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Switching to Contracting?

Cliff posted more than 9 years ago | from the full-time-jobs-with-no-benefits dept.

The Almighty Buck 613

SoonToBeWorking asks: "I recently did a telephone interview for what I thought would be an absolutely wonderful job. It is primarily embedded Linux, with a stable employer that was less than 10 miles from my residence. The interview went extremely well, until the end. The position was listed as full-time but they want me to come on as contractor because the approval is easier to get. Then, I am told they would move me to full-time. I'm recently married, and looking for stable income because I have more than myself to look out for now (kids are not present or on the way for several years yet). I've never contracted before, so I am in unfamiliar territory. I hear a lot of good things -- 3-day work weeks and crazy amounts of money, but is the lack of stability worth it? I know I need my own health & life insurance, but what else? How do I convert my base salary to a contractor rate? Without a 401k or a 403b, how do I take care of retirement?"

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Equally instable (5, Interesting)

fembots (753724) | more than 9 years ago | (#10905183)

What a timing! I'm recently thinking of moving from permanent employment to contract works, not that I don't enjoy my current income, but the inability to do something else in the quiet period (unlke Google which allows employees to work 1 day a week on their own hobby/project) is a killer. I'm a developer and all I want is to develop/create things, not sitting around waiting 3 months for PHB to approve a 8-week project.

I'm also thinking of my future income and lifestyle. Contractors seem to have more exposures to different industry/management styles, I hope to be more in-demand with such exposures, and through word-of-mouth, as long as you did good in the previous jobs, it shouldn't be too hard to find another contract. Your permanent employer probably wouldn't do word-of-mouth for you to many others.

And let's not be fooled into thinking you have a stable job by being "permanently" employed. You're only employed as permanently as the required notice period, 4 weeks maybe?

Just do it... (5, Interesting)

p.rican (643452) | more than 9 years ago | (#10905296)

Be your own boss (kinda) while you dont have the worry of kids hanging over your head.

Dont be fooled into thinking that a non-contractor position is any safer than being a contractor.

The market is still brutal and there is no loyalty anymore between corporations and their employees. I would take the position in a heartbeat.

Good Luck!

Re:Equally instable (2, Interesting)

skids (119237) | more than 9 years ago | (#10905336)

You are right. I used to consider myself pretty "secure" having a government job, but then they up and moved the facility where I was working over an hour commute away (don't say I'm whining, becase you have a longer commute. I'm an environmentalist so in addition to the time, there's the extra guilt.)

If you are the type of person who leaves customers happy, and impresses people with your skill, you can do really well with contract work... if you make a good impression with a temp/pro-services agency with your first couple of jobs, they will call you back, and I have been told the work will usually be pretty steady so long as you leave the customers with a smile on their face.

(P.S. I didn't quit over just a commute. There were other factors. But it would have cost me in the range of 5-10K a year, not a problem for me but some people where I worked were only making 25-35K.)

Re:Equally instable (4, Informative)

MaineCoon (12585) | more than 9 years ago | (#10905361)

As a side note, that Google 'own hobby/project time' deal involves a hobby/project that is related to work and could potentially benefit the company, and is still company owned work.

Re:Equally instable (0)

Anonymous Coward | more than 9 years ago | (#10905395)

Thats fine, as long as its something that YOU enjoy. Pick a job you like and you'll never work a day in your life, and whatnot. It doesn't matter if the company reaps the benefits, you reap the benefit of not working constantly on someone's underbudget turd.

Re:Equally instable - But Fees pays your bills (2, Informative)

3chuck3 (512455) | more than 9 years ago | (#10905407)

Yes, contracting is scary. if you can do W-2, then you don't have to worry as much about estimated taxes.

Roll your 401K into an IRA at a repitable bank or investment firm, be good about puttin money from your contracting fees into you new IRA.

I have been looking for FT perm since I was layed off from a Sys Admin/Citrix Admin positions, fools. a year ago

I have been contracting on 4 1-2 day a week projects, paying my bills and gas money ( the gas part hurts)

figure it out (-1, Troll)

Anonymous Coward | more than 9 years ago | (#10905186)

if you can't figure this out, you can't be a contractor.

you need to do shit for yourself.

Re:figure it out (2, Insightful)

deadlinegrunt (520160) | more than 9 years ago | (#10905392)

The truly sad part is that the Anonymous Coward is 100% correct*.

While I burn my karma here and take massive metamod hits for good measure, think about the front page "question" and then think about the OP response.

Seriously. Maybe the delivery was poor but the point is still valid.

*Instead of modding my response down as flaimbait/troll why don't you educate both myself and the OP response was anything but factual with an equally factual reply.

moonlighting (0)

Anonymous Coward | more than 9 years ago | (#10905191)

As a street pharmacist of course.

so what (0)

Anonymous Coward | more than 9 years ago | (#10905193)

take it....they can lay you off anytime as a full time employee anyhow...

$100K/year == $100/hour (2, Interesting)

Anonymous Coward | more than 9 years ago | (#10905194)

Double your salary: $100,000 year salary is like $100/hour, even though the gross revenue from that would be $200,000 a year. There's just so much overhead, risk, paperwork, instability, etc.

Duh? (-1, Flamebait)

Anonymous Coward | more than 9 years ago | (#10905200)

Do you have any skills at all? Most, if not all, companies hire this way. If you had one iota more than meager and pathetic abilities, why would you worry about it? Do you get fired alot?

Or is it just that working in Lunix is naturally an unstable and questionable future?

whatever you... (-1, Offtopic)

Anonymous Coward | more than 9 years ago | (#10905202)

do don't switch to BSD. Now that we have Gentoo with its Portage, BSD and its ports are history.

Re:whatever you... (-1, Redundant)

Anonymous Coward | more than 9 years ago | (#10905405)

Netcraft confirms it! BSD is totally DEAD!

In Soviet Russia BSD ports YOU!!!!

1. create inferior operating system
2. allow better operating systems to take over
3. ???

Fifth PR0St!

Stephen Koing is DEAD!!!!

Back in my day, we all worked full time (-1, Troll)

Anonymous Coward | more than 9 years ago | (#10905203)

Get a job hippy.

don't do it! (5, Interesting)

danielrose (460523) | more than 9 years ago | (#10905206)

I've been contracting for the last 5 years..
With the company I am presently with, for 2 years. They constantly dangle the "full time" carrot, but never deliver. I've found this with every place I have contracted, they talk the talk, but make excuses when its time to pay up on promises.

Re:don't do it! (4, Informative)

poot_rootbeer (188613) | more than 9 years ago | (#10905312)

On the other hand, the company I work at has hired nearly a dozen tech resources as contractors over the past two years, and except for one that was determined not to be a good fit for the position, all of them so far have been converted to full-time employees after 12 months on the job.

Companies tend to like making contract-to-perm offers these days not to screw members of the workforce, but to make sure that members of the workforce don't screw them. Is it justified? I'm not sure.

Re:don't do it! (1)

danielrose (460523) | more than 9 years ago | (#10905348)

i must be shit outta luck with the places i work then ;(

Re:don't do it! (1)

jarich (733129) | more than 9 years ago | (#10905332)

Absolutely true.

Every contracting gig I've ever been involved with involved deception. Some were mild, some were outright liars.

Go full-time if you can get it... if not, maybe this will the be exception to the rule! ;)

Re:don't do it! (0)

Anonymous Coward | more than 9 years ago | (#10905352)

on the other hand, I started my current position as a contractor, and the company did work to find an open req and offered me a full time position after 6 months.

so... it depends

the contract position could be a foot in the door

Re:don't do it! (3, Interesting)

Euler (31942) | more than 9 years ago | (#10905369)


There is real contracting, and then there is 'contracting' which sounds like this situation. The latter, 'contracting', is really just working as a temp or through a temp agency who's office you've never set foot in. The 'contract' is basically: "We'll hire you without benefits as long as we can and pay you a few bucks less until we determine that you are docile enough to work for us on our payroll."

Your options are:
- Write your own contract which is truly equitable and see if they bite.
- Take the job as stated above, which I did, and hope for the best.
- Keep looking for work.

Re:don't do it! (3, Insightful)

rackhamh (217889) | more than 9 years ago | (#10905374)

While this is definitely a possibility, some companies just like to bring people on first as contractors, or through a temp agency, because it gives them a chance to safely conduct a "working interview". If they like you, then they hire you.

Keep in mind -- once you've been there for a few weeks to a couple of months (or longer), they've already invested in your training, and you've had a chance to make a good impression. At that point you have a fair amount of leverage to start pushing hard for that full-time position. If you hate your job, you can walk out and leave them starting over from scratch -- and if they're smart they'll realize this.

If getting approval is such a hassle (3, Insightful)

Omkar (618823) | more than 9 years ago | (#10905208)

Ask yourself if you really want to work decades for a company where getting approval is such a hassle.

vacation (1)

IgorMrBean (528387) | more than 9 years ago | (#10905210)

make sure to deal your vacations usually, contracts are based on 52 weeks/year, which means that you will work all year long... think about 2-3 weeks off, more if you wish.. ;)

That was long ago (1, Interesting)

Anonymous Coward | more than 9 years ago | (#10905211)

3 day work weeks and big pay were in the 90's dude.
I now interview people for full time positions that are way over qualified, will work for a fraction of what was being paid, and my inbox is full in 2 days after posting an opening.

As more work is sent away, the pools gets smaller from which to drink.

Tax liability... (3, Informative)

Anonymous Coward | more than 9 years ago | (#10905216)

As a contractor, you will have to pay the employer's share of FICA taxes. That's ~13.4% of your income that is automatically lost to taxes, before you figure regular income taxes or anything else.

Re:Tax liability... (1, Informative)

Anonymous Coward | more than 9 years ago | (#10905280)

That is only true if you are a 1099 contractor.

Most contracts are W2 and you do not have to pay self-employment tax. You also get basic benefits on a W2 contract (and sometimes even accrue paid time off).

Who modded this informative?

Re:Tax liability... (1)

duffbeer703 (177751) | more than 9 years ago | (#10905373)

If you're not 1099, you're not a contractor... your a body-shop employee getting screwed out of 40% or more of your billing.

Re:Tax liability... (2, Interesting)

Mudcathi (584851) | more than 9 years ago | (#10905398)

On the other hand, your travel to & from the office becomes a tax deduction, along with many other legitimate business expenses that a "mere" employee incurs but can't use to reduce income taxes.

same boat (1)

grawk (107524) | more than 9 years ago | (#10905217)

That's basically the situation I'm in. I was hired by a large 3 letter corporation for a position at a university. I have been told that at some point in the future, they want to move me to permanent, but the process to hire someone right now is so painful that they just hired me as a contractor. My rule of thumb is to charge 30% more for contracting than for salary ( salary / 1920 * 1.3 to get hourly rate). That way, if I never get moved to salaried, I'm still happy.

Re:same boat (2, Informative)

squidfood (149212) | more than 9 years ago | (#10905267)

My rule of thumb is to charge 30% more for contracting than for salary ( salary / 1920 * 1.3 to get hourly rate).

I did the calcs at two diff. jobs over the last four years, and the break-even point was around 25% in one, 35% in the other (extra salary needed to buy missing benefits: health, paid vacation, retirement).

Re:same boat (0)

Anonymous Coward | more than 9 years ago | (#10905318)

My rule of thumb is to charge a thousand dollars an hour.

Too bad we don't live in a world where you can just arbitrarily charge your 'rule of thumb'.

oh the beauties of capitalism (0)

Anonymous Coward | more than 9 years ago | (#10905379)

i can ask a million bajillion dollars an hour, with access to the boss' 16 year old daughter on weekends as a pay rate, it doesn't mean i'll actually get that. if the company doesn't want to pay you what you feel your time is worth, the'll find somebody whose time is worth less.

Re:same boat (1)

ditto999999999999999 (546129) | more than 9 years ago | (#10905421)

See this [] comment...

My company has started hiring people as contractor (1)

Scyber (539694) | more than 9 years ago | (#10905220)

and they have eventually made the full time offer to (nearly) everyone that has wanted it. I think it is just much easier for mid level management to get upper management to approve the hiring of contractors. It is less of an expense for the company. Once they prove their worth, then the company tries to make them fulltime employees.

Retirement saving is better (5, Interesting)

gorbachev (512743) | more than 9 years ago | (#10905224)

There's a number of different options for independent contractors as regards to retirements savings. You can actually save more than an employee as an independent contractor. You can put 25% of their income up to $41K / year into a retirement savings account.

The Google keywords are: independent contractor retirement savings [] .

Re:Retirement saving is better (0)

Anonymous Coward | more than 9 years ago | (#10905327)

Honestly, at this point in time people worried about retirement should consider learning about managing their own investments.

At the moment, now is a good time to go long on precious metals and other commodities. It's also not a bad time to get involved in the Forex, but that takes some serious learning in order to play it effectively.

Also, with the falling dollar, people should realize that we are likely to be facing increased demand for American tech, which might very well translate into more tech jobs. This also means that if you do some due diligence into tech companies, putting your money into the ones that have good fundamentals today and a history of exporting services/produdcts, you could stand to profit going forward thanks to the weaker dollar.

This is not professional investment advice. If you look into these things, I think you'll agree with me, but anyone considering needs to do their own research and come to their own conclusions.

Re:Retirement saving is better (1)

geoffspear (692508) | more than 9 years ago | (#10905417)

You can defer taxes on more money, but not getting matching contributions from your employer is a big negative.

Taxes (3, Informative)

Ween (13381) | more than 9 years ago | (#10905229)

In my state, and I suspect most others, the rate you want to make per hour should be increased by a third to take into account the taxes you will have to pay. Be aware that not only will you have to pay all the taxes that were taken out of your check, you will also be responsible for the matching your employer was paying. Do not forget general liability insurance as well as unemployment, etc etc. Although you might want to receive $20 per hour in pocket take home, you will need to bill around $50 per hour just to cover all your expenses. Maybe even more.

Be smart and incorporate. This protects your personal assets to a higher degree and makes things a lot easier. You will need an accountant to help you out. Although lots of people will say you can do it yourself, my accountant saves me far more through his knowledge of the system than I could ever save not paying him.

And finally, the benefit. Every cost you incur in your business is pretax deductible. Every cost you incur as an individual is after tax. This makes it very smart to be in your own business just for the tax savings of things you would buy anyhow.

Re:Taxes (0)

Anonymous Coward | more than 9 years ago | (#10905304)

moddup. screwing the common man who has no incorporation options is what america is all about

Stable Company and high salary (4, Insightful)

Forge (2456) | more than 9 years ago | (#10905237)

If you get a high salary from a stable company and are a competent worker then you have little to fear.

The terms of employment may say contract or permanent but in reality people get dumped from both categories when hard times come and the least needed persons (in managment's perception) get droped 1st.

In reality the 2 to 4 weeks notice required for termination of a permanent worker don't mean squat. Health insurance etc.. just cost money so make sure the pay is enogh.

Re:Stable Company and high salary (0)

Anonymous Coward | more than 9 years ago | (#10905420)

What does "drope" mean?

Contracting.. (3, Interesting)

IceCat12 (442300) | more than 9 years ago | (#10905239)

I switched to contracting 4 years ago and generally have not looked back. I do miss the lack of structured vacations. (they end up being between contracts with a slight level of uncertainty if I haven't prearranged the next contract before leaving). I am a pretty healthy person so sick days are not an issue and I've always covered life insurance from my own pocket to even supplement my employer. For health care... Living in Canada it's not a huge issue so I can't help you there.

All in all I would do it again and I recommend it.

It's probably not what you think (4, Insightful)

Cylix (55374) | more than 9 years ago | (#10905241)

Companies will tell you its easier to get contract employment.

I've know companies who will hire someone on as a contract employee for six months and if they are any good then they will switch them to full time.

It's simply easier not to renew someones contract then fire them. If you fire them they will persue unemployment and that in itself can imvolve some time.

I'm not saying this is the case for this company... I've just seen this tactic more then once.

avoid it if you can (0)

Anonymous Coward | more than 9 years ago | (#10905244)

if you're after something stable avoid contracting. if you dont plan on going after other clients and running your own business, just working as a contractor for this company, id suggest you try and get them to give you a full time role. or at least put in writing that you will be taken on fulltime after three to six months. it will cost you money to set up all the structures you need to require (eg registering a business, retirement plans etc), and if you dont work you dont get paid (no sick leave, holidays etc).

contacting does provide more flexibility, but there are serious downsides. i would be careful if i were you.

job no job (1, Insightful)

Anonymous Coward | more than 9 years ago | (#10905249)

In this economy you don't often get much chance. Take the job if you like it. The other stuff is your responsibility, even though companies used to handle those things well, nowadays you're better off buying your own insurrance plans and saving up for retirement yourself. Get a savings account and put asside some of your income every month. That's how people get rich BTW, they save up and eventually start investing. Most people aren't rich simply becaues they're not able to control their spending habbits, and instead choose to live hand-to-mouth.

Run... (2, Insightful)

cdrudge (68377) | more than 9 years ago | (#10905251)

The position was listed as full-time but they want me to come on as contractor because the approval is easier to get.
Let me get this straight. They post an ad for a full-time position, even yet to be approved, but they want to bring you on as a contractor because it's easier to get approval. Right. What they are really looking for is a cheap temp that they can easily get rid of in a few months when they are done with you.

Re:Run... (5, Interesting)

phaire (798105) | more than 9 years ago | (#10905286)

Depends on the job. Most contracts I've taken have been short-term for almost that reason: if you don't work out, they want to be able to get rid of you.

If you're right for the job, then chances are the contract will be extended (depending on what kind of job it is). I've never had a contract that only lasted as long as the initial duration, and about half of them have lead to full time positions.

Re:Run... (1)

/dev/trash (182850) | more than 9 years ago | (#10905416)

What? You mean if they hire me full time regular employee they can't ever fire me????

Some Thoughts (0)

Anonymous Coward | more than 9 years ago | (#10905259)

The retirement part is easy, you contribute to an IRA type account at your local financial institution of choice.

As for a contracting rate(you do the taxes) vs. a W2 rate(they do the taxes), I have usually found that the contracting rate is 2x or more of the W2 rate.

In MA getting health insurace as an individual is 500+ a month, so if your wife is employed that is where to get the insurance.

check out health savings accounts (2, Interesting)

clamboat (813890) | more than 9 years ago | (#10905262)

Check out health savings accounts ( for your healthcare needs. That may be a good option if you are making your own health insurance decisions.

Contracting can be great, as long as you know what to expect. I was a long-time employee at Sun when I left for a startup. The startup didn't work out for me so I went back Sun as a contractor. Even though I had been at Sun for something like 6 or 7 years, when I came back as a contractor I was the lowest of the low. I could not go to employee meetings, I did not participate in any of the extra cirrucular activities, I did not get any little tschotkies (SP?) at the end of a project. As long as that doesn't bug you, contracting is a good way to go.

makes no difference except bennies (2, Informative)

karlandtanya (601084) | more than 9 years ago | (#10905265)

Do the math--is the pay less bennies acceptable to you?

At the co. I work for, the multiplier is 1.5.

Or, calculate the cost (if you can even get it) to purchase appropriate health insurance, life insurance, equivalent vacation days, etc.

My employer has contractors and employees--we're a consulting firm. Contractors who are worth a damn stick around as long as they choose to. Same thing with employees.

I suppose, as a consultant, getting laid off from a job is irrelevant. One job ends, the next one starts. In 10 years of employment, I've had 1 week when I didn't work, not counting planned vacations. During that week, I could have done minor jobs, but I wanted the time with my wife before going out of town.

If you see a "permanent" position as somehow more stable or respectable, or as a guarantee that your family will be secure then you're fooling yourself.

You need a... (0)

IGTeRR0r (805236) | more than 9 years ago | (#10905266)

This is what financial advisors are for, buddy.
Not slashdot.

Whatever, nothing to see here, move along.

Lack of stability? (1)

ucblockhead (63650) | more than 9 years ago | (#10905269)

I've done both. Longest period of employment as a contractor: six years, I quit. Longest period of employment as an employee: just under five years.

Overall, I've worked five places as a contractor and six as an employee. As an employee, I've unexpectedly lost my job twice. As a contractor, I've only unexpectantly lost my position once (though twice I had fixed-term contracts end.)

In general, I've not found contracting to be any less stable than full-time employment. You do have to plan for downtime, which is annoying, but if the economy is hot enough to get work, it is likely hot enough to get contracts.

It isn't that bad (1)

Necroman (61604) | more than 9 years ago | (#10905272)

The company I work for does the exact same thing. When they need to hire someone, but they can't get the upper level people to create a rec for a new job, they will bring you on as a contractor. We have a contracting company that you actually work for, and then we pay the company who will then pay the contractor.

Some people in my company went for a little over 2 years as a contractor, others went for 9 months, some for 3 months. It all depends on the state of the company and what they are able to get upper level manager to sign for.

My company has hired fulltime everyone they told they would move from a contractor.
The contracting company provided healthcare, and even hard 401k. It was a pretty good deal.

my experience (1)

evanh23 (584055) | more than 9 years ago | (#10905274)

i moved from full-time salary to contract about a year ago, and i must say that i hope i NEVER have another "job" again. Flexible hours, dont have to worry about getting screwed over on money when the employer needs to "lean" on you (read: when they have projects that go over schedule/budget). now they pay me hourly or per project and i am much better off now. make sure the pay difference between the salary and contract is pretty significant-given the costs of acquiring health care. don't forget the tax ding that we take being self-employed (damn government). MOST IMPORTANT--Get you taxes squared away FIRST THING. don't push off saving a bit of your income for your quarterlies and actually sending them in. otherwise you will be really hurting come tax time. I (along with several other contractors i know) got lazy and caught in this trap. and getting a $10k tax bill come april will make anyone bleed. I'll repeat it just for clarity--GET YOUR TAXES TAKEN CARE OF. DO NOT PUSH THEM OFF. its extremely easy to do and really hurts when the time comes to pay up (april).

Don't do it! (1, Insightful)

Anonymous Coward | more than 9 years ago | (#10905275)

I've been working in a "contract to hire" position for four and a half years. I was enticed in with decent pay, with no benefits -- but made the tradeoff because the pay was good. I've been posted at the same company the whole time and had three substantial promotions. With each promotion I've been told that I had to wait for a raise, only to find out about 6 months later that no raise would be coming. I started as an entry level tester, and after cost of living adjustments make less now as a Project Manager than I did when I started.

To make matters worse, contracting companies usually don't let you discuss anything relating to your employment with your managers. So if you have a grievance, you can't take it up with the person you report to.

Contracting is a scam. It's the new Amway. Don't fall for it. If a company isn't ready to commit to you, they're not worth working for.

Re:Don't do it! (0)

Anonymous Coward | more than 9 years ago | (#10905349)

Why the hell are you still working there? I don't blame your company for stiffing you. You are the perfect sap, just grabbing your ankles and taking it.

Can you get something else? (3, Informative)

Blasphemy (78348) | more than 9 years ago | (#10905277)

Stability is great, but being unemployed is also stable.

Remember (and try to find a polite way of letting your employer know) that you can only offer the level of commitment to them that they are prepared to offer you. There is very little security in contract work, but there is also little security in the first few months of a full-time position. Make sure that your contract time will count against any probationary period that your company mandates and that your benefit waiting periods will be reduced by the amount of time you work under contract (assuming they do hire you in 6 months).

It's not a bad idea to let your employer know that you don't consider the contract position as a real job and you will still be looking for a real job until they offer you a full-time position.

Great resource for embedded, contracting, etc (1)

nullset (39850) | more than 9 years ago | (#10905278)

Check out Jack Ganssle's site

Articles such as I, Consultant []

There are 5 parts to that article.


Did it myself (3, Insightful)

j_cavera (758777) | more than 9 years ago | (#10905285)

for 5-ish years. Take what you think you want to make per year as a "normal", chop off the thousands and use that as your hourly rate: you want to make $50K, charge $50 per hour. This will be slightly off the going rate depending on your location, but will be in the ballpark. If you're in CA, NY NY or DC, double that. And remember that you will need to save roughly half of what you make to pay taxes.

And some advice: For cheap insurance, check out your professional society (IEEE, ACM, whatever). They usually get great rates for independants.

Keep excellent records of the time you spend. It may seem anal, but no points lost for over-documentation.

Spend at least one hour per day (off their clock) looking for the next gig. When your current project is done, it's done and they will have no qualms about letting you go fast.

And finally, if you want the long-term stability or a regular job, drop the hourly rate (slightly) and make sure that every week they know how invaluable you are. And don't sow bad karma by not commenting or documenting or writing unclean code. After all, they might let you go and then hire me to fix it...

Good luck.
- Jim

Dont forget about 1099 (0)

Anonymous Coward | more than 9 years ago | (#10905294)

When doing contract, take into account if it's a 1099. If it is, then don't take it unless you know the IRS tax laws. In the year of 2001, I contracted for high tech company at a rate of 45.00 an hour for 40 hours work weeks for 4 months. The problem was not revealed to me till I got an audit letter from the IRS stating that in I'd have to cover the employers part of the TAX'es which to make a long story short, instead of pay 1100 for taxes, I now owe 6100.00, thats a whole months contract work for taxes. IMHO make sure you get a W2 and not a 1099 unless you run a business but I'm solo so I dont know much about it. I Oh well thats life, we are short term hires, when they dry you for ideas they show you the door.

Conversion (1)

afidel (530433) | more than 9 years ago | (#10905298)

The formula we use is 1/3rd of billings=commision. This factors in taxes for the employer side of things, overhead (not a factor for a single consultant unless you are going to pay professionals to do things like taxes which is probably a good idea), and a modest profit for the founder and owner. A very non-conservative estimate would be to double your base salary to cover payroll taxes and insurance. Don't think that being a consultant will mean flex time, there are MANY situations where you are a consultant in name and tax status only. Btw the employer can only legally use you as a single consultant for two years so if you are getting to around 18 months and they haven't brought you on full time start to worry, they are either going to dump you or they don't know what they are doing and something is going to blow up eventually.

Your case is different (1)

Eberlin (570874) | more than 9 years ago | (#10905299)

Your case moves you to contract work with a pseudo-guarantee that you'll then be hired in full-time. That's a bit different than someone jumping strictly to contract work. (your situation sounds like an extended job interview the way they play it)

As I'm mostly introverted, contract work is a bit daunting. Minding your own, doing your work, and not having to do any socializing seems nicer than having to market yourself, do the actual spec work with potentially clueless customers, and in general dealing with the social aspects of the real world.

Of course with that experience comes gained insight and development of "social skills" which in turn makes you both a better person and a more marketable one. Even then, I don't know how far that'll take you.

Contracting (2, Insightful)

onyxruby (118189) | more than 9 years ago | (#10905302)

Once you start you can't stop. Seriously, its next to impossible to ever go back to being a "real" employee. I know people from 1 to 25 years experience and not a one of them can get a real job. The only thing anyone can get is a contract. As a result almost all of them have no health insurance, retirement or loyalty.

If you do sign a contract, get it put in your contract that you will become an actual employee after a certain number of days. Otherwise you may find your 90 days becomes 200 (hello target). As a contractor you get to walk on eggshells constantly no matter if your a flunky or project manager. If your a real employee you get wonderful things like benefits. You'll also discover a fair number of programs for laid off people won't help you if were a contractor.

I'd be a contractor anyday over employee (0)

Anonymous Coward | more than 9 years ago | (#10905305)

True, being an employee gives you a bit of security, but many people who thought their jobs were secure have recently found out they truly aren't....I was layed off from a job I had for a Fortune 100 job is secure.

But if you have good skills, you are secure. Sure there may be a dry month or 2 in between jobs, but more likely than not, the pay of a contractor will exceed that of an employee.

Oh, and the Tax Breaks! As an employee you get taxes taken out before you get your check. As a contractor, you get the *whole amount* from which you spend and then get taxed on the remainder. And as a contractor, many expenses, including partial rent/mortgage, transportation, computer equipment, broadband charges, phone bills, etc... are now tax deductable. With the benefits of being a contractor, I make about 2x what I used to as an employee. Get with any accountant and they'll tell you the same thing.

If you're good at what you do, you'll blend right in with everyone else who has an employee badge. If you know your stuff, all will be well. The only people I'd recommend being an employee to are people who are mediocre at what they do and really aren't interested in their industry. Those are the people who hide behind employee badges.

Ask more (0)

Anonymous Coward | more than 9 years ago | (#10905309)

I recently moved from a full time position at a big hardware company (+9000 ppl) to contracting. Yes, not having benefits kinda' sucks, but doing basically the same work, I can ask for almost double my previous pay, from 45/h to 75/h now. The work is a bit harder and they expect you to perform at the rate you get paid, so it adds a substantial amount of stress. Working 50 hs weeks now is a lot more pleasing than before, knowing you'll be cashing in for *every* hour you put in.


Some options (0)

Anonymous Coward | more than 9 years ago | (#10905310)

A lot here depends on whether you're already employed or not. Leaving a job for a potential full-time job is probably harder, eh?

If you are expecting to make $50K/year, $50/hour contracting is somewhat standard. This varies a bit depending on parts of the country, industry you're in, etc. If it's long-term, I'd look for this kind of rate, myself -- you have to cover taxes and benefits, etc.

Did they say how long they thought you'd have to be contracting?

Can you contract part-time with them while they figure things out?

I think this kind of offer is a little more popular with companies in the post-dotcom era. There are too many variables to make general conclusions, but I'm on a 3-month contract with a company during an executive transition period (I'll likely be a Board member after the contract), so it's good for me. I also get to feel them out and see what happens.

If you get a bad contracting rate, though, you won't have any leverage and they won't be as motivated to move you full-time.

If you think there's any chance you'll be contracting long-term, with or without this company, get yourself a book on consulting and get a grip on what's involved.

lots to consider (1)

NaturePhotog (317732) | more than 9 years ago | (#10905315)

IANATA (I am not a tax attorney), but besides your own health coverage, etc., consider the possible tax implications when figuring out how much you need to make. If you're a contractor and self-employed, in the U.S. you'll probably have to pay the employer share of share of Social Security in addition to the normal employee side.

As a contractor, you probably won't be able to take part in any employee retirement plans, etc. However, if you do end up self-employed, you may be able to start a Simplified Employee Pension fund (SEP). You'll get some tax benefits for that similar to a 401K.

All in all, worth checking with a tax expert before setting your wage.

Contracting was good to me (2, Informative)

Aggrazel (13616) | more than 9 years ago | (#10905321)

I contracted out for about a year to a company.

Made some damn good money because contractors get something regular employees don't get.... overtime pay.

Putting in all those 60+ hour weeks don't seem so bad when you're getting time and a half for all the hours after 40.

The only downside for me was the fact that I didn't get any benefits like vacation days, or health insurance, but my wife's job carried the health insurance for my family, so we were good.

I was a contractor (1)

oldzoot (60984) | more than 9 years ago | (#10905325)

I was a contractor for a couple years. It was quite an experience.
I was hired through a contract agency, in my case, TekSystems. I was pleased with the arrangement. I had health benefits and a 401K. The money was quite good also, I was paid hourly with overtime over 8 hours per day / 40 hours per week. The client perfered to work me overtime than to hire an additional person, and I liked the money. I was paid weekly by check. Putting $3-5K per week in the bank account is a fairly strange feeling - at least for me. I paid attention each time, appreciating that it was an artifact of the dot-bomb bubble and not "real value", but it was quite fun.
My contract ended Aug 30 2001. Not a good time to find another contract. TekSystems had no Unix geek openings at that time. had lots of listings, but they were mostly vapor - I finally got through to a couple of the recruiters and they said they had been trying to get rid of the listings for some time. I was lucky that a previous employer was happy to take me back, and I was ready to go back after 5 years on my own.

The comment about permanant employment is quite real. While I was a contractor, I watched 60 out of 75 of the employees at the bio-tech startup I was housed at ( but not employed by ) get laid off. I was employed by the start-up's parent company and housed at the start-up for location convienience only.

not good (2, Insightful)

MikeFM (12491) | more than 9 years ago | (#10905326)

If they are already telling you lies do you really think they'll be a good employer? If you REALLY need the money then go ahead and take the job but keep your eye open for something else.

On the other hand many full-time jobs treat you as contract help. I've had several that as soon as a project was finished found some excuse to fire me. At least if they admit upfront that you'll only be there until the end of the project then you know to be looking for your next job.

My last employer hired me full-time but evidently never filed the paperwork. When we parted company (because he just stopped paying for my work) I tried to get unemployment only to find out that he'd never filed any paperwork on me and evidently hadn't been paying any of my taxes he was supposedly taking out of my paychecks. To top it off, to get my final paycheck he made me sign a document saying I had been a contract worker.. then he stiffed me for half my paycheck after I signed.

The moral of the story is to be careful. If your employer looks untrustworthy be careful not to trust them. Look for somebody else to work for.

try before you buy (2, Informative)

sednet (6179) | more than 9 years ago | (#10905330)

i would view contract-to-hire as a mutual try-before-you-buy period, during which you get a feel for the workplace and the employer evaluates your performance. if the contract is not renewed, your resume just lists a contract job that was completed.

contractors in the usa are often reported to the IRS via form 1099, with no withholdings or employer contributions for medicare, social security, health insurance, state and federal tax, disability, etc., so you would should expect to pay for those out of pocket before you count your loot.

good luck!

Australia (2, Informative)

femto (459605) | more than 9 years ago | (#10905331)

Here in Australia, the following deductions need to be made to your gross contracting income:

GST 10%
Payroll tax 8%
Professional indemnity insurance ~3%
Public Liability insurance ~3%
Annual Leave: 20 days/yr
Public Holidays: 5? days/yr
Long service Leave: 6 days/yr
Special Leave: 3 days/yr

After doing this, you end up with the gross salary you would receive as an employee. As very rough guide, work out your hourly rate as an employee then double it to get what you should be charging to get the same money as a contractor. Of course you must figure out what premium you want to charge for lack of income security (or insure your income).

The correct answer to "What should I charge?'" is "What the market will bear". If your client raises their eyebrows at your hourly rate, then pays anyway, you are probably about optimum.

An Australian specific answer, but hopefully of some help.

Re:Australia (0)

Anonymous Coward | more than 9 years ago | (#10905354)

Oops, I forgot to mention ~10% superannuation. The 'double it' rule still holds.

Run away from the bait-and-switch. (1)

TFoo (678732) | more than 9 years ago | (#10905334)

If they advertised the position as full-time, and then are trying to do a bait-and-switch for contracting: don't buy it. Is this the kind of place you want to work for? Do you really believe them when they say they'll move you to full-time? What credibility do they have at this point?

In all my years as a hiring manager, I've never had a situation where I advertised a position and then "couldn't get approval". You don't advertise the position before you get approval. There *are* situations where I meet a candidate and interview them for one position, realize they aren't a good fit but decide I still want to hire them into the organization -- in those situations I might offer them a contracting role with the hope of getting a full-time spot: but I am always very clear that this is a different position than the one they came in originally for.

If you do decide to take the job, remember that the tax rates are often higher and you'll need to cover things like benefits, etc. Contractor should be _substantially_ higher than a full-time salary (say 40-50% higher as a guess, but definitely research that # more). Saving for retirement will also cost you more: look into things like a SEP IRA or a traditional IRA.

When you're working as a contractor, make sure to keep track of your expenses, keep your receipts for anything even remotely relating to your work -- then consult a tax professional about what does and doesn't qualify. It definitely is worth it to pay an accountant, especially at first so you know how the game works.

Check pricing on medical insurance first! (0)

Anonymous Coward | more than 9 years ago | (#10905335)

If you or your spouse has the smallest bit of unnecessary medical activity other than one visit every 3-5 years, your rates could be insane. I'm in this boat - took contracting position at higher pay, but medical insurance quotes came in starting at $1500/month, since as few of the kids had some normal accidents and one had broken a leg the previous year. Instant move to "high risk" catagory, and now that higher contracting salary isn't so good.

I'm also stuck in the "we'll hire you real soon now!" boat, now in my eighth month of hearing excuses why I haven't seen an offer letter yet. So if they hire you as contractor, expect you may be stuck there.

Would seem to me.. (2, Insightful)

MultiModeRb87 (804979) | more than 9 years ago | (#10905337)

...that if you are just married but don't have/expect kids for a few years, that you aren't quite as much in need of stability as you may think. Unless your spouse is unemployed, it really isn't the end of the world if you don't have 100% job stability. One salary (well, a $40k salary, for comfort) can feed the both of you, push come to shove. If it's this job or none, certainly take it. Remember that if you're doing contract work, there's no stigma associated with you for taking your services elsewhere if you decide you need more stability (kid arriving unexpectedly, etc). You can still put it on your resume.

My philosophy is that this is the best time you're going to have in your career to take risks. Once you have kids, you have more financial commitments, and you have even more as they get into high school and college. That doesn't mean you should take silly risks, but you shouldn't turn down opportunities flat just because of a moderate risk.

A lot of companies have been doing this. (1)

mr_burns (13129) | more than 9 years ago | (#10905343)

In the US, a company has to pay your employment tax if they bring you on on a w-4 just for that probationary first 3 months. And if they were to cut you loose, they'd have unemployment and severence and all that stuff to deal with. So what a lot of companies like to do now is bring people on as contractors on a w-9 even if it means they pay the employee more. It saves them a lot of hassle if it doesn't work out, and if they still like the person after that initial period it is a cost savings to bring that person on as permenant personnel.

So really, this isn't much different than if you started working any other place. The only thing to remember is that your taxes are going to be a little different this year. for the period you're on your own you'll have to withhold for yourself, pay employment tax and file quarterly. But it's not as scary as it sounds.

And besides. It's one thing for a company to ask you to come in as a contractor. It's another thing to be basically unemployed and have to find all the contracts yourself. I did the former for 3 years and in comparison, what you're facing is like a big thing of riches on a silver platter.

Do the math (2, Insightful)

darylb (10898) | more than 9 years ago | (#10905347)

It all depends on the arrangement. If you're working as a direct contractor, on a 1099 basis, then you've got to budget a lot extra for the self-employment tax and your benefits, plus the headache of quarterly tax payments. If you're a W-2 employee of a "body shop" type firm, then it's all pretty easy for you. You'll be just another piece of meat, but that can work to your advantage. Make sure your pimp pays on time, though.

The stability of "permanent" W-2 employment is a myth any more. I've watched downsizing go on for a solid decade now, and it hasn't let up. I've seen 20-year veterans get the axe, just like the newbies. What happens is that the bean counters tend to cut EITHER contractors OR employees, since they often come from different budgets and with different approval requirements. If it's employees, the contractors will often be left completely safe. And vice vera.

I tend to boil it down to a simple monetary calculation. Figure out your total compensation for both arrangements (permanent versus contract), assigning a real monetary value to benefits or deducting appropriately from contractor payments, and adjusting for vacation and the fact that, as a contractor, you'll likely be paid for ALL the hours you work (not just 40 per week). Once you've got an idea of the cash, figure out the value of the experience each arrangement gets you. (Does the employer pay for further education and skills development. REALLY? Many places promise it, but few deliver.) What does it cost you to pay some for your own education, if you do it yourself? Will you do more interesting or career-enhancing work one way or the other? Finally, figure out how much less you're willing to accept because you're part of the team, not some "prostitute". Also figure out how much not having an annual review (as a contractor) is worth to you.

For what it's worth, I took a contract assignment near the bottom of the dot com bubble. It was supposed to last six weeks. Three and a half years later, still going, at a rate based on a short six week assignment.

my experience (1)

Agrippa (111029) | more than 9 years ago | (#10905355)

I contracted for about 6 months this year after working full time for the past 5 years since leaving college. Even though I was making decent money as a contractor, I really detested the fact that I had no health benefits, no 401k, etc, and that I had to save up a large percentage of what I made just to pay taxes. In the end I was making less contracting than I had made at my previous job, even though my paychecks were bigger. I needed more stability so when one of my friends had an opening at his company I took that. About the only benefit to me of being a contractor was I was able to put in 1 hour notice (it was structured in my contract I could leave at anytime).

On the other hand, I have friends who swear by contracting and love the free time and ability to choose their jobs. It wasn't for me though.


i started in 1991 (1)

bobalu (1921) | more than 9 years ago | (#10905356)

as a contractor, took a 3 week deal that turned into 18 months, and I could probably still be there if they didn't annoy me.

It comes and goes. There is more uncertainty in a way, but not really because you never know what your "stable" company will do. I went full-time 18 months ago after 2 yrs as a contractor (they gave me an ultimatum) and I've just been outsourced to yet another company, so what does that tell you about security?

Incorporate so you can get the higher pay, you can deduct everything in the world and since the new tax laws favor business and are against W2 people you'll pay a lot less tax. Some of that will be taken up by FICA, but there ya go.

The health stuff can really hurt, but if your wife is covered at work it'll be no problem.

I never did get a decent vacation though. If you might be off between jobs, it's pretty hard to actually take time off DURING a gig.... especially if it's short. A 3 month contract, you gonna take 3 weeks off? Not likely.

The math you need to know. (1)

Courageous (228506) | more than 9 years ago | (#10905358)

There's a little mathematical error that people will sometimes make when they "correct" for what's lost.

For example, as a contractor, you may have to pay for your own vacations and holidays. Vacations and holidays, for an ordinary person, may be something like 15% of your year.

The naive decision is to raise your rate by 15%.

That's not correct.

Look at it this way:

85% of 100 is 85.

15% more than 85 is 97.75.

So that math didn't work out.

These are just for the obvious things: The social security, holidays, vacation, sick leave, and so forth that were all included as part of your package before, but aren't now.

Then there's some non obvious things:

"The cost of doing business". The cost of doing business is an estimate of down time, the unbillable time between contracting, that is part of you being a business man. What this figure is, I really can't say, but it is truly and genuinely expected that you charge it.

My last company charged almost /3/ times what it paid for its software engineers, and they were paid lots (six figures), let me tell you. So a client would pay nearly $300K annually to get a hold of one of our people.

You won't be pulling that kind of rate, but 1.5X your salary isn't entirely unreasonable.

If they want you to take something unreasonable (1.2 times your salary, IMO), I'd say skip it and get a salaried job.

Your other option is to file a schedule C, incorporate, and present yourself to them as a bonafide subcontractor. Go month to month, day to day, but charge double.

You're then not caring very much if you have every other month off, if you get my drift....


Talk to your accountant (0)

Anonymous Coward | more than 9 years ago | (#10905366)

Contracting can be great but you will have to pay all of your own medical, vacation, pension, taxes etc. so make sure that your rate represents fair compensation for all of those things. You are also likely to need both an accountant and a lawyer to handle incorporation (easy and recommended) and stay on the right side of your taxes.

Contract to Perm normal (2, Informative)

linuxtelephony (141049) | more than 9 years ago | (#10905371)

It's normal for a lot of companies to start you off as a contractor before going full-time.

If this company is large, well-established, and been around for a while, and not a younger (less than 5 years), smaller sized company, then odds are they are telling the truth about easier to hire contract.

Of course, the fact the position is advertised as full time, and they are now telling you it is contract, and that the reason is because it is easier to get approval, then that means the position your going for may not be fully funded.

Bottom line: Ask questions. Questions such as:

Is this position fully funded already, or is that why you need approval?

If it is funded, as a contractor (i.e. temp), how long is it funded for?

Does the company have any restrictions on how long you have to work as a contractor before being eligible to go perm?

How long until this position is moved from contractor to perm?

When moving to perm status, will benefits start the first day, or will there be an additional probationary (no benefits) period beyond the time spent as a contractor?

Will you be working under a staffing company (where you are a regular employee of the staffing company), or would you be working as an individual directly with the company (W-2 versus 1099 in the US)?

I've seen some companies use contractors as a way to check out the work and abilities of someone they are interested in hiring when the candidate does not have the "required" education or job experience they originally listed. It can be a great way to get a foot in the door of the company.

Of course, there are also companies that use contractors as a way to staff up and down with little penalties.

You should do your own due diligence, check out the company, their track record, things like that. If you'll be working for a staffing company, research them as well.

One nice thing about working for staffing companies, you submit your time card to them and they take care of all the billing and collecting. You are a regular employee of the staffing company. That means you have labor law protections. When you work as a contractor directly for the company, it's a simple business arrangement, meaning if they don't pay you, you can't use labor laws (easily) to collect. Plus, in several cases, the staffing company will pay you weekly. :)

Use an umbrella (2, Informative)

Anonymous Coward | more than 9 years ago | (#10905378)

Warning: my information is about 3 years old (when I retired) so some of it might not be as valid now.

Check out realrates [] . It's a good resource for contractors with lots of tips.

Use an "umbrella" company. They'll "hire" you as a full-time employee and do all the paperwork and billing on your behalf with the client. You can also get health insurance and 401k through them. Good ones won't charge the high percentages regular agencies do.

For annual salary equivalent: take your hourly rate and multiply by 1600. Remember, you won't get paid for holidays, sick-leave, bench-time, plus you have to pay about 15% extra in taxes for being self-employed, and health-care etc, but you'll get a bit more tax breaks. While there may be more hours available in a year, you will not to be able to bill for every one of them, so be a bit conservative in your estimates.

Contracting can be as stable as full-time, sometimes even more, especially in large companies. I've survived several rounds of lay-offs as a contractor.

These days, there are tons of contractors in IT, even at lower managerial positions. You only need a full-time position if you want to make it into higher-level management and/or get stock options.

Re:Use an umbrella (1, Insightful)

Anonymous Coward | more than 9 years ago | (#10905393)

Sorry, messed up the link to realrates [] .

What's the difference? (0)

Anonymous Coward | more than 9 years ago | (#10905385)

I already see a lot of commenting on this topic as though fulltime or contract is a big deal.

Your always an expendible resource, no matter what your HR qualifications. Go ask the millions of tech guys that were killed off betweeen 2000-20003. If you never were, and think it's cause you were 'fulltime', it's not. It's because your project wasn't under scrutiny or worse, because the business unit wasn't dissolved.

Perception is reality - if you guys making $30k at Redhat that will never lose your jobs think it's because your indispensible - think again. It's because you work cheaper than the secretary, and you'll never cost more.

Enter the contractors - most of the 'big guys' pay anywhere from 70-100/hr for good developer talent. Yup - 2-4x more what a fulltime gig pays.

So the question is obvious to me - do you want to make your year's salary within 6 months? Stability is a self-lie - I know fulltimers laid off within 2 years at a company, and contractors that have been working at the same place for 10 years.

I guess it's your 'choice' but it isn't even one if ya ask me.

Been a contactor for 10 years. No big deal... (5, Insightful)

wernst (536414) | more than 9 years ago | (#10905387)

This is going to be short since I need to get back to work. (heh heh heh)

Contracting usually requires dilligence and pro-activeness, plus a willingness to take care of the details of an employer (since you are really employing yourself here), but the benefits (sometimes) include a better hourly rate compared to employees, and MUCH more flexibility. If you combine all these traits and pick up other smaller contracts to fill up any extra time you have, you'll earn that much more (remember, YOU are the employer, and YOU can tell your employees -- you-- that it's OK to moonlight, even during "working hours.")

First, the boring and annoying stuff. Get an individual health plan for yourself and employees. Kaiser, Blue Cross, and others offer good coverage and good prices. (My Kaiser coverage is much better than my salaried co-workers at one big company.) Check with an independant insurance broker for other options. There are many.

Invest for retirement with an IRA, Sep IRA, or Roth IRA. Don't know about these things? OK, see a financial advisor too.

My Advisor is also my tax guy, which is a good thing, because the Income Taxes get a LOT more complicated too as a contractor. If you're "employer" isn't withholding, then *YOU* need to do it yourself. On the other hand, there are MANY more legal deductions you can make for equipment, work space, classes, books, office supplies and such. You REALLY need a tax guy to guide you.

Now for the good stuff. Because you don't get sick days, vacation days, benefits, or "stability" (but in my experience, salaried employees are just as likely to be layed off as contracters when the shit hits the fan in a company. YMMV), you must DEMAND a better pay rate than salaried employees. I'd say at least 15%, but shoot for as much more as you can get.

Since you're not an employees, negotiate the ability to work at home X days a week, if possible. Don't abuse the privilege if you can get it. Being home makes up for a lot of the loss of other things.

Consider taking other consulting jobs on the side sometimes. Make that experience you have really pay.

Make sure your terms of employment give you the rights to develop professional ideas outside teh office. Previous slashdot articles cover this. Remember that the limitations imposed on salaried employees SHOULD NOT APPLY TO YOU in exachange for the lack of stability.

Well, that's just off the top of my head.

I like contacting so much that I've turned down salaraied positions at the companies I've contracted for. If you like the flexibity, then the work is worth it, but note that you probably won't advance up the ranks of the company as a contractor. If this is important to you, then you need to negotiate that up front, or don't be a contractor.

They lied to you (2, Insightful)

EllynGeek (824747) | more than 9 years ago | (#10905388)

What makes you think they will be good to work for, when they pulled a bait-and-switch on you? That's not a tiny lie, that's a huge one. What else are they lying about? How many other ways will they backstab you?

Two words (0)

Anonymous Coward | more than 9 years ago | (#10905389)

paid overtime.

Choices & Decisions (2, Informative)

sigipickl (595932) | more than 9 years ago | (#10905391)

You may want to check out bringing a third party in to payroll. Someone like eWork [] can payroll you and bill the client on your behalf. The benefit of this situation is that you would be a W2 employee of ework, avoiding the process of filing quarterly estimated taxes and keeping your own books. They often can extend group plan benefits to you at discounted rates, too. (I am not affiliated with ework.) If going independent/1099, make sure you bill enough to cover things like benefits, taxes, expenses, etc. A rule of thumb is to double the hourly rate that you would work for them as an employee (i.e. if you'd work full-time with bennies for $20/hour, charge $40 as an independent). Also make sure you cover your butt on contract details like overtime/off-hours work, minimum hours worked per week, job/task description, worksites, travel time/expenses etc... my $0.02

I just went through this (1)

barzok (26681) | more than 9 years ago | (#10905394)

And in the end, didn't get the job. But here's what I learned (in the US, anyway):
  • Taxes can nail you hard. Figure on stashing 1/3 of whatever you get away for tax purposes. Pay estimated taxes quarterly
  • There are no paid holidays, paid vacations, paid sick days, etc. Plan accordingly.
  • Save for "downtime" (between jobs). Figure downtime into your rate when you consider your annual salary
  • Medical insurance costs a LOT of money. I budgeted $1000/month for myself and my wife. Overboard? Maybe. That's also tax-deductible
  • Don't just translate your current pay to an hourly rate (for reasons above)
  • Records, records, records. Keep careful records of everything. Theoretically, your commute becomes tax-deductible - save toll receipts, train ticket stubs, keep mileage records, whatever. For 2003, the IRS allotted 37.5 cents/mile as deductible. Every printer cartridge, 25% of your cellphone bill, lots of stuff could become a tax writeoff if you're careful.
One year at $50/hour and 2 weeks not working (holidays, vacation, sick time) is a gross of $100K. Minus $12K for medical insurance (using my above numbers). Minus 1/3 for taxes. Minus X for retirement (401(k) may be gone, but you can still kick into a Roth IRA, start your own investing, etc.). It all starts adding up. Save up for when they let you go with 5 minutes' notice (because they can, when you're an independent contractor) and you can't find work for 4 months.

I built a spreadsheet in Excel so I could look at the range of hourly rates I could (or couldn't) afford. Even at a very high confidence level about the number of weeks I'd work (IOW, assuming I work a full year there), I was shocked by the rate I came up with. I kept looking at it saying "there's no way I can be worth that much" but I also know what my current (full-time) employer figures for my hourly rate, and in reality, I was giving myself only a very slight raise - when you consider I said the rate was "negotiable" that raise disappears.

Umbrella Companies (2, Informative)

euphline (308359) | more than 9 years ago | (#10905396)

I did work under a similar arrangement for a while. I used a company called for the benefits. They're generally called an "umbrella company" or an "employer of record". It made getting a mortgage recently _much_ easier.

I had no complaints with MyBizOffice. There are other options, but they were the only ones with a good web interface at the time I was in the market (July 2003).


I'll believe it when I see it (1)

prozac79 (651102) | more than 9 years ago | (#10905400)

3 day work weeks huh? Not quite. Try more like 5 long work days and 2 more "on-call" days. I am currently a contractor and I work harder than I ever did as a full-time employee. Since you are only contracted for a set period of time, an employer wants to make sure they get every last penny's-worth of work out of you before that contract is up. The money is good with overtime and such, but it's hardly a cushy gig (but I guess that also depends on who you are contracted by).

Just keep this in mind. If you are a contractor you are pretty much self-employed. Pick up a book on tax benefits for the self-employed to learn the tricks of the trade since that's where the real benifits come into play. Also, now-a-days the only difference between a full-time employee and a contractor is that the contractor knows when he/she will be fired. Good luck!

some income better than no income (1)

Triumph The Insult C (586706) | more than 9 years ago | (#10905401)

try it out for a few months. it nothing happens, go look elsewhere. if they don't like it, remind them that they lured you to the position by making it appear to be full-time and they didn't hold up their end of the bargain. tough shit for them. it's part of doing business

Reasons to hire contractors (2, Insightful)

jridley (9305) | more than 9 years ago | (#10905408)

I think some employers hire contractors and then offer full time positions because if a person turns out to be an idiot, it's easy to let contractors go, not so easy (and potential to get sued for wrongful termination) with employees.

Every company has hired people who look great in the interview and wind up being idiots, or jerks, or just unproductive. OTOH there are a lot of very productive, smart people who would be great assets, but don't interview well. Using the contractor option gives companies the option to give you the benefit of the doubt without such a commitment.

So if you're really a competent, hard working individual, going for a contract position is probably a good bet (caveat; I've never done it myself). OTOH if you're the type that got an MSCE through learning-by-rote, and doesn't really know what they're doing, watch out.

Buy This Book Now!! (3, Informative)

tiny69 (34486) | more than 9 years ago | (#10905409)

anet Ruhl's Answers for Computer Contractors: How to Get the Highest Rates and the Fairest Deals from Consulting Firms, Agencies, and Clients ISBN: 0964711621 Buy it from your favorite online bookstore and have them overnight it to you!! You are on unfamiliar territory and can very easily be taken advantage of. There are a lot of pitfulls with computer consulting/contracting. However, the rewards are well worth it if you know what you are doing.

There's one more intangible to consider... (1)

David M. Sweeney (105063) | more than 9 years ago | (#10905415)

Don't forget the mysterious aura of competence that seems to surround contractors in the minds of managers at most large corporations. Employees are a bunch of lumps who don't know anything, so companies bring in High Powered Consultants to get the real work done and keep the working stiffs in line. I dread the day that my clients figure out that the simple act of paying their employees for overtime would fix their attitude problems overnight!

Oh yeah, and a 50% raise lessens the fear of unemployment considerably.

Thoughts on this (1)

DarkHelmet (120004) | more than 9 years ago | (#10905418)

The company I work at right now originally wanted me to come on as contract before hiring me fulltime. I politely declined.

My justification to where I work now is that I wouldn't quit my current full-time place of work for a contract job that MAY or MAY NOT pan out. I was in a fairly stable situation at my old job, and did not want the extra uncertainty of moving to a contract position, even if they promised it was only temporary.

The other little tidbit about my job was that they wanted to start me off on a lower salary, and then move me up to the amount promised if "things went well." I declined that as well, and told them that if they weren't happy with the work I was doing, to simply get rid of me after three months.

Go to a job interview confident. Tell them what you know. Be technical. But most importantly, do not give them the impression that you need to work for them. I cannot stress that enough. Do not be trampled on just because you want a job.

The other little thing they forget to mention is that as a contractor, they usually don't take taxes out. Which means, you're paying all of Social Security, which amounts to more taxes at the end of the year.

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