't expect to get paid but the department also accepts that If I am not getting paid I don't work. Whereas my last job was salaried and they expected me to work whether I was getting paid or not.

 

[urvile]

Direct or not, W2 or 1099 doesn't really matter. I was asking more along the lines of being a full time employee of the company (company benefits, company salary, company career) vs not (being hired for a specific role and paid hourly).

The main issue I have with it is job security. And people say "but if you're good, they'll keep you." Two of my friends we're on contract to hire positions with a 6 month contract. They were both very good. They instead just got their contracts renewed; neither of them got hired. This happened several times.

I think I'm going to continue to pass on these kinds of positions. It's a shame - there are some cool ones, but the companies absolutely refuse to actually hire anyone.

In my experience contractors are disposable in both the private and public sector. The company I used to work for would build project teams almost entirely staffed with contractors so if the project went south they could just fire them all. Which I have seen happen. Public sector jobs have been known to get political and the ideology of the current government can effect contractors livelihoods. That's the risk you take. It seems like you are aware of it. If you are not comfortable with it. Don't contract.

 

[slugg]

Well, I went for something a bit different. I ended up joining a startup. I'm full time, and then some. LOL! But I'm working with some amazing people and I truly believe in the vision of the company. It's pretty exciting. That said, there are certain risks associated with startups, but I'm aware and okay with them. We'll see how it goes!

 

[you2]

I thought about joining a startup but for the life of me I havent' seen one in a long time doing anything that interest me. I also chatted with a friend from grad school who was working in a startup but it just wasn't that exciting (the project). Hum. Maybe i just need to look harder.