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Moving from a Permanent Position to Contract Work?

Cliff posted more than 8 years ago | from the normal-paychecks-to-customer-billing dept.

Businesses 295

duncan bayne asks: "I'm sure many developers in salaried, permanent positions have been tempted by the self-management, flexibility and higher pay that are the perks of being a contractor, while at the same time looking nervously at the uncertainty and irregular income. So, to all those in the Slashdot crowd who've made the change - what was it like, was it worth it, and what advice can you share?"

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Clarification (5, Insightful)

rackhamh (217889) | more than 8 years ago | (#13744013)

Contracting isn't exactly self-management. Many companies prefer to do all project management themselves and simply treat contractors as implementers.

Re:Clarification (3, Insightful)

IDkrysez (552137) | more than 8 years ago | (#13744060)

More likely self-management in terms of employment regulations -- IIRC, if you're a contractor then your employer is not allowed to define the hours of when you work or don't work; they can only define milestones for your progress and set times for meetings they need you to attend.

You should get paid more, and have more freedom in this sense... and you'd need to be self-managing in terms of making yourself get the work done :)

If you're lucky, you might've found a job where you can pretty much set your own hours anyway -- i.e., if your employer trusts you and believes that you're more efficient and happy when working when you *want* to, then whee! Benefits of regular employment are nice, I do contract work on the side... and thus I've lost all freedom! ;)

      -borg

Re:Clarification (5, Insightful)

rackhamh (217889) | more than 8 years ago | (#13744106)

IIRC, if you're a contractor then your employer is not allowed to define the hours of when you work or don't work
That may be; I don't know the legal side of it. But in practical terms, on projects that require interaction with business groups, you will be working the same hours that they do. Furthermore, some companies will require that you work on-site, as a means of providing secure access to company resources -- which will also limit your working hours.

I'm sure it's possible to build up a consulting business that avoids this kind of situations, but you may have to turn down some lucrative jobs to maintain such standards.

Re:Clarification (1, Informative)

Anonymous Coward | more than 8 years ago | (#13744374)

The legal side of it is covered in section 1706 of the Tax Code. See the "Safe Harbor" Provisions.

From the sounds of it, you're not a contractor at all; just a temporary employee, who isn't paying the proper taxes.

The problem here is that you're exposing your so-called client to legal risk. The I.R.S. can recategorize you as an employee, and force your employer/client to pay all the back taxes that they should have been paying, along with penalties.

In general, it's not a good idea to expose your clients to unnecessary legal risks. A real contractor WOULD know the the legal side of things, and not do this.

Contract in a country that has free health care (0)

Anonymous Coward | more than 8 years ago | (#13744081)

like Canada. Otherwise be prepared to pay $10,000/year or more for health insurance.

Re:Clarification (3, Informative)

tezbobobo (879983) | more than 8 years ago | (#13744109)

I've actually had less autonomy. Whilst working for the company, they dictate your time and what they think you should be doing and so on. Since I went contract firm want a much stricter account of the time spent. For a person like me who'd prefer to get the job done and not worry about the paper work, that is very frustrating. All of a sudden lunch breaks and my many coffee breaks are a no-go or at east a keep secret. Same for cigarettes.

Oh yeah, there is also the finance paper work...

First post? (-1)

Anonymous Coward | more than 8 years ago | (#13744015)

Is it?

Funny you should ask (3, Funny)

Anonymous Coward | more than 8 years ago | (#13744017)

When I first started out it was definately frightening, however as time went on they kept giving me more and more responbility, eventually they ended up with a contract CEO. Don't ask. But the perk for me is that since I'm contract I can hit on the hot workers at my workplace without having to worry about any side effects. Try it sometime.

Re:Funny you should ask (1, Funny)

Anonymous Coward | more than 8 years ago | (#13744031)

I will. Where's your workplace?

Re:Funny you should ask (3, Insightful)

winkydink (650484) | more than 8 years ago | (#13744032)

They can also tell you that today is your last day for no reason at all. Or worse, call you after you've left for the day and tell you not to come back.

Re:Funny you should ask (3, Informative)

iminplaya (723125) | more than 8 years ago | (#13744073)

"Willful employment" is a common practice, even amongst full time "permanent" employees. So what if they don't want you back. They still have to pay. They do have to honor a contract...unless there's a stipulation that says otherwise...or they can afford a decent lawyer to help them weasel out of it.

Re:Funny you should ask (1)

winkydink (650484) | more than 8 years ago | (#13744388)

Most companies take some litigation prevention steps like verbal & written warnings, performance improvement plans, etc... At the end of the day, if they want to fire your butt, you're gone anyway, but, speaking as a PHB, it's a lot of work. In some companies, especially larger, profitable ones, it can be so much work, it's almost as if they want you to keep the dead wood.

Re:Funny you should ask (2, Insightful)

nolife (233813) | more than 8 years ago | (#13744112)

Almost any employer can do that, contract worker or not. I'd image there are variations from state to state though.

Re:Funny you should ask (1)

winkydink (650484) | more than 8 years ago | (#13744392)

I think you'll find that, for the most part, there's a pretty big gap between "can" and "will"

Re:Funny you should ask (2, Interesting)

kenevel (921288) | more than 8 years ago | (#13744038)

I guess it has a lot to do with the culture where you're working now. I know guys who are happy at a small firm who have implemented XP who are well paid and have no inclination to jump ship. I was at a very large consultancy, itching for more responsibility and more design work and left without a contract to go to a couple of years ago. As soon as I had a leaving date, the interviews came in and I sorted out a contract within a week of resigning. Since then I haven't looked back.

Where do you work to get fit staff to hit on? The places I've ended up has been almost entirely wall-to-wall blokes. Not what you'd call a target-rich environment...

Re:Funny you should ask (3, Funny)

Frank T. Lofaro Jr. (142215) | more than 8 years ago | (#13744304)

I know guys who are happy at a small firm who have implemented XP

Microsoft is hardly considered a small firm.

Re:Funny you should ask (4, Funny)

nomad_monad (442915) | more than 8 years ago | (#13744050)

Hot coworkers?

Sorry, I think the original poster was talking about contracting for TECH companies...

Re:Funny you should ask (4, Insightful)

eln (21727) | more than 8 years ago | (#13744236)

since I'm contract I can hit on the hot workers at my workplace without having to worry about any side effects.

How do you figure? You can get sued for sexual harassment whether you're an employee or not. You can also be released from your contract for violating the employer's rules of conduct while you're in their building.

Also, basically all CEOs and upper level management are on contract. They may draw a salary, but you can bet they have contracts spelling out things like severance pay and bonus structure.

It was worth it (5, Informative)

RGRistroph (86936) | more than 8 years ago | (#13744035)

I think it was worth it to me. You have to realize that you won't always get higher pay and more flexibility; sometimes part of becoming your own one-man company is that you have less flexibility because you are the only one to do things. And while the pay may be more per hour often you get fewer hours, or spend huge amounts of time marketing yourself and doing research to setting up contracts.

Still, on the whole it is worth it. You do have more independence.

Traditionally people following this route have had former employers as their main clients. With sites such as scriptlance, rentacoder, guru.com, and etc., you can now get a larger client base, and even start doing it before you quit your old job.

However, I do have to say, that if insecurity makes you nervous, maybe you shouldn't do it, or at least save up money for a while first.

Re:It was worth it (1)

knightinshiningarmor (653332) | more than 8 years ago | (#13744078)

You have to realize that you won't always get higher pay

What are you talking about? I get paid a lot of... Whoa.. the lights are flickering. Dang, this happened at the same time last month. I'll just send this and finish when the power comes back up.. sorry.

Re:It was worth it (3, Informative)

iminplaya (723125) | more than 8 years ago | (#13744101)

I think it's worth it also, but doing your taxes can get pretty complicated, and you might find yourself paying into unemployement, workman's comp, etc. Self employment can be bureaucratic hell.

Re:It was worth it (2, Interesting)

mre5565 (305546) | more than 8 years ago | (#13744313)

Assuming you are posting from the USA, how do you deal with health insurance, given that the USA's system is biased toward employer provided health insurance?

The problem... (2, Insightful)

artemis67 (93453) | more than 8 years ago | (#13744355)

with bidding on projects on the job boards you mentioned is that you have guys from the US and guys from countries like India bidding on the same jobs. The US contractors want $80/hr, the Indian guys want $10/hr. It's very tough to land a freelance contract that doesn't require you to be onsite.

Good link on the subject: (4, Informative)

jdclucidly (520630) | more than 8 years ago | (#13744039)

I used this resource when I did what you are considering doing: "So You Want to Become a Consultant?" [unixwiz.net]

Contracting is fine... (2, Insightful)

HotNeedleOfInquiry (598897) | more than 8 years ago | (#13744040)

But should be a stepping stone to having your own company that actually *makes* something. I was a consultant for about 1.5 years. Not great money because I was only doing part-time while designing my own product.

I went the other way (2, Interesting)

$RANDOMLUSER (804576) | more than 8 years ago | (#13744042)

Hell, I gave up and went the other direction (contract to employee) during Clinton's first year in office. Paying Social Security at 1.5 (then) times the rate everybody else was, paying 2.5 times what everybody else was for medical insurance, getting audited anually by the IRS for a chintzy office-in-home deduction, expected to amortize computer equipment over FIVE YEARS, fer chrissake...

Feh!! Good luck to you. You can have it!

Re:I went the other way (2, Informative)

ankarbass (882629) | more than 8 years ago | (#13744084)

The office-in-home is a red flag from what I've heard. Of course, I'm not telling you to lie on your taxes, however, you probably wouldn't get audited for a similar deduction spread out over office supplies and mileage. ymmv.

Re:I went the other way (4, Insightful)

PCM2 (4486) | more than 8 years ago | (#13744281)

Paying Social Security at 1.5 (then) times the rate everybody else was, paying 2.5 times what everybody else was for medical insurance
Um, you realize that you're paying the exact same taxes you were paying before, right? It's just that before your employer would pay a portion of what the government wanted. Now you have to pay it all, because you are the employer. The plus side? You get to keep all the revenue -- minus, of course, the part that you set aside to re-invest into your business. But that's a whole 'nother story. If you can't even figure out your taxes, or hire an accountant to take care of them for you, and you don't know how to charge enough that you cover your costs, then maybe contracting really isn't for you.

Re:I went the other way (1)

phizman (742537) | more than 8 years ago | (#13744369)

But companies can establish a bulk rate for insurance. As a lone employee of your own company you get screwed.

Re:I went the other way (4, Informative)

RichHolland (23236) | more than 8 years ago | (#13744325)

Typically contracting you'll make 50-100% more per year (if you keep busy) than you would as an FTE. That MORE than makes up for the extra self-employment tax hit and benefits. You don't have to amortize a computer over 5 years -- write it off the first year as a Section 179 deduction. The rule varies in how much you can deduct each year; it's been rising from $20K up to around $25K now, I believe. One or two years in there it was up to $100K to stimulate small business spending in the economy.

Pay for a CPA to give you advice and do you're taxes. The $1-2K/year you'll spend will MORE than be recovered when they show you how to correctly deduct things, etc.

I've always opted NOT to deduce my home office. It's only 150 sqft of a 3500 sqft house, so I can't deduct all that much, and it's not worth the flags in IRS or the hassle in figuring out how much you have to repay when you sell the house in a few years...

It's a mixed bag (3, Insightful)

TrekCycling (468080) | more than 8 years ago | (#13744046)

I've been contracting for a couple years ago. I've discovered that contractors often get brought on board often to organizations that either are experiencing unmanagable growth or are stuck in the mud because of problems with business process. So it can be frustrating. But the money is better and it's nice to know that you can take a couple weeks off here and there (assuming you save your money, etc.).

I think it's really a lifestyle thing. I like being permanently (although that word is a joke in this market) employed from the standpoint of working on the same project and getting some momentum for a while. But I don't have kids. Don't have a mortgage, so that's really the only advantage to me. That and if you like your co-workers a lot and want to stick with them. Those are reasons I'd rather be permanent.

Not much help, I know. Like I said, it's a mixed bag. Permanence is about more than just stability in work. It's about stability in what you do, stability in who you work with. And depending on if the job is boring and if you like your co-workers this can either be a plus or a minus. I'm just glad I have the financial flexibility to make that choice and not worry (as much) about the financial end of it.

Health insurance (4, Informative)

spineboy (22918) | more than 8 years ago | (#13744203)

One thing to consider - you might make a higher wage, because the company doesn't have to pay for your health insurance. Make sure you have health insurance for your family!!, and you. This can be quite expensive, and maybe worth sticking to the company, as opposed to being an independent contractor. You might want to look at the cost and see if you really are making more as an independent vs being a company man.
If your life goes perfectly and you don't have any problems then great - you gambled and you got lucky. But what if you get into a car accident/ get appendicitis, or something worse? - Do you really want to pay out of pocket for medical expenses? What about eyeglasses or dental?
People get into accidents through no fault of their own. It's nice to be an adult and PLAN ahead for the unexpected, instead of just gambling on everything being perfect.

Re:Health insurance (1)

CastrTroy (595695) | more than 8 years ago | (#13744306)

Or even better, you could become a contractor in Canada, where medical is covered by your taxes. Eyeglasses and dental are extra, but insurance can be had for pretty cheap. And despite what you might hear about waiting times, the system isn't half as bad as it sounds. Waiting times are mostly only a problem on non-critical procedures such as knee and hip replacements. Sure, it's an inconvenience, but you aren't likely to die if your knee doesn't get replaced quick enough.

Part time (1)

kevin_conaway (585204) | more than 8 years ago | (#13744047)

Sorry to not really answer your question, but I have one of my own.

I am a salaried developer right now but I'm interested in doing part time work as well. What resources do people suggest for this kind of endeavor?

Thanks.

Re:Part time (1)

caffiend666 (598633) | more than 8 years ago | (#13744179)

First, have a long heart to heart talk with your trusted co-workers. See what they think, don't really say you are looking to do part time work, but ask about people who have. They'll lead you in the direction of whether your company supports it or does not (some of them might even have leads). Second, have a heart to heart talk with your boss, what do they think (they might even have leads)? Third, ask yourself, if you can't do your first job, can you really do a second one. Fourth, ask yourself, do I have any leads? It's all about networking. Also, try putting in that many more hours at work or on a personal project. If you can't realistically, regulary, put 10-15 hours a week into a personal project, how can you expect to put that many into a part time job? If you are just bored, get a part time job somewhere. The neighborhood Burgar Barn might seem boring, but they are always hiring, and you'll get enough stories to last a lifetime.

Re:Part time (1)

geekoid (135745) | more than 8 years ago | (#13744187)

The first and formeost is networking. as in people networks.

Go to user groups that have interests and talk to them.

Find small companies that hire out consultants. Sometime they'll need people they can call for short term projects. 3-4 days type stuff.

Convert your curent salary to dollars per hour(based on a 40 hour week), triple it.

Start ups can be a resource of people who need quick help now. In this case, you may have to lower your wage a little.
In most cities there are places people running starts go to, usually to discuss way to find money, or display there product/service to angel investors.

Call you friends in other companies, see if you can get a lead. Thats how I got my first contract. they just needed someone to come in an fix a serial device interface. easy work, butbthere regular engineers where too busy. that turned into a very well paying long term contract on another projet. and THAT turned into being released when the bubble pooped.

Mom's Cooking was worth the decision (3, Funny)

talipdx (891867) | more than 8 years ago | (#13744048)

I went from a cozy 3rd year job at an upstart, to managing my mom's spyware riddled m$ home network. Altho the hours are great with decent meal benefits a cozy corner office....... I for one, welcome avian flu. :[

read the fine print (1)

pbjones (315127) | more than 8 years ago | (#13744051)

contract positions also give the company the option the terminate your services more easily. You may or may not be paid for sick leave, public holidays, etc. You have to sit down and cost out the conditions that you have as a permanent staff member vs contract, sometimes it works and sometimes it does not. be suspicious of any company offer to move to contract, they must be getting more out of it or they would not make the offer.

Different Take (1)

TheBrutalTruth (890948) | more than 8 years ago | (#13744055)

Funny - I went the other way around. Contractor for 5 years. My wife was about to have a nervouse breakdown every time a contract came up. So I took less pay and freedom (to change jobs only - work is work!) for real benefits and stability.

Unless I get laid off, as our company keeps outsourcing.

Previous Ask /. discussion (5, Informative)

KittyFishnets (306744) | more than 8 years ago | (#13744056)

There was a very good Ask Slashdot discussion on this topic, almost a year ago. It is worth reading:

Switching to Contracting? [slashdot.org] KFN

Recommend Reading (4, Informative)

Doc Squidly (720087) | more than 8 years ago | (#13744061)

I recommend getting a copy of The Career Programmer: Guerilla Tactics for an Imperfect World [amazon.com] by Christopher Duncan.

I read this after getting my first (and very bad) job as a programmer. It covers many aspects of working in I.T., including some of the differences between working as an employee or a contractor.

Good Luck!

Job security does not exist anymore (3, Insightful)

teutonic_leech (596265) | more than 8 years ago | (#13744064)

You actually might be better off - there are plenty of opportunities out there for talented contractors these days, especially senior people. The money is better, but you need to probably incorporate yourself to properly 'play the system' IYKWIM ;-) Bottomline is that you can probably make up to 30% more/year being a consultants, but bear in mind that you also need to buy your own health insurance, pay for your own 401k etc. So, don't be timid when negotiating your rate - if you have been making $100k/year in salary you probably should ask for at least $60/hr as a consultant, otherwise you're probably just break even or even wind up not making much more. BTW, that estimate consider approx. 3 months of no work per year. Good luck!

Tell ya what (1)

Weaselmancer (533834) | more than 8 years ago | (#13744172)

When he leaves that $100k/year job, have his former employer give me a call, k?

Re:Job security does not exist anymore (2, Informative)

superpulpsicle (533373) | more than 8 years ago | (#13744198)

The 2 states that have contract positions paying $60/hr consistently is NY and CA. The rest of the country rarely go above $50, and that goes for even the most hardcore tech positions. The contracting market is IMHO dead compared to couple years ago when it was actually worthwhile to take some chances.

And 401k is absolutely overrated. You save by evading tax now. But if you didn't evade tax and withdraw the amount, tons of financial companies have better ways to make greater gains with your money.

Re:Job security does not exist anymore (0)

Anonymous Coward | more than 8 years ago | (#13744398)

Until I see the first US security cleared person (who can make 20% higher than a regular gov't employee) "transitioned" or "fired", then I'll believe "Job security does not exist anymore".

Cost loading (1)

Bork (115412) | more than 8 years ago | (#13744068)

There is a cost of not working for a company.
$300~$700 a month in paying your own health insurance.
Paying unemployment insurance
No matching 401k

Of course if you did not have them before, will not miss them now.

Moving from a Permanent Position to Contract Work? (5, Interesting)

Phlatline_ATL (174344) | more than 8 years ago | (#13744082)

I made this move a little over 3 years ago. I was in a desperate situation in that my employer at the time was axing people left and right, good people too. I ended up getting dumped an entire bag of junk and work that I couldn't perform. My coworker, who was in an architect manager role had had enough and made the jump about 3 weeks prior. I ended up hooking up with the same contracting firm he went to and got myself under a W-2 employment agreement with them. He on the otherhand already had a 1099 corp established and was able to get the appropriate agreements in place for it. I personally didn't want to go through the motions of establishing personal health care, the 1099 corp, etc. It just wasn't something I could stomach at the time.

The jump was scary as all hell. I hopped on a new contract about 48 hours after leaving my former employer and started getting setup. Unfortunately, the position was not exactly as my account rep had conveyed with me. Nor was it as clear cut as the contractee's interview/position description stated. Needless to say, the first few weeks were a bit bumpy. I was able to establish a fairly good rapport with the client and things have been more or less peachy since. There is the temptation in some cases that, as contract, you will get paid overtime. I have to warn you. This is a blessing and a curse. When you do this stuff and go the extra mile, it sometimes becomes expected of you. While the extra money is nice, the long hours tend to really eat in to you.

In early June, after a couple of internal management organization shifts, I was under the impression that my contract was stable through the end of the year. Well 1 week into June, I was informed that I would no longer be needed in my current role after 30 June. Needless to say I felt that I had just been screwed over, my contract firm was outraged, and I was really starting to freak out as my, then, girlfriend (now wife) had just moved in. Money coming in was VERY important. Luckily, my contract firm has feelers in all over this particular company, they were able to secure me a position quickly in C++ land, which I wasn't overly proficient at as having programmed in Java for the last 4 years, but it was work. The way the agreement was inked, I would be paid as a salaried employee up to 40 hours, get 2 weeks vacation time, 5 sick days, etc. Overtime was a bit of a sticker. I have to work something like 6% overtime or some such garbage before I get paid for it. Since my earlier experience put a real pinch on me, overtime was going to be minimal at most if I could help it.

Long and short of this is that you should really research your options and your current situation. If you can stick it out and look for a perm position, go for it. If you are willing to "eat shit" for a while, you may come up smelling like a rose. My experience may or may not be the same that many people have. If you are confident in your skills and are able to adapt quickly to fluid situations, then you may want to try your hand at it. Make sure though that you have enough banked up to cover shortages in hours (i.e. around christmas time where code freezes may be rampant and actual work may be scarce).

Hope my long winded telling of my last three years has not been over the top or wandering too much.

Money money money (1, Informative)

Anonymous Coward | more than 8 years ago | (#13744085)

I made a heckuva lot more money contracting but I worked my ass off. Sixteen hour days for three months at a time, no sleep, blood pressure issues. Did it pay off? Sure, but I can't do it anymore because of health reasons. If you're young (and it's not an age thing, but a health thing) I'd say go for it. The money I made contracting paid for my house, a couple sports cars, little things that make life a lot more fun if not a lot more meaningful. It beat the crap out of me, but was a million times better than my former job at a software company.

If you are confident, Do it. (1)

Aussie (10167) | more than 8 years ago | (#13744088)

As long as you are confident in your skills and there is a market for them, you will usually do OK.
I made the change about 10 years ago. There have been a couple of lean years, but generally I have been
happy with the flexability and very happy with the money.

Also you, to some extent anyway, can choose your work.

Contracting sucks (3, Informative)

Loconut1389 (455297) | more than 8 years ago | (#13744093)

For me, I have very few clients, one of which makes up the bulk of my income. I was sort of forced into contracting when that primary client couldn't afford to hire me full time with benefits.

The working from home is very nice, and yet due to my 11.5 month old, I am far less productive. There's something nice to having a real office to go (away) to.

As a contractor, make damn sure you have enough potential clients that can support your needs- for me, if my main client dumps me, I'm toast and there is no clause in the deal that they have to give me x-weeks notice since I'm not an employee.

Anyway, contracting has its plusses- and if you've got a good client base, it can definately be better than working in a cubicle. But you're also off on your own and you assume all of the risk.

So if you decide to wing it, work really hard to get and keep clients.

So rent an office (1)

PCM2 (4486) | more than 8 years ago | (#13744243)

In most cities there is office space available for people like you. Don't asume that all office space is designed for growing companies with lots of employees. There are often spaces available where several individuals share the same facilities but do completely separate things. A Web developer friend of mine had a place like this once. basically had a common entry area that included a kitchenette (microwave, coffee machine etc.), a couch, and a coffee table with a couple of magazines where clients could wait. Surrounding that was a bunch of offices. The lady in the office next to my friend was a field rep for Dole Pineapple. Another guy was some other kind of marketer. Another one was some kind of programmer. It wasn't a bad setup and, like you say, it gave him someplace to go to get away from the distractions of home and get some work done. Plus, during the downtime he could even chit-chat with his "coworkers" on a business-y level, even though they didn't actually work together. There's something to be said, psychologically, for occasionally seeing another human soul besides your immediate family during the work week.

Of course, this does take a certain amount of money. But look at it this way: If your billing structure isn't enough to accommodate the very basics, like a roof over your desk, then you're probably either not charging enough or not working hard enough. Sounds like you need to go out and find yourself another client.

Rule #1 with kids (1)

robbo (4388) | more than 8 years ago | (#13744341)

Working @ home doesn't work so well with small kids around- "Honey can you change DD's diaper?", "Honey can you watch DD while I hop in the shower/run to the store/etc/etc?" Make sure you've got your own work space that is strictly off-limits to kids and significant others while you're "@ work". Otherwise you'll find your productivity is a fraction of what it should be.

Worth it, but hard (2, Interesting)

TheViciousOverWind (649139) | more than 8 years ago | (#13744096)

Well, it was definately worth it for me. - But it's not always more flexible. Sometimes a customer has a deadline, and if you promised it done to that date and are late, then you're gonna have to pull some hard work-hours the last week or so to reach it.

Sure, there's some flexibility in the fact that you don't have to ask a boss for anything, but as soon as you get enough customers, you're pretty soon going to have the same workhours as you would in a normal job, because that's when people expect to be able to get hold of you over the phone, also it's a lot more difficult to fit in a vacation if you have lots of work piled up.

And lastly, watch out, it's very easy to become a work-o-holic.

Re:Worth it, but hard (1)

TheVidiot (549995) | more than 8 years ago | (#13744248)

Amen to that. For me, I became overworked and overwhelmed due to the inconsistent flow of requests from my clients. It became necessary to hire subcontractors to save myself from insanity. Hopefully a vacation is now possible.

I now face the choice between staying a one-man operation or becoming an employer myself.

Anyone have thoughts or tips on that process?

Made the switch eleven years ago. (1)

mrsam (12205) | more than 8 years ago | (#13744100)

... and I've been an incorporated independent consultant ever since.

I consider that to be the best decision I've ever made in my life.

No more twelve hour days at the office.

No more wearing a leash on your neck, every weekend, dialed in remotely, and having to provide coverage and support for the preciousssssssssssssss weekend produciton job runs.

And making twice as much money (even after factoring in the overhead of being self-employed), then the salaried schmucks who sit next to me.

And I still have a decent medical plan (and if I don't like my medical insurance carrier, I can fire them and get a new one).

And I still have a retirement plan, to which I contribute pre-tax dollars every year.

There's been an endless stream of recruiters, over the last ten years, constantly calling me and desperately try to raise my interest in some salaried position they're trying to fill.

I'm still looking for a single, valid reason why I should.

And to the scumbag bastard of a manager, who opened my eyes eleven years ago as to which side of the bread _really_ gets buttered (by shipping a dozen consultants and employees 7,000 files to do a customer site install, paying all the consultants' expenses and car rentals, while making all the employees suffer through some infernal car pooling arrangement), I have only two words to say:

THANK YOU!

Re:Made the switch eleven years ago. (1)

geekoid (135745) | more than 8 years ago | (#13744134)

I bet 11 years ago one of those words was different...

i'm half and half (1)

circletimessquare (444983) | more than 8 years ago | (#13744103)

i have a part time salaried job and also some contract work. the contract stuff is top notch pay and sexy tech, but, it comes and goes. nothing for months, then boom, a windfall

i keep the part time gig because it is close by to where i live and it's a nice low stress place... my hours are also flexible with them as well. i'm not making yearly bonuses like i did back in the dot com boom era, but then again, i'm not having a heart attack every day either. granted, it helps that it is a small company where they have that flexibility for me to work part time and at odd hours. when i was talking about leaving, they really wanted me to stay, so they were open to such a compromise (it helps i wrote the codebase for all of their operations)

so if you are in such a position (large impersonal corporations i don't think really care enough to keep you part time unfortunately, but small companies might) then i would think about the part time compromise/ insurance policy against being kicked out of your home and having nothing to eat

Difficult Decision (1)

malus (6786) | more than 8 years ago | (#13744113)

I quit my 'career' IBM job back in May to take a contract job. I'd been shoved from Sprint -> IBM 6 months prior, and while it took 6 years to become disillusioned with Sprint, it took only 6 months for IBM to rip my soul completely out.

Anyhow. The contract job is, for me, a better job by far. My work ethic is solid, my attention to detail and creativity, equally solid. I was working 60 hours a week for Sprint/IBM, and I work between 60-65 hours a week now, but the results are sooo totally different. I can actually *see* the product materializing before me. My customer is more than thrilled with the results so far.

In summary, my current experience with contract work has been nothing but excellent. I can't imagine going back to a day-to-day grind-job, a "career" job.

Simple 1 + 2 = 3 (1)

drwylde (44601) | more than 8 years ago | (#13744116)

Steps:

1. Put $20,000 in the bank - keep it there.

2. P*s* off your boss - you've had enough.

3. Be patient - always productive - Yes!

4. Treat your clients like you'd like
        to be treated - always give value.

Twenty-five years, /bill

Re:Simple 1 + 2 = 3 (0)

Anonymous Coward | more than 8 years ago | (#13744372)

5. Pr0fit

Lots of benefits, some headaches, but worth it (2, Informative)

rmckiern (921291) | more than 8 years ago | (#13744127)

The pay is usally fairly good as compared to employee (even considering their benefits.) If you do not live in metro area though you may find yourself flying into a job on Monday and returning home on Friday. If you like that life then go for it. I did it while I was young and loved the travel. Now that I have a child, I don't want any part of it. Additional benefit, as an consultant I have worked for many different companies, IBM, Cap One, Citibank etc etc. I've learned a lot of business domains. As an employee somewhere you may not get that. This business knowledge has helped me start my own consultant business locally with a vast array of clients. Headaches: paperwork! Ensuring you have a good accountant who understands the business of a consultant so you get max return. May be hard to find. Sometimes you may be aware more so than you should that you are just a consultant, not an employee. It hasn't happen too me but others have personally told me they were treated unfailry because they were not an employee. I've been doing it 12 years now, no regrets! Oh yeah, big plus, no more freaking annoying 360 evaluations. If that does not mean anything, those annoying evaluations where you judge your fellow co-workers. Ahhhhhhh!

Financial side of contracting (4, Informative)

G4from128k (686170) | more than 8 years ago | (#13744129)

My own experience is that some of the financial issues for contractors are a big change versus being an employee.

  1. Delays in getting paid: Timely payments are a big issue for contractors. Whereas an employee gets paid like clockwork, some contractor situations involve invoices, approvals, and getting the check from the accounting department. It may take 30 to 60 days between doing the work and getting the check. A good cushion in a savings account helps buffer irregular payments for the self-employed.

  2. Estimated tax payments: The IRS wants its cut and with no automatic deductions, its up the the contractor to figure out and make timely payments. If you get to the end of the year without making these payments, you may be surprised at: a) how much you own on the accumulated earnings, b) that you own even more due to penalties (a 50k contracting gig can easily create $10,000 in tax liabilities -- which could be a nasty surprise come April 15th).

  3. Expenses: Start collecting receipts for all the office junk that you must now buy and own yourself. You might consider devoting a room in your house as a home office (and taking the home office deduction) but there are reasons not to (we don't) and the full list of pro/cons is beyond the scope of what I can confidently discuss.

  4. Benefits: Contractors need to get their own health insurance. The downside can be the cost. On the plus side, you can get the health plan you want in terms of deductable, types of coverage, etc. For people with good financial self-discipline, a high-deductable plan and an HSA are great -- the health insurance premiums are lower and they permit much greater tax-free deductions of healthcare expenses.

  5. Retirement plan: Again, the contractor is on his own. The good news is some self-employed, small-business retirement plans are pretty nice. A QRP/KEOGH lets you sock away up to 20% of net revenues before taxes (much better than the limits on IRAs).

Both a techie and a salesguy be. (3, Informative)

crism (194943) | more than 8 years ago | (#13744130)

I had a nearly-ideal opportunity; my employer was closing, and our sole customer needed a development department. I knew their offer was a panic reaction, and wouldn't last, so I offered to consult (non-exclusively) for a few months. That allowed me to launch my independent consulting career, which lasted a little over four years.

My problem, however, is that I'm not good at sales: cold-calling, lead-tracking, pavement-pounding. Once in contact, I could generally make a sale, and deliver solid work for good prices, but it was only enough work to break even after rent and taxes. When things temporarily slowed down, I didn't have much cushion.

I'm very glad I did it, but I wouldn't do it again without a bigger operating buffer or a sales partner. You really need to combine technical and sales skills to succeed.

Re:Both a techie and a salesguy be. (1)

emurphy42 (631808) | more than 8 years ago | (#13744362)

Seconded.

I work for a small consulting company, which for me provides a nice combination of stability and cheap benefits (I have a wife and three kids) and variety of work (a few clients with semi-steady work, manymany clients with support issues once in a blue moon). I am not a salesguy, and never want to be; once the foot's in the door, though, I am decent about showing my integrity and getting work done.

The salary's a bit tight, especially as the kids get older, but hopefully that'll improve. We recently hired a new guy, and are hoping to expand somewhat over the next few years. Even if we don't, the existing client base needs upgrades every so often.

the good, the bad and the ugly (4, Informative)

iggymanz (596061) | more than 8 years ago | (#13744141)

Having done both at various times over 24 years, here's the poop for USA:

1. you'll have to make more than 50% as self-employed as you do salary to keep about the same benefits and have same income after taxes counting time between gigs making $0.

2. mediocre health insurance not including dental or eye for whole family: $430/month near chicago area, other posters might also give some rates.

3. Bookkeeping will be a pain: educate yourself on estimating and making quarterly tax payments or just opting to pay penalty, keep record and receipts, know tax laws for business expensing, entertainment expense, and use of vehicle, which is complicated. Tax software for the self-employed helps a great deal, highly reccomended.

4. Don't quit your day job and then start a business or look for contract work. Start your business while you work, or get a contract with appropriate start date and then quit job with proper two weeks notice, don't burn bridges. If you help your current employer to make a smooth transition you can usually use them as a good reference later. So no mooning/flipping the bird/taking dump in desk drawer of the CTO or your boss on the way out

5. Having a search engine friendly resume on internet has lead to most of my 6 -8 month contract jobs in last five years, not bulletin boards or job sites or snail mail or newspaper ads.

6. You can't restrict yourself to projects that are cool or exciting, some might involve some boring/legacy/archane junk that you've done before and the client needs someone with that hard-to-find skill. Happened to me twice in last 3 years.

5. You're in sales/marketing now, baby! of yourself - you need to network with people to see what opportunities are there, let people you you're willing to tackle projects, aggresively pursue follow-on projects and look for other work at clients.

Re:the good, the bad and the ugly (4, Insightful)

2Bits (167227) | more than 8 years ago | (#13744349)

I did it for one year, almost ten years ago. It sucked, especially for #6 above. As a contractor, you are considered a code monkey, you are not involved in any part of the project except coding, fixing other people's bugs, and testing. Well, it makes sense, which company is stupid enough to let contractors do the core?

I was contracting at BNR (Bell Northern Research, in Ottawa) once, for 6 months. My main work was to fix bugs and maintain two 2-year-old modules of the Magellan ATM switch. The Magellan switch (at the time) had a nasty problem in the back plane design that it could not handle two-way connections, you had to use 2 one-way connections to simulate a two-way connection to make a call. To make a call, you have to go thru a grid of back planes, and you had to take care of state management in HW redundance, etc, which greatly complicated things. The employee who implemented the 2 modules for billing didn't understand it or didn't have experience, it was a classical example of spagheti code. There were at least 3 emergency calls from customers every week. I could've lived on that contract for at least 2 years, if I just fixed an urgent bug a week (which reduced the response time to 1/3 already), and the manager would be really happy.

But I was so efficient in fixing bugs that the group manager kept loaning me to other groups to fix bugs, and made quite a bunch of money on me (each group had internal budget). At the end, with the manager's approval, I just rewrote the 2 modules.

The work was no fun, and you are considered outsider all the time. The group manager was nice enough to invite me for group activities (which was an exception), but you are not allowed to participate in core works. You know full well that you could do a better job, but you have to implement some really lousy design.

And there's no chance for you to get promotion, regardless of your work.

So, if you don't mind the ugly codes, the no-fun work, being considered an outsider, no way to feel being part of a team, no chance for promotion, and if you are disciplined enoguh, etc, then go ahead.

Being part of a team is the fun part, regardless of office politics. You won't have that feeling as a contractor.

ContractingVs. Regular (0)

Anonymous Coward | more than 8 years ago | (#13744156)

IMHO, everything really depends on if you have a good, ethical company for full time work. If not, contracting might be a better deal.

As for me, I contracted for many years and we used my wife's health insurance and 401K. But then came kiddos and we decided my wife would stay home to raise the kids... I mean, why have them if you don't want to raise them?? Anyway, I contracted for a couple of years after that but out of pocket health care costs got completely out of hand, so I went regular.

Highest year doing contracting (in the 1990's: around 225,000) My salary now as a regular employee is just shy of 130,000. But with the perks of regular employment (matching 401K , help with health insurance, etc), it's a much better deal, and my wife is no longer going grey. Plus, I absolutely love my boss. He's one fine dude (most especially for a stressed out business owner) and we are good friends.

Best of luck to you whatever you decide.

When I left... (2, Informative)

nailchipper (461706) | more than 8 years ago | (#13744160)

I left my own company because my friend and I were going to team up and work freelance. When I told my bosses that I was going to leave (as expected) they first tried to convince me to stay but after they saw that I was not going to stay they said "Well, I guess that is all" and I said "Well, not really" and explained that I can still be contracted to do some of the projects that I worked in. Then, they were really excited and we both saw that it could be a good deal. They didn't have to pay for health insurance and for a flat rate have me work on smaller contracts. I still get emails from them about issues they have with environment I set up for them. And I help them for free for small issues.

I sent them a proposal and quote for how much it would cost to finish a major project they wanted me to work on. I quoted them at half the rate that it would cost for someone internally to do. It was a lot of money for me since at half their rate I would get enough to live on comfortably for a few months and still give me time to work on other projects.

They were slow to respond and never got me feedback on the proposal and eventually got an email telling me that they would like to continue the development internally. It was a bad economic blow for me and was living on the small projects that I expected to have fillers around that big project. I was making a fraction of the salary that I made at that company for many months, but I stuck with it. I ate less went out less. I cut down my bank statements from having hundreds of a transactions per month to a few dozen. The decision to leave was made in the beginning of this summer and used up a lot from savings to sustain, but I learned that a lot of the seeds that I planted a few months ago are just now becoming fruitful. I am in the process of signing 3 major contracts with people who I talked to months ago and I expect to be able to live on this easily for at least a year.

If I were to do it all over again, I would. It was the best decision I ever made. Freedom is great. I work more than I ever did at my old company. I am doing more advanced things and I am learning more. Because I don't have to be at the "office" I work whenever I want. I read more about other topics I am interested in.

BUT! discipline is everything. I make sure that I worked a minimum of 8 hours a day. I tried to do 10 though. If I wake up late, I work late. My housemates always comment about how disciplined I am and how I am always working, and it's true. Every moment you have, work. You also have to set boundaries. I never work on Saturday and Sunday. I turn of my cell phone and computer and don't touch my computer. I have another friend who does this and I suspect he's going to burn out pretty soon (i.e going to grad school).

Unless you have made a name for yourself... (2, Interesting)

betelgeuse68 (230611) | more than 8 years ago | (#13744188)

Prepare to be disappointed. Most contractors are implementors. That's one way. Another more albeit more negative way of looking at them is "sh*t shovelers", aka grunts. Most contractors are brought in when high level decisions and designs have been made. The contracting business is nowhere as robust as it was 10 years ago. With IT budgets slashed and the birth of offshoring, unless you're damn good and have made a name for yourself, I would not recommend it for the faint of heart.

-M

My biggest advice: have clients (1)

arete (170676) | more than 8 years ago | (#13744194)

My biggest advice is don't move into the contracting world until you have clients. Try to get some relationships doing afterhours work, and or try to land at least one big ongoing contracting gig without enough lead time to quit your job when you get it.

When you can't possibly keep up with the work is when you should quit your day job, and you probably won't have either enough work or money at that point.

Expect that you'll spend a lot of time self-marketing and that it may take a long time to substantially add to your number of clients.

The taxes are a bit worse on paper - because you're paying stuff that previously your employer never showed you. But also bear in mind that you need to pay attention to estimated taxes; it is a lot easier to feel afloat before that.

Minimal office politics is one advantage (1)

Strudelkugel (594414) | more than 8 years ago | (#13744197)


One thing you will discover when contracting, as compared to being an employee is that the political environment changes in a beneficial way. When you are an employee, frequently your boss will dangle or suggest that working a lot of OT will be reflected in your next review. Maybe, maybe the story changes by the time of the review. When you are contracting, your rate is negotiated up front - no ambiguous incentives.

I found this greatly improves the dialog between you the contractor and the people who hired you. They become much more objective, since promising benefits in the future for extras today is not part of the equation. If you are doing good work, you will stay and will be able to get an increased rate. If you are not, they will just end your contract. The employer doesn't have to worry about having an unhappy employee around, so in both cases they tend to be more honest about everything.

The other benefit I found is that some supervisors are always trying to figure out how to stay on top. If you are an employee and do a good job, someone above your boss may think someday *you* should be in that spot. If your boss is of the underhanded variety, he or she will begin to disparage you just to make sure the org chart has the same taxonomy, to be polite... Once again, if you are a contractor, you are not as likely to be interested in taking he supervisor job, so the person in that position will be more honest with you as well.

As for the "lack of job security" attribute, compare to being an employee. I don't know anyone in this business who has job security. I work as an employee now, but I always keep in touch with the people in the contracting world. Ultimately your success depends on your ability, technical and personal. Contractors generally has to have more social skills than an employee, because they have to sell their capabilities more frequently. I would summarize the situation like this: If you find a good employer with interesting work, stay there. If you don't want to be a FT employee (maybe you want to take off two months every year or something), or your current job isn't that great, be a contractor but make sure you are taking jobs that add relevant experience

Full Time Employee vs. Non-Payroll Worker (2, Informative)

BigLinuxGuy (241110) | more than 8 years ago | (#13744223)

I think that people fresh out of school should seek out salaried positions for the first 1-5 years to build experience (learning the real consequences of a missed deadline is the single best lesson during this timeframe). After that, I think they should think seriously about going into the contract market. The "risk" associated with being a contractor (depending on your location) is no more than that of an employee. It's just a matter of different illusions/perceptions. The best job security, in my (not so) humble opinion, is always the ability to secure the next job . Unfortunately, most people tend to be too timid to realize that in most cases a company will take care of the bottom line, not the employees, first.

But your mileage may vary.....

It's a good way to get experience (1)

Gary Destruction (683101) | more than 8 years ago | (#13744228)

If you work for contracting firms, you can do work that deals with various situations and diverse industries. In some ways, contracting can be safer than some corporate jobs. With all the outsourcing that goes on, it might be safer to be on the outsourcing side of things. But then again, not all companies do outsourcing or the outsourcing they do varies.
On the flip side of things, you can encounter slow times. It really depends if you're getting long term contracts or short terms contracts.

Random thoughts... (0)

Anonymous Coward | more than 8 years ago | (#13744229)

The pay is not better. Downtime between projects can kill your bottom line.

You're also giving up any employer matching 401k. You can incorporate, and have your business match your contributions, but it isn't the same "free money" deal.

Additionally, there is self employment taxes, accountant fees, business expenses, home office, increased utilities and -- nastiest of all -- health insurance.

Fortunately, each of those is a potential tax deduction. Get an accountant. Yes, you could do it yourself, but it really isn't worth the time.

"Time" is key. You are a business owner now. More than anything else, you're selling your time. You will start to view it differently. You have a limited amount of time each day for work.

Anything that takes you away from work has a real price tag. Caught the flu? You just lost X dollars. Feel like taking the kids to the park for the afternoon? You can, but it'll cost you $Y.

I've been contracting for 3 years now. I love it. Wouldn't have it any other way. But there's a lot to think about before you make the switch.

Be a contracter - but don't be your own boss! (1)

the_wesman (106427) | more than 8 years ago | (#13744230)

So, I work as a software engineer and I'm in that 50,000 - 60,000 a year bracket - we just recently took on 2 consultants from a consulting firms - these ninjas make over $100/hour! which, at 40 hours/week for a 6 month contract (26 weeks) is twice what I make in a year in half the time! Plus since these crackers have a consulting firm placing them into big companies, they're pretty much guaranteed work (yeah yeah, nothing is guaranteed, but....)

My company has a revolving door of constultants and the ones that are good get their contracts extended.

If I had to do it over again, I'd team up with Patni, or AppLabs or Tek Systems and get the same job I have now for 4x the money.

Re:Be a contracter - but don't be your own boss! (1)

dentar (6540) | more than 8 years ago | (#13744276)

They may make $100.00 per hour, but when the contract is over, they could have several months of bupkis. That $100/hr quickly becomes as good as $20.00/hr.

Be prepared, don't do it on a whim (2, Informative)

clafortefeelingsoftw (921294) | more than 8 years ago | (#13744259)

Before I funded Feeling Software, I researched the market for several months. I also contacted hundreds of former colleagues, industry contacts, etc. I made sure I had enough cash in the bank to last at least 6 months. (It takes on average 2-3 months before I get paid by my clients, partly because currency exchanges from USD to CND means that checks are frozen for a month.) I read several books, e.g. "Getting started in Computer Consulting (Meyer)". I had nearly 10 years of commercial experience for highly reputable companies. I also did managed the R&D for a start-up for over a year. I knew about government subsidies, how to deal with investors, etc. Basically, I was prepared for the next step. It's been 8 months now and overall we've been quite successful. 4 employees (myself included), a dozen excellent clients, including regular ones. Cool projects. I'm still not making as much salary as I could if I worked full-time. But that's because we keep money to invest in the company. Overall the company is profitable and we're always ready to hire top talent when we see it. Note that unless you're pro at what you do, and therefore already able to keep a good and satisfying full-time job, you're not going to enjoy contract work more than regular work. Good luck. Christian Laforte 3D Graphics Expert http://www.feelingsoftware.com/ [feelingsoftware.com]

Mobility is key (2, Interesting)

adoll (184191) | more than 8 years ago | (#13744265)

I do contract engineering work for mining and oilsand clients. In the last 5 years I have worked, in order: in Calgary, Vancouver, Edmonton, Vancouver, Edmonton and am currently in Vancouver. Two of the lean times have been very lean and forced the move from city to city, the other moves were chasing better opportunities.

Two other comments:
-I could never have made this work if I was encumbered with a wife/offspring.
-I will never go back to being an employee. Well, if I get hungry enough I might, but if I'm not hungry, then I'm not interested in being an employee.

-AD

All Depends (1)

spookyfluke (254600) | more than 8 years ago | (#13744270)

I left a stable permanent positionat a small software company in order to strike out on my own. I was hard but eventually I landed and long-term contract with a large company. Overall, I didn't like the contract. I felt the contractors were treated as second class employes. I just recently accepted a permanent position in the public sector (non-profit hospital - this is Canada, eh :). I believe it will be the best of both worlds. Doing what I love for and employer that doesn't judge me based on how much money I can earn for them.

Here in Germany... (0)

Anonymous Coward | more than 8 years ago | (#13744277)

You could earn as much as ~50 Euro/h as a contractor here.

The problems are:
1) Health-insurance becomes obscenely high. As a matter of fact it's the health-insurance that makes the lifes of most contractors here in germany very difficult for nothing. You still need a 2nd Health-insurance for your teeth and glasses.

2) The good ol' goverment burns ~70% of the tax income for bureaucrats and you'll have to pay your share. No matter if you have work or not.

3) The majority German IT Business isn't about programming. German IT Businesses take pride in training social skills and consuling (re-selling) the software products of others.
The most software projects you can get involved with here in germany are plain bullshit.

4) You don't want to work as a programmer here in germany because most software companies here have no culture. They stubbornly believe that group work can compensate incompetency.

If you want to work as a programmer here you better move to cologne and kiss asses until you landed at EA. They might ask you to move to Canada. And you'll say: "Yes, I would like that!".

Or go to India. The climate is great. Life costs are low and programmers there have (in relation) a good income.

My brother did it (0)

Anonymous Coward | more than 8 years ago | (#13744278)

My brother was a civil servant like I still am. The civil service is very inflexible about remuneration. He quit and hired back as a consultant. He works on a large database and programs in a strange language (Mumps) and there aren't a lot of people around who can take his place. His house is twice the size of mine. He makes a mint, obviously more than me.
He's been doing so for the last twenty years. So, yes, it can work.

Flexibility and higher pay? (1)

asackett (161377) | more than 8 years ago | (#13744291)

I wouldn't count on flexibility and higher pay. You'll have two jobs where before you had only one: You'll be the boss, but you'll also have to be the employee.

I've seen my income go both well over and well under what I was making before going into business for myself. Overall, I'm making less money than I used to, but I'm far more independent. If you value independence more than money, self employment is a good gig. If you value money more, stay in the korporate world.

More money? Check the prices of health and life insurance, the cost of your currently paid vacations and sick days, and calculate your tax burden. If you're going to have more than one or two clients, you're going to be lucky if you can manage to make much more than half of your office hours billable. If you have only one or two clients, all it takes is for one to pull the plug and things get really dicey really quickly.

When you're self employed, you have to deal with slow pays, bankrupt clients, and slow to completely dry spells that can last for several months at a time. If you don't have the discipline to set at least three and preferably six months' expenses aside, it'll take only one dry spell to leave you flat broke. Then you'll discover that the better (higher paying) employers don't look favorably upon renegades. "How do we know that you won't return to your own business as soon as things pick up for you again?"

That all said, I've been running my business for nine years now, exclusively for the last seven. I would never go back to wage slavery. Who needs higher pay, shorter hours, better benefits, social interaction... wait a minute...

Salesmen are born, not made (1)

grikdog (697841) | more than 8 years ago | (#13744297)

Don't be naive. You'll have one client whose investment in you is smaller than it would be as a paid employee. You get no workman's comp, no health insurance, no dental plan, no 401k, no child college plan -- and you'll pay quarterly taxes, self-employment taxes and whatever fees you cough up to incorporate yourself. Are you an accountant? You'll need one. If market conditions change, your client (your former employer) will outsource your sorry chairwarming behind to Trinidad. As a "consultant", you'll have to wrangle your own consultees, and do you have time to sell yourself as well as generate and sell your billables? Unless you've got serious credentials at the Ph.D. from M.I.T. altocumulus stratum, you are living in The Happiest Land of All, i.e., Fantasyland. Face it. If your people skills were THAT good, you'd be in marketing, you'd be smiling, and you'd be C.E.O. of the company you just left.

First things first (1)

KittyFishnets (306744) | more than 8 years ago | (#13744300)

Before you make the switch:

  1. Calculate your monthly household expenses.
  2. Open a high interest savings account. EmigrantDirect, ING, whatever.
  3. Deposit 3 months expenses. This is your emergency fund. Don't touch it.
  4. Save up an an additional 1-2 months expenses. This is float money. Keep it in your checking account or an easily accessible savings.
  5. Investigate your retirement plan options.
  6. Ask friends and family to recommend a good accountant.
  7. Decide what form of business you'll be operating. Sole prop., LLC, S corp., etc.

KFN

Your kidding, right? (0)

Anonymous Coward | more than 8 years ago | (#13744308)

in the Slashdot crowd who've made the change - what was it like, was it worth it...

Your kidding, right?

If your pissed with your job and you are truly good at what you do become a consultant. No problem, I did this in 1995 and have never looked back. I liked my job back then, I liked the people I worked with too... but the pay was basic at best... and years of failed management promises later I called some who stayed. It depressed me, they laid off many in the worst of times and many did not recover.

If your with a company that isn't treating you well - LEAVE on the first decent opportunity. And don't look back.

For me, I am now happy with my employment and only wish I did it sooner. Most companies in I/T and SW engineering treat their technical staff sub-par. However, if you are with an employer that pays well and treats you well - STAY. A real good employer is best, consulting is second best and being with a grub employer is well - existing.

But if you are in the business for none other than the love of it, you will be washed out.

Moving to Freedom!!! (1)

sdoughtie (921290) | more than 8 years ago | (#13744314)

I work in AEC (Architecture, Engineering and Construction) industry, but I can't believe that the 'basics' of freelancing would be much different in the software industry. Just to give you some perspective, I have 15 years experience in the Computer Aided Drafting, Architectural Design, Structural Design and Construction Project Management. About 80% of my work is done in front of a computer. I also operate a website that gives my clients access to their projects.

I always dreamed of working for myself and believed that it was the only way that I would ever get paid what I thought I was worth. Last March, my employer that thought it would be a good idea to offer me a reduction in salary by $10 an hour. It was actually a good time for me; I developed many business contacts and relationships. I also had some money in savings (for the first time in my life). When I presented this 'offer I couldn't refuse' I quit on the spot. I felt really good about it!

Shockingly, over the first few months I became extremely busy, yet the lag in time from work to getting paid became a problem. A few times finances were really tight.

Once you get cash flow moving, things become really great! I had to learn to see projects as Investments and Risks. As any investment, there is no guarantee of return (or that you'll get paid). There are things that you can to minimize the risk, but there is always risk.

The benefits are great: I have an extremely flexible schedule, yet I work many hours. I love not having to check in with a supervisor. I am free of office politics. The tax benefits are extremely good, except for FICA; your employer pays half of that now. (You'll be expected to pay all of it; 15% of your income, quarterly).

Some clients like to treat you like an employee. Some ask, "What kind of work you have on your plate?" Sometimes it may be honest curiosity, but remember that all you owe your clients is first-rate fulfillment of what they contracted you for.

Also, learn how to write contract proposals!

Former Contractor turned Salary (2, Insightful)

RingDev (879105) | more than 8 years ago | (#13744327)

I pulled contracting gigs from 2k1 to 2k4. And it was okay. I was a single early 20s guy, fresh out of the military with vetrans health care and a strong liver. Jump up to 2k4 and I had a wife, kid, and a house to keep tabs on. My last contract was killing me because health insurance was not included and the bill for family coverage was $980/month. So a year ago I got hired on to a local very successful and stable company, and I've been loving it ever since. No more down time with unemployment and odd jobs to pay the rent. No more putting my resume into 600 applicant positions. No more worrying about what will happen when I finish a project. Nope, I took a slight pay cut, but I gain full health insurance, 401k with 8% matching, profit sharing, a yearly bonus (depending on sales), a cubicle with a window view, and a project list about a mile and a half long. Job security is a beautiful thing!

-Rick

Don't underestimate the benefits of being fulltime (2, Insightful)

Anonymous Coward | more than 8 years ago | (#13744328)

It is easy to underestimate the value of the benefits that most "permanent" employees have. I recently considered a contract position that was going to pay $70/hr. In my current position I make good, but not great, money as a Java architect. I did the math and figured up the monetary value of my benefits (stock, 3 weeks vacation, sick days, holidays, 401k) and the "break even" point for me was somewhere between $60 and $65/hr. Oh, and by the way I wouldn't see any money as a contractor for about 65 days. And the contract was only four months. The extra $5-$10/hr just wasn't enough. I would basically have to put all of that money in my "rainy day" fund, so my disposable income would have been about the same.

My point is that many people look at hourly rates in the range of $60-$70/hr and *assume* that it is a lot more money than they are currently making. Once you factor the value of benefits, that may not actually be the case. The worst thing you can do is jump into a consulting engagement assuming that you will make more money.

I work for Google on a contract/ part time basis. (1)

nigelvthomas (908973) | more than 8 years ago | (#13744333)

The economy is moving, in terms of multiple phases within decades even hundereds of years, from an essentially supply vs demand percieved dynamic, to a subscription based more liquid dynamic. So in a sense jobs are like subscriptions, if you have multipple contracts.

My experience (1)

bjtuna (70129) | more than 8 years ago | (#13744335)

I got out of college and got a decent salaried position in NJ at a small online retailer. The pay was about what you'd expect. Then I quit because I was moving across the country, to Idaho. When I got here, I took a contracting position at a very VERY large computer/electronics firm here whose name consists of two letters. I was writing automated scripts in TCL to test the firmware on certain hardware devices they make. In general, contractors were looked down upon as second-class citizens, even though we made up like 50% of the workforce. Like in "Office Space," I had 8 bosses at LEAST. Nobody knew what anyone else was doing. Total corporate clusterf*ck.

After being there for 3 weeks, they pulled our entire team (about 50 contractors) into a conference room and told us the client had to meet a budget cut and we'd be put on "furlough" for 3 weeks, effective 5 minutes ago. I started looking for a new job the next morning, found one a few days later and I've been happy as a clam. Making more money, benefits are MUCH better, and it's a friendly collaborating working environment with no cubes.

So while contracting at some places might not be bad, my experience left me with a bad taste in my mouth.

If you are good ... (1)

cprice (143407) | more than 8 years ago | (#13744344)

... you will have as much job security as any perm employee. I have also been told that since contracts are budgeted in advance they, at times, can be more secure than regular employment.

It's all about connections (2, Insightful)

recharged95 (782975) | more than 8 years ago | (#13744357)

Was it worth it? Yes, from an experience point of view you can see how much technical value relates to business. Like shockingly only 33% of a total gig. Successful contractors get the big picture of a problem/customer and can apply their expertise to develop a solution. That's why you're paid the big bucks in contracting. Unsuccessful contractors just get paid big bucks (and screw up the implmentation, hence contractor/consultants get a bad wrap in general--like lawyers). Then again that can sound just as good if you can get a steady stream of cash year over year (think federal contracting!). Definitely, there are way more bad contractors than good contractors.


Otherwise, 8 out of 10 contracting jobs are usually doing the crap work no one else wants to do. And working with other contractors IS A ROYAL PAIN. Most of my contracting gigs paid great, but the work was pretty undesirable (read: CODE MAINTAINANCE ;) ). That's why connections are so critical in contracting, I doubt anyone off the street with a Ph.D. in CompSci is going to get a cool gig with a Google or a CIA shop. You either need world-known credentials or a good network and you'll be fine contracting, and then ultimately, you will enjoy that work. Otherwise, most contractors drop in-and-out of the corporate/startup environment because of the funding problems and that they fall into a niche they didn't choose, cause gigs come and go in buckets due to the environment.

Keep trying (1)

moebius_4d (26199) | more than 8 years ago | (#13744358)

The first time I did this, I transitioned from an FTE to an independent contractor. There were some resentments about this, and I was seen as disloyal by some. Politics being what it is, I was soon released.

Next time I did it right. Working at a small consultancy in a pretty independent way to start with, I started volunteering to take small projects that didn't pay until delivery, on a fixed bid basis. Then I was able to hire some guys to help me and turn around and justify being paid for these projects as a 1099 because I had deductable business expenses. Soon I was a sole proprietor.

(I've always maintained my own health insurance, for years before this, because of experiencing the problems caused by a layoff. It's not for everyone, but in this case it helped me transition easily.)

Benefits: control of my own schedule, able to work for more than one shop, hire my own guys and delegate as needed.
Downside: higher risk, times with no income, people wanting to push project risk downhill

An example of that last one would be, shop accepts a project on a fixed bid, promptly fucks it up spending half the money. Asks me can I complete it for what's left. When I'm done the client of course has some changes to make before acceptance. If I have 6-12 man months in it, I can't afford to say no and walk away. Fun fun. You just have to make sure to leave a cushion for contingencies in your bids, and when you are doing someone a favor, make sure you tell them that. Don't rub it in, but also don't just say "sure!" Make sure they know you are taking a hit. Because these things add up in the relationship.

Consulting? (2, Funny)

presidentbeef (779674) | more than 8 years ago | (#13744363)

All I know about it is that consultants contribute a lot of code to the Daily WTF [thedailywtf.com]

I love this part: (1)

bahwi (43111) | more than 8 years ago | (#13744367)

Consulting maxim:
You have no job security, even if you think you do

From what I've seen, this is getting to be pretty equal in a salaried/hourly job as well. I've seen projects set back months because someone copped an attitude with the wrong person. Not to mention a highly paid consultant can get the project back on track, and for less than your annual salary in most cases. Not always true(well, really, it is, but people want to think it's not)

I've done both (1)

museumpeace (735109) | more than 8 years ago | (#13744368)

and the direct employment has included some pretty short term stuff with failing dot coms. I made good money ... and I was gone in 6 monthes. The turbulence or if you want to talk like a Republican, the dynamism of the tech job market means you wont have a lot of job security in either mode of employment.
so why am I telling you to go for the contracting if it interests you? You MUST like honing your skills and learning new systems, languages, applications etc and if you can hack the contracting, it will bulk up all but the most stellar resumes [IMHO].

Prepare. (0)

abulafia (7826) | more than 8 years ago | (#13744376)

One part at a time...

have been tempted

Certainly.

by the self-management,

This is only an ideal, and depends on the client. Heavily. Expect to be managed heavily at first, unless you're leveraging off some known quantity that you have a working relationship with, who already treats you like this. I'm now a small firm, and we still have people who want to micromanage my employees, rather a lot.

flexibility

Yes, perfect flexibility. Remember that the other word for that is 'risk'. I'm not trying to scare you, I'm just saying that the uncertainty that allows flexibility implies the risk of making the wrong choice, and not having a gig.

and higher pay

I don't know what the average is. My desire not to leak finance information makes me not want to guess. But I took a massive hit from my corporate drone job to fully independent, and another big hit when dealing with incorporation. I don't feel bad about the choice now, but there were moments when I thought I has miscalculated, and was going to get kicked out of my apartment. (Actually, more precisely, I should have planned more carefully in those cases. It worked out, but never count of that.) For the record, I've got a much nicer place to work, 'cause I own it, and all; I still make less than my last drone job. 1099 sucks hard, and becoming a C- or S- corp doesn't make it easier, although it can release a little more money back to you. Don't think it is all wine and roses. that are the perks of being a contractor, while at the same time looking nervously at the uncertainty and irregular income.

It can work. You're going to work you're ass off. Don't think it is easier - you're so doomed, unless you're really special.

Typically, the only people that build businesses around me are people like me - we can't hold normal jobs, and have to build something to have a future. Go figure.

Field Service... (1)

lord_of_the_apes (921276) | more than 8 years ago | (#13744379)

Contract jobs kinda rock. Just Imagine, working at different states of the US doing what you enjoy. I don't mind the contract positions that is a new trend for programmers. But, for a someone who is married and have kids, I can see the downside in contracs..

Master your finances, master marketing. (1)

2ndRateSoul (473341) | more than 8 years ago | (#13744391)

Being self-employed is alot more difficult, challenging and risky than simply being an employee. You'll have less vacation and alot more stress. Doing the technical work is the easiest part of being successfully self-employed. The upside, however, is potentially unbounded.

Before making the switch from salaried to contractor, get your personal finances under control. Your own finances will dicate how long you can float during lean times and there will be lean times. Reduce your monthly burn as much as reasonable. Don't take on unnecessary debt. Be wary of recurring expenses. Make sure you have good records. Get comfortable with Quicken. Understand how much money you need on a month to month basis in order to stay afloat. Know how long you can burn before you run out of cash. Beware of estimated taxes. In a highly variable income environment sometimes making too much money can be worse than too little; one $40K month can blow you into the next tax bracket throwing your whole year off and possibly running you into trouble on April 15th.

Understand pre-tax vs. post tax money. Understand what's a business expense and what isn't. Based on performance year to date project out what you expect to make in the months ahead.

Buy the NoLo Press book - Software Development, A Legal Guide. Read it.

Buy The "Getting to yes" book by the Harvard Press. Other books to consider: "Inside the tornado", "selling the invisible".

Your first year is the most important. Keep track of /everything/. Understand what your good months are and what the lean times are. Chances are, if your business is like most, the fall will be your best time. Mid-summer the worst.

Understand that you're not self-employed, you're running a business.

Get a contact manager and start jotting down /everyone/ you meet, who they are, what they do and how they fit into a "funnel" of prospective clients. You just never know who is going to turn into a customer or refer business your way.

Contracts and new relationships take years to develop. Start building them on day 1.

Generally avoid the temptation to allow one client to be too large a percentage of your income. Even if the money is good, sometimes scaling back and taking on more clients is better. Think portfolio diversification.

Assuming you're doing coding, everyone will ask you for exclusives on your code. Find a reason that makes sense to them that they don't want an exclusive. Try to own everything you write. License it non-exclusively to your clients. Over time your portfolio of code will be worth vastly more than the higher rate you might make by licensing it exclusively to your client - and that will be your leverage. If you do it right, you can move from hourly consulting/contracting to building a business with real value (and frankly most clients will want to know that a codebase has a life of it's own.)

If you're making the transition from employee to contractor with a client already willing to fund you nearly full time, it's easier than striking out completely on your own.

If you're totally on your own, forget everything you think you know about marketing. Forget every vacuous marketeer you've met. Find a good one and befriend them. (trust me on this one, marketing is the key to surviving losing that huge client that's been keeping you fat, happy and complacent all this time.) Understand how to speak in the language of your target audience. They will probably not care about abstract interfaces, execution times or coding elegance. When pricing yourself speak in their language; understand not what you are doing, but what it means for them. A good resource of articles is http://www.turningpointemarketing.com/ [turningpoi...keting.com] - disclaimer, these people are a customer of mine.

Every moment of every day you are self-employed has to be marketing. Doing excellent code is marketing. Telling someone what you do is marketing. Build a website about what you do. Write something about what you do and put it up. Make sure people can contact your through your website.

Understand the value of recurring revenue. Try to build recurring revenue models that have value all to themselves. There's only one of you. You have finite hours so there's a built in maximum to what you can earn on an hourly basis. Sometimes, if you have a client that's onto something, you might be better off reducing or eliminating your hourly rate and sharing reward on the backend. You can make alot of money this way. Do this very rarely as they are very very hard to do right.

Read every good business magazine you can get ahold of. Learn the language of business. The most valuable people right now are business savvy technologists. At the moment, they can't be outsourced and the few that exist are worth their weight in gold. If you do it right, you can move from being merely an hourly employee that doesn't require overhead to a partner than can help drive the direction of a business.

What you learn doing this, if you apply yourself, will be vastly more valuable than any MBA ...

Important lesson I learned: SAVE! (2, Informative)

thesqlizer (919307) | more than 8 years ago | (#13744402)

Before a business partner and I decided to go on our own, I made a point to have at least six full months of money at my current standard of living *before* we made the leap. Because of certain choices I/we made in landing some of our contracts, it got dicey towards the end. Luckily, it has gone well since.

I'll tell you what: Once I saw how quickly the six months passed with contracts dragging on and on, I've since made two pledges to myself:

A.) to have at least 1 full year of loot in the bank in cash and solid investments (low risk bonds and the like) juuuust in case
B.) to always save at least 10% of my gross income monthly even after I'd achieved A.
I personally watched four good-sized to lucrative contracts all at once drag on FAR longer than any reasonable person would have expected. Then there's the normal invoicing and payment delays, particularly so when working with very large companies, government, or educational institutions.

As for the mechanics of savings, IMHO ingdirect.com is a great way to do just that as they offer superior rates.

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