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Switching to Contracting?
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?"
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?
Rock that crushes, Paper & Scissors that don't matter.
As a street pharmacist of course.
take it....they can lay you off anytime as a full time employee anyhow...
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.
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.
i hate pansy republicans
Ask yourself if you really want to work decades for a company where getting approval is such a hassle.
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.. ;)
Mess with the best, die like the rest
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.
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.
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.
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.
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.
In Soviet Russia, I ruled you
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.
Tis better to be silent and thought a fool, than to open your mouth and remove all doubt --Abraham Lincoln
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.
--= Isn't it surprising how badly I spell ?
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.
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.
"You should always go to other people's funerals; otherwise, they won't come to yours." -- Yogi Berra
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.
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.
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 (www.hsainsider.com) 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.
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.
"Reality is that which, when you stop believing in it, it doesn't go away." - Philip K. Dick
This is what financial advisors are for, buddy.
Not slashdot.
Whatever, nothing to see here, move along.
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.
The cake is a pie
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.
Its not what it is, its something else.
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).
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.
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.
Check out Jack Ganssle's site
particularly:
Articles such as I, Consultant
There are 5 parts to that article.
--buddy
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
#include "humorous_pop_culture_reference.h"
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.
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!
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.
There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
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.
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.
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 company...no 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.
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.
-P@
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.
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.
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 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. Dice.com 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.
enough is too much
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.
At what price learning? At what cost wisdom? The price is a man's peace of mind, and the cost is his life.
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!
about sean dreilinger
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.
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.
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.
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.
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.
"Let him go, Ralph. He knows what he's doing." --Otto Mann (simpsons)
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.
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).
.agrippa.
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.
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 revolution will NOT be televised.
There's a little mathematical error that people will sometimes make when they "correct" for what's lost.
/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.
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
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....
C//
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.
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.
. 62,400 repetitions make one truth -- Brave New World, Aldous Huxley
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.
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.
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.
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.
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?
we will end no whine before its time
paid overtime.
You may want to check out bringing a third party in to payroll. Someone like eWork http://www.ework.com/html/services/index.htm 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
Never trust anyone who takes pride in being called a 'geek'....
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.
BSD is designed. Linux is grown. C++ libs
- 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.
I did work under a similar arrangement for a while. I used a company called mybizoffice.com 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).
-jbn
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!
"Oh dear, she's stuck in an infinite loop and he's an idiot" -Prof. Farnsworth (Futurama)
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
vodka, straight up, thank you!
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)
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.
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.
Go not unto/. for advice, for you will be told both yea and nay (but have nothing to do with the question)
Oh yeah, and a 50% raise lessens the fear of unemployment considerably.
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.
/^[A-Z0-9._%+-]+@[A-Z0-9.-]+\.[A-Z]{2,4}$/i
I used to do contract work during school. I used to hear that your hourly rate during contract work should be at least twice as much as your salaried rate. I was pulling in about $80k/yr. at my rates if I was working full-time. I wasn't working full-time because of school, and I was getting health insurance through school and also a stipend.
:P
Well, then I got a job. My salaried rate now is now about equal to that $80k/yr. But you've got to add health insurance, the 401k, etc. So the actual costs to IBM (who I work for is no secret) is probably close to around $120k/yr. just in terms of money paid out for my benefit.
But, you're also not working 8 hours a day the entire year steady. You also have to spend time on administrative things, like health insurance, retirement funds, equipment, finding new clients, etc. There's downtime. So you're really only working maybe 75% of the time for an actual client. You've gotta pull in as much in 6 hours as someone else in 8 hours. You need to pay yourself for the stuff that the company pays other people for.
Final result? Quadruple your salaried hourly rate. That covers all the extra benefits and the time you have to spend yourself on all the administrative things the company would normally take care of. Whether or not you can pull off that rate when you ask for it is another thing all together.
Here's my anecdote.
I've been looking for work as a contract employee. I am going to grad school in 8 months, so I am available for 8 months (I was available for a year when I started looking). I put on my resume that I was going to leave in a year for grad school. I applied to "contract" positions that had the correct time-frame. I did this for 3-4 months. I didn't get a single reply.
Recently, I removed the statements that I plan to leave in a year, and I continued to apply to contract postions. Now I actually get responses. I get a lot of responses, in fact. It seems that all of these "contract" positions are really full-time positions without benifits or commitment from the employers, but they still expect a commitment from you. I even had one respond to me saying that they are offering "a contract position leading to full-time employment."
My prediction is that your company will constantly dangle the "full-time" carrot in front of you, but never deliver. Also, do you really want to work for a company that can't approve a full-time hire when it is needed? Or is this full-time line complete BS just to get you on board and can you when whatever project is done? Keep in mind also that if they decide that they don't want you, all that they have to do is not renew your contract, instead of fire you. You have no recource from that.
I have been doing independent contracting for a couple of years now, and the biggest expense by far has been health insurance. Bear in mind that my wife and I are in our mid 50s, and rates are higher for us. We were able to continue group coverage through a state administered program, but the price for the two of us is roughly US$975 / month.
Whatever you do, do not just try to "go bare" without that insurance. I have been perfectly healthy, but turned yellow in September, had major cancer surgery in October (Whipple Procedure, for colangeocarcinoma (bile duct tumor)), and am seeing bills totalling about US$75000 for five hours on the operating table and a week of recovery at the UAB Hospital. The insurance is paying most of it (about 90%) and the remainder is still a large price. It is still better than having been uninsured when it happened!
So, this week I am back to knocking on my contacts' doors looking for more contract work, a bit poorer but very glad I paid the insurance premiums.
I would advise you to do the same.
Soli Deo Gloria
2. Look for another job while working.
3. ???
4. Profit!!!
Contracting is the SAME as employment, from my experience. It's just a way for the employer to avoid committing to tax withholding, benefits, bonus plans, and other employment laws or practices.
You can in fact negotiate a better salary BECAUSE you are not getting those benefits, bonuses, etc.
The only caveat is being responsible enough to set aside your taxes.
As for stability, why would this be any different than any other employment? Are you telling me you can't get fired or laid off from a full-time job??
The one question that you must ask yourself; Do you trust this economy? If you do not, then don't do it. If you do, then it may be a great gamble.
I prefer the "u" in honour as it seems to be missing these days.
Since this is the only market I've worked as a contractor, I can only give information specific to here. Which translates to 'This is almost completely useless', but hey!
When it comes to actual earnings, I've found that the difference between contracting and permanent employement is not as high as I thought.
Contracting does bring in more money, but in order to manage superannuation, tax, holidays, etc you either need to take time out to do it yourself, or use a contracting company (who basically stand between you and the employing company and charge a smallish fee for taking care of everything).
The nature of contracting also changes dramatically depending on what kind of work you do. In my area, a contractor performs the same tasks but is not considered part of the team: in contrast, a fulltime employee is an asset who is brought into the fold, and has access to information and internal connections that would otherwise be closed avenues.
Human genome = 3 billion base pairs = 6 GBit. Windows + Office = 20 Gbit. Which is more impressive?
You'd run your billing through them. You'd be able to get your health insurance, Liability insurance (you want this) and 401K (since you do the match and the primary contribution you can sock away a bunch).
f fice.com
You'll also be able to shield quite a bit from taxes by running your business expenses through them too.
Two that I know of are
http://www.pacepros.com
and
http://www.mybizo
I know everyone is always worried about stability, but I know that during the worst part of the slowdown in the IT market I was working while many of my full-time friends were unemplyed. If you have good interviewing skills and a solid resume you are at least as stable as a contractor as you would be as a perm employee.
Contracting is a real job, but in my opinion getting paid by the hour to work on projects is a much more hygenic relationship that the normal salaried-chair-warmer "permanent" employee relationship.
Perm employees get laid of all of the time. If you are at the top of the list at a consulting agency as someone who can consistently get the jobs that they get you interviews for, you will at least be sure that when you lose your job a whole team of people is working to find you another one.
You get better experience, better job satisfation, and (occationaly) better pay. The pay isn't as much as most people think, because if you are smart you are working through an agency and it is in your best interest to be happy that the agency is making money.
My advice would be to keep your resume up to date and comptetitive (as in figure out what is selling in the area where you are working and make sure it is legitimately on your resume), develop a good relationship with an agancy that does a lot of business in your area, and be prepared to interview for a job every 6 months to a year.
I loved being a consultant and I only got out because a position opened up to be in charge of all of the software development at a small, profitable, family-owned company. But sometimes I still miss running from project to project with the consulting agency.
You do say that kiddies aren't on the way now, but should you really trust your future salary to what your hear on slashdot? I'm not from the US but I assume you are which raises another point.
Why not get legal and/or accounting advise from someone in your Country or State rather than what folks who may live in Spain say?
I know it may be useful and all but you'll have to ask a pro sooner or later so why not cut out the middle man who may not know anything and just ask someone who really does know?
My 2 cent (euro cent that is).
2) Then, take out at least 10% for 'short term' savings (S) - in case you lose the job (something like a savings account would do.) If this acct ever gets over a couple thousand, move it to long-term savings.
3) Then, take out another 10-20% and set that side for retirement (R) in a long-term fund. I set it this high for several reasons: 1) you want to retire early, 2) inflation, 3) knowing the flukes of our economy and career choice, you'll likely need it sooner than later. This is also a practice of the Japanese culture (or was, 10 years ago), and it's been shown that the 'recommended' 10% that most Americans save has traditionally not been enough.
4) Now, figure what your annual health (etc.) costs (H) will be, and subtract it from what you have left.
5) This will leave you with the money you have for day to day annual living. Divide by 52 to figure out what your weekly available budget would be.
6) Figure out what you could get by on in order to pay rent/mortgage, food, utilities and a base level of entertainment (eating out, movies, video games) funds for the both of you. Subtract this living cost (L) from the total.
7) You should have at least 5% of your living costs left over at the end of the month.
So, in summary:
~/ssh slashdot.org ssh: connect to host slashdot.org port 22: too many beers
I've been both an employee and a contractor. In fact, I've been both for the same project at the same company once. Here's some thoughts.
I doubt that you'll actually get converted, because that's a second headache for them. If it turns out they love you, maybe, but not normally.
It's a lot more money; maybe 50% more than the guy sitting next to you doing the same job, particularly if you're an independent, rather than going through a contracting company. However, there is some added work and expense; you need to figure out how to pay your taxes, and you need to get biz. insurance, and so on. The best thing to do it find an accountant that other contractors in your area use, go to him and say "what do I do?" You might even wind up starting a corporation to accept the checks, which is easier than it sounds.
If you start your own corporation, you can setup a retirement plan for yourself called an SEP, which works just like a 401(k). You can contribute whatever you want to it, and buy mutual funds and so on.
To figure your hourly rate, what you want to do is divide the employee version of the job by 1000. Like, if you'd make $100,000 as an employee, you'd like to charge about $100 an hour. You might not get quite that much, but that's the goal.
One thing about your salary goal--it's not quite as much more than an employee as it first seems, because of the biz. expenses an employee doesn't have (accountant, taxes, etc). But it's still pretty good.
Another way to figure your hourly rate is to divide your yearly salary goal by 1840 hours. That's about 46 weeks, which is about how many you can work...you don't have any paid holiday or vacation days or sick days, so need to figure those in. 6 weeks of non-work is pretty safe. When I was a contractor, I found it hard to take a day off because of all the money I was loosing. :-)
Finally, there's health insurance. If you don't have some other coverage (like from your spouse), it costs a bundle...maybe $10K. I didn't have to do that, because my wife's plan covered me, so I don't know much about it.
Good luck, brother contractor.
You should also note as a contractor, your employer will not be making payments to the state unemployment and/or workers compensation programs, which may harm you at a later date should you need those services.
If you can't get a job, well, heck, it's a no-brainer. In fact, if you are "good" and can get it done quicker, you might have time to pick up a second "gig" as a contractor for someone else, eventually hiring people yourself to form your own company (American dream here).
But if all you want is stability....maybe something else is a better solution.
EA will give you stability. 80 hours a week of thankless work for a check. Yeah you make $60,000 a year, but hey ITS STEADY.
"brxref
The only extra tax that a self employed individual needs to pay is "the other" half of social security.
15.3% of the first $87,600. As an employee you only have 1/2 of that taken out in withholding, and the employer pays the other half. Next year the limit is $90,000. In any event, the 2.9% medicare has no limit.
Note however, that you WILL pay your taxes quarterly (e.g. file 1040-ES) or you will be subject to penalties for not paying your taxes nice and early.
Now, that said, you may want to raise your hourly rate by a third or more to cover things like medical insurance, unpaid vacation time, time between jobs, etc.
Being self employed is no less stable than being an employee. Just ask anyone who has been downsized.
This issue is a bit more complicated than you think.
- Conditions:
- seemingly solid company?
- bright folks?
- they give you a timeline (6 mos., 12 mos.) for conversion (of course given that you meet their expectations)?
- you know precisely what those expectations are and feel capable to meet and exceed them?
- no other full-time offers available or on the horizon and/or no other companies you want to check out but haven't yet (i.e. how deep into your search are you)
- What's up with the bait and switch? Was this position always intended to be "contractor to full-time" or they're offering YOU contractor b/c you're not as strong as what they're looking for or short on experience or otherwise need to prove yourself a little or what? Definitely a question I'd ask
I'd say it's not a great sign that you seem very concerned about the deal... either you are just risk averse (or somehow unsure you'll be able to perform to their expectations) OR you got some weird feeling(s) from them that you haven't fully deciphered yet.At the risk of sounding New Agey, I'd say that any time I've had real concerns about any sort of deal (financial, job-related,
But on another note, if all of the above conditions were met, I'd take it in a heart beat. But then I tend to be pretty confident that I'll meet and exceed expectations on the job. So taking that risk is always something I'm open to (given that the company and position are worth the hassle).
I have been an independent contractor since 1981, and I can tell you without any doubt that if you are bumping your hourly up only 30%, to handle taxes, you won't be in business by the time the next job rolls around.
... the list goes on and on.
A good rule of thumb is to take your yearly salary, and divide it by 1000, and that is what you must charge per hour in order to have a reasonable chance of staying in business as an independent contractor.
Remember, you deserve to take home what any full time employee doing the same job would. But out of your net, you will have to cover your expenses, such as: taxes, down time, office expenses, bookkeeping, retirement, vacations, insurance(medical, life, malpractice) advertising, transportation, legal expenses, licenses, rent, utilities,
You may think that if you do a great job the next one will quietly appear when you need it, and sometimes it does... but most of the time, it will be feast, or famine. While you are doing the current job, you will be turning away jobs that you would have liked to have done, but are far too busy to do. Any client you turn away will never ask again.
-Chuck
Someone who's been a consultant lately can give a better answer, but here's my back of the envelope numbers from way back when. Take the amount you'd like to make next year, say $75,000. Double it to account for your taxes, benefits you have to buy, paying for your own training and books, and any time off you want. Now divide that by the number of hours you expect to work, 1920 (240 days times 8 hours if you have a one year contract; if you expect to spend a few months looking, decrease the number). (150,000/2000) is about $75/hour. If you're working with an agency, tell them this is what you want them to pay you, not what the client pays. Also, always add a fudge factor of 10-20%. You need to build up a few months pay in a savings account.
Envy my 5 digit Slashdot User ID!
I hope people listen to you but I imagine you're in for a world of hurt.
It definately helps to be more independent when you're a contractor, but not a guarantee of success OR failure.
If we give the guy the benefit of the doubt (he has at least superficially looked into retirement, healthcare costs, etc) we could assume he's asking for additional information. Any "independent" contractor that's stupid enough to think that he's done all the research and he can't be wrong deserves a smackdown.
Even if he is relying on slashdot to do ALL his work (unlikely), this is going to be an interesting discusson for the thousands of people who are reading this thread. Many people might be considering contract work semi-seriously and this thread will give them fantastic links (and horribly wrong information) to start with.
I agree, the grandparent post was poorly delivered (and reminded me of several arrogant high-school pricks who, like all humans, are occasionally right).
But the post doesn't further the discussion and is arguably wasting diskspace and bandwidth globally. Mind you, I'll give him points for being consise and minimizing the waste. (Too bad I couldn't minimize the waste generated by this post)
I did contracting for 9 years. I liked it but did not have the dicipline to pay the taxes. Your social security is 2* everyone elses. That stinks. I also could not afford insurance but was covered under my wife's plan. That was good. The company I was contracting with eventually got rid of my job because they decided that contractors were bad to have (Microsoft being sued by independent contractors for benefits, etc). They might have offered me full time but I did not like the 40+ hour week stuff.
I've heard two rules of thumb that are pretty close to each other:
1. full-time salary / 1000 = hourly contract rate
2. Take your hourly full-time salary rate, double it and round up to the next 5, so 41 * 2 = $82/hr => $85/hr.
I used this to determine an hourly rate (contract) for a side job outside of my full-time employment. #1 helped.
If you spouse is working you might get by on their coverage, if it is offered. Otherwise, plan on a minimum of several hundred bucks for a no-frills, high deductable policy to almost $1000/month for a really nice medical policy that will probably cover alien babies.
Good luck.
This issue is a bit more complicated than you think.
Have you found a great job, but the company does not want to add you to their internal payroll? Use our Employer of Record(TM) service. You become our employee, and we invoice the company for your services.
l oyer.htm
http://www.topechelon.com/jobseekers/contract_emp
If you do what you always did, you get what you always got.
The original posting doesn't say if an agency is involved or not.
:)
If you will be working through an agency like Volt contracting is pretty easy.
I work AT Microsoft, but FOR Volt... But my only contact with Volt is pretty much the paychecks. MSFT pays Volt for a warm body, Volt pays me to be the body. (The drawback: contracts at MSFT are a max of 9 months. Period. And there is a 100-day break before you can have another contract at MSFT. So when my contract is up, I spend 100 days looking for a full-time job, and when I don't find one I crawl back to Volt and tell them I am available.)
Now, if this prospective employer wants to write their own contract and pay you themselves, you have a lot more work to do... figuring out your own taxes... But if the money is good, do it; it's a job!
The full-time carrot might not be a cruel lie. Maybe.
But it probably is.
I can only talk from experience as a contractor in Toronto for the past 8 years. Not sure how contracting works in the US but here contractors are usually incorporated. In my case my corporation get paid by the client and it (corporation) in turns pays me (and my spouse) a fixed salary every month from which I deduct taxes, retirement savings plan (for me and my spouse), etc.
Since personal taxes are higher in Canada, contracting makes sense because you have the advantage of income splitting as I outlined above. Also, many of my toys (PCs, PDAs, etc.) can be expensed out... subject to depreciation of course :-) Yet another advantage is you get to know more people (and make more friends) who can potentially be contacts for future gigs. If you do a good job, clients will be more than willing to hire you back.
Finally, learning is accelerated if one is lucky enough to work in different development projects and with different people who can add their own insight and experience to problem solving.
I quit a $21 an hour welding job to start a computer shop. That was 5 years ago. The mix of responsibility and freedom can never be matched at a day job. I may not make as much money, but sometimes I can make a months wages in a couple days. Sometimes there is also a lot of free time for personal projects. Good luck!
I'm not anti-social, I'm anti-idiot.
I did contracting all thru the late 90's. worked well for me, I got a $5 raise every 4 months. In Post 911, outside Silicon Valley they ask a bunch of questions about why you left so soon. Saying you were contracting doesn't cut it. In the valley you get funny looks if you didn't contract. They will think you don't have any initative or skill. If your boss worked in the valley it's cool but you have to take that into account. Hope that helps, likely it didn't.
Sorry about the writing. Robot fingers, you know? Cliff Steele in DOOM PATROL #23
I was a contractor at IBM with the carrot dangling. Not only did I get the full time job, but I made a killing in the process. It's not for everyone, weigh your choices, know the company you are working for and the company you are working at. Work hard, show them your stuff, if it's good enough you just might get it and if not, you are still contracting and can look for other work.
My company normally hires new IS Staff on a 3 month contract to perm basis. I've found that it's fairly common for companies to do this, especially in the IS areas as a way to make sure you're going to work out right. It's kind of like 'Temp-to-Perm', just with another title. I'd look at it that way.
... make sure you're going to be a good fit, and hire you permanent after 3 months if you are.
Of course, it means after three months they can get rid of you fairly easily. That's the idea from their end
Get it in writing. If they wont give you a guarantee of employment after your contract period is up (provided you performed to their expectations) step away from the table. It seems that a lot of tech jobs these days are becoming contract positions which is really a double edged sword.
Some people make out like bandits and basically run a small business that works with many different firms. However, this often does not work out as well as one hopes. You can go through dry seasons etc. where you get inadequate work so you'd better brush up on some basic accounting before you jump in. You've got no retirement benefits, no health insurance, a potentially unstable salary, rolling your own taxes every year, and a plethora of other things I've probably not though of.
Truth be told, you could stand to make a ton of money if you pull it off but just remember what you're getting yourself into. If you want to work the contract job with the hope of nabbing a full-time position, get it in writing before you become a pawn.
I've been consulting for the last 9 years and it's been ok. I had the opposite problem: Tektronix forced me to go from contractor to permanent (at a significant pay reduction). Since I was single and they had no employee bonuses or stock options at the time, so I got tired of it about 6 months later and went back to contracting.
In my experience, you don't have any more job security in a "permanent" position than you do contracting. You'd be suprised how many people get laid off shortly before they vest in their retirement plan...
"Freedom means freedom for everybody" -- Dick Cheney
OK.
I can live with that. Your response will be worth the hits I am sure I will take.
BSD is designed. Linux is grown. C++ libs
If you are working in the tech industry, I think you would be crazy to think that full-time employment means something more stable than contracting.
Thanks to the new overtime rules, you are more than likely to find yourself exempt from any kind of overtime pay on that salary. As the folks at EA how that's working out for them. Contracting is paid by the hour. I've never been paid overtime, but at least if I end up working a 12 hour day, I get paid for it.
California, as I suspect is the same elsewhere, is an "at-will" state. You can be fired at any time for any reason. There is no tech union so unless you are working for a government agency, if the company decides to get rid of you, poof. Contracting is theoretically unstable but you at least have some notice. If you contract is ending in a month, all you need to do is ask the company if they want to extend it or start shopping for another customer. If you contract for an agency, they take care of this for you. I've never worked for a company that didn't expand the scope of a project several times. Six month contracts end up being 18 month contracts...if you do good work, believe me they find places for you.
The dirty secret of contracting is that it's considered overhead, not employees. You get paid out of the same fund that pays for things like light and heat. So consequently, there's not a lot of attention paid to what gets spent, it's simply the cost of doing business. It's not uncommon to make twice as much per hour as a salaried equivalent. For specialize things like security, thin-client, servers you can make hourly rates that bring back visions of the dot-com days.
Health insurance is a biggie if you have no coverage right now. I was on my parents health insurance when I started contracting, and I switch over seamlessly to my own plan when that expired. I pay $170/mo for your basic HMO garbage, which isn't ideal, but I make enough to cover the cost. I got a Roth IRA way back when that I occasionally remember to pay into, but honestly...the only real way I've made any money is real estate. I bought a house that doubled in value in four years. Thank you California.
For stability, your best bet is to get work for a government agency. TSA, Post Office, I have many techie friends that moved to those jobs when the dot com bust happened and they haven't looked back...essentially they have jobs for life. Working for state governments is a more midgroup approach. You still have a pecking order (they don't fire, but they might layoff), but if you make it there a few years, again, employment for life. But full time? In this current pro-corporate climate? I don't think it's stable. You should expect to change jobs at least three or four times in your lifetime.
If that's what you are facing, the question remains, why not at least make the most while you can? Just don't be a spend-happy idiot consumer. Put lots away for a rainy day and keep your taxes in a separate bank account. As a contractor, you have to pay your own taxes and that's a pretty hefty chunk if you don't remember to "set aside" like withholding does. Again, agencies will often take care of this for you but you will be paying for it...if they pay you $30/hr you can bet they are billing more like $60/hr
Anyway, that's my thoughts. I started contracting, went through two failed dotcom companies, got fired from one full-time position (long story), got my business license, started contracting for myself, and haven't looked back.
- JoeShmoe
.
-- I wonder which will go down in history as the bigger failure: the War on Drugs or the War on Filesharing
OK, you say increase your billing by a third, then you say go from $20/hour to $50/hour (an increase of 150%, not 33%)
... I'm sure I'm missing some stuff here.
Your general advice is right, but the numbers are way off.
I have been contracting (1099) for about 6 years. Here's what I can think of that you need to worry about:
* save the taxes your employer would have deducted
* also save the additional 6.2% on the first $87,000 you make for the employer's portion of social security and 1.45% of your salary for employer's portion of Medicare/Medicaid
* you may choose to pay your unemployment taxes (pretty low)
* pay worker's compensation (also pretty low)
* provide your own insurance. This is expensive; expect to pay more than $300 per month
* provide for your own vacation *and holiday*
* file estimated taxes 4 times per year. You can do without this, but you pay a penalty
* if you incorporate (I recommend it) DO IT IN DELAWARE. I paid $7000 in franchise taxes last year because I foolishly incorporated in TX.
* if you incorporate, pay your franchise tax. It should be $100/year
* you can deduct TONS of stuff. Insurance, medical bills, travel (track your miles driven for business), possibly rent a portion of your house to your business for office space, business meals, business trips,
Overall, I think the +30% figure is probably about right; maybe it's a little high. I figure it by a % added (8% for FICA + 7% for vacation) + my insurance cost (about $5k) and a little extra for the trouble. Of course, that's only for when you're asked to choose between contracting vs salary rates - you always ask for as much as you can get.
No doubt they're using this contract as an alternative to a probation period. If they don't like you after 6 months then it's easier for them to simply not renew the contract than it would be for them to fire you.
I've been a contractor on/off for nearly a decade now. Here are some helpful hints.
Last piece of advice. Do not think you will make more money out of being a contractor. You might. You probably won't. You will receive all sorts of shit from permanents who think you're raking in a million dollars. In reality, you're likely to be making as much as they are when all is said and done.
I've been contracting since May, after going 15 months without being able to get a job (not even at a mall or convenience store). I had access to medical right away, and 401k after 3 months - pretty sweet gig on the surface. The contract's been extended twice, and they seem willing to just let it ride for as long as I'll put up with staying on contract. The downside? The job's in Indianapolis, and my wife, kids, and house are just outside of Ann Arbor.
A point well taken in a previous post is keeping track of those expenses. As part of this gig, they kick in a little extra to cover room and board, so I've got a hotel I stay at during the week (this place has it's own T1, which is a nice touch). But still, four and a half hour drive home on Friday night, four and a half hour drive back to the hotel on Sunday night... every weekend for 6 months now. I wonder if the taxman will allow that wear and tear on the car as an expense.
Come to the University of Mars! Classes starting soon!
There is no loyalty anyway. Even if you're an employee, you can still be layed off or fired on little more than a whim. Being a contractor simply makes the lack of promise explicit.
Long ago, I took an employee position. I was layed off after five months. I felt betrayed and I was really angry. My next several posisitons were as a contractor and my employement at these positions lasted as long as *I* wanted it to. Since I hadn't made a promise, I simply left if I didn't like the job that much. The positions that I liked lasted for years. The lack of promise kept everyone happier and prevented anyone from feeling betrayed by a one-sided promise.
My company has been throught two rounds of layoffs now in the IT department. Permanent isn't so permanent anymore. Take the relative freedom you have now and go out on your own. They're willing to hire you up contracted, do it. Prove your worth. If they like you they'll either keep you contract or make your permanent. Either way it's as permanent as anything. Somebody said take your asking salary and add 1/3. I'd say more like 1/2 or even 2/3's again.
The contracting firm I worked for had basically doubled what I made just so they could offer up my bennies and pay my taxes. You're not supporting an entire corporation (just you) so 1/2 to 2/3rds is extremely reasonable. They're still on the cheap because they don't have to pay out all the benefits and taxes on your behalf, and if you suck (you don't, do you?!) they can let you go without too much worry or hassle.
Don't wait till you have kiddies at home, do this NOW!
The company I work at has it's global IT support division at about 90% contractor right now -- the way it works is you end up working for a contracting company, and you become a glorified temp in the eyes of the company in which you do the work for. The good: You can get your foot in the door, theoretically. My company is a special case, as they just started converting contractors now after a 4 year stallout. The bad: you are, for all intents and purposes, a temp. Stability? You might get it. But that extra layer of protection with HR, where they have to have a reason for firing you-- or in many cases any kind of direct chain of command, is lost. The mixed: The job is good resume fodder, but you should continue looking for another job the minete you suspect something bad is coming down the line.
I've contracted for almost 10 years now, and 1 thing I can tell you is, I've been out of work and on unemployment (between contracts) more often than I've been working. I have no benefits as a contractor, no retirement, no insurance, and little money to show for it.
I've been lied to about contract length more than once, told it's 1 year and end up looking again 3 to 6 months after starting. Promised there's a renewal after 6 months to be told they can't renew for this or that reason etc.
If you can get and hold onto a regular full time job, do so, I wish the IT industry and desktop support still hired regular instead of contract, but the way the industry is lately, it's not happening.
As for taxes, if you do take a contract, make sure it's W-2 and not 1099, that way they'll take withholding and unemployment out like any normal employee. If the contract ends, you can collect unemployment. On 1099, you're 100% responsible for your own taxes, withholding, etc, you're a self employed independant and cannot get the benefit of unemployment insurance.
Most contracts do not supply benefits, some agencies will, it's rare at best. Expect that if you need insurance, you're on your own.
Good luck with your future.
First of all, forget the notion of 3-day work weeks. Your goal, if you take this contract position, is to convert it to full-time. Working only 3 days a week is not going to help you get that goal.
There are a lot of different things to consider when you take a contract position. How much of a pay differential you get depends a lot on the specifics of your contract. You will want to discuss this with the company making you an offer and make sure you get all of the details. Here are some things to find out:
- Will you be W-2 or 1099? 1099 contractors are independent contractors according to the IRS. This means you pay *all* of your FICA taxes. If you are W-2, the IRA considers you an employee, which means you pay half and the employers pays half. So if you are 1099, that's an additional 7% reduction in your net pay that you will never get back.
- What benefits, if any, are you eligible for, and how do they differ from full-time employee's benefits? This all depends on your contract. Sometimes health insurance and 401k are available to contractors, sometimes not. This may or may not be important to you (you may have health insurance through your spouse's job, for example). 401ks are usually a very good deal if they are offered, but sometimes they are not available to contractors.
- Contractors usually do not get paid holidays or paid vacation, but that is not always true. If you get no paid time off, that's about 20 days of lost pay per year (assuming 10 days vacation and 10 holidays) out of a 200-business-day year, the equivalent of a 10% reduction in pay.
- Employees are typically salaried but many contract positions are hourly, and some will pay time-and-a-half for overtime. If so, find out whether overtime is considered over 8 hours per day, or over 40 hours per week. 8hrs/day is better than 40 hrs/wk, but 40 hrs/wk is probably more common.
- Are they serious about making you full time eventually? How long do they expect you to be a contractor before offering you full-time? See if they will put a conversion date in writing. Starting out as a contractor can be a very good way to get in the door and prove yourself, but it could also be the employer's way to make it easier to trim staff when workload lightens. If you know anyone who works there already, see if you can talk to them about how things look from the inside and find out if it is really the great job it looks to be. If they intend to leave you as a contractor forever or cut you loose after a short period of time, be aware that many potential employers look negatively at short-term contract work on a resume. Not all do, but many do.
Be prepared to take a pay cut if and when they do offer to convert you to full-time.
Don't be afraid to talk to the recruiter or hiring manager openly and honestly about your concerns. You are raising kids and have never had a contract position so you have a very legitimate reason to be concerned and to want to proceed carefully. If they balk at your concerns, I would take that as a red flag that something is wrong with the situation. If everything is on the up-and-up, they should be understanding of your situation and willing to spell things out for you.
Good luck!
Interestingly enough, I've just resigned from a full-time position to take up contracting work. I've two kids and a (non-incoming earning) wife to support, but both my wife and I agree that this approach is the best way to look after ourselves and spend time with the kids when they need it.
My current job (well, for the one I'll have for next few weeks) involved a lot of time away from home, crazy work hours and some spectacularly impressive PHB moments (like, being banned from having weekly project meetings because meetings are "a product of the 70s").
I feel much happier, am about to become my own boss again - having done the contracting game before - and it doesn't look like they'll be any shortage of work.
All I can say is, it looks like it'll work for me - I hope it works for you. If it doesn't, you can always get another job.
Cheers
I've taken work on a contractor basis for two different companies, and i've been able to negotiate for a weekly pay basis both times. There were both long (90-hr, suit and tie, not counting air travel time) and short (25 hr, work from home in my underpants) weeks at both jobs- but the weekly basis makes it easier for you to justify billing in whole-week increments so you don't have to account for every hour of your time. billing hours is a pain in the ass, and you're not likely to get paid for more than 40 anyway.
My rule of thumb for $$ was that since I expect to pay 35 - 40% of salary in some form of tax, you should ask for double or 2.5x the annual pay you would expect if you were a salaried employee, and then divide by 52 for your weekly rate... and go ahead and start high at 2.5x, because if they think it's too much but they want to hire you anyway, they'll be willing to negotiate- but going from 2000/week to 2300/week doesn't seem like as big a jump, even though it represents another 15,000/year... and for some reason, it seems much more reasonable to talk about 3000/week vs 2500/week than it does to argue about $60/hr vs $75/hr. justify the multiplier by noting that you'll be responsible for managing your own administrative costs and healthcare, and that you'll need to file estimated income tax payments several times a year, so if they're getting 40 hours/week of work from you, you're really working for free for an additional 10 hours on administrative stuff that otherwise the company would have to pay for. Use the term "Fully-Loaded FTE" to compare yourself against a salaried employee with full health benefits, disability insurance, FICA tax... that's what fully-loaded means to an HR person. Have this conversation with the hiring manager, not with HR.
Another benefit of the weekly schedule is that if you need to take some vacation time, you can tell them up front "I won't be available during the week of January 1st." I think it's probably a good policy to tell them in advance that you'll need to take at least 3 or 4 weeks off during the year- if you don't have events scheduled, make some up, and tell them before they agree to hire you. That way you'll look resposible for having your schedule planned so far in advance, and if it's more than a week or two away the manager won't be able to justify telling you "no."
Humpty Dumpty was pushed.
Take the contracting job while you continue to search for more stable employment. If and when you find full-time employment, go to your employer and inform them of the same. You will A) get them to take you on full-time or B) take the other job as full-time. The way I see it, you have a win-win. One caveat, make sure that you don't need to sign any type of non-compete agreement with the contracting company and/or make sure that any agreement signed would not conflict with near-term employment opportunities. Also, some companies higher contracters through a temping agency. Basically you interview with people from the company, but they hire you on through a temp agency. In these cases the temp agency will often have an agreement that bars you from being hired by the company for a certain period of time. Make sure that there won't be any conflicts if the company decides to hire you on as a full-employee. Other than those notes, contract employment can be very enjoyable and lucrative. I worked as a contractor with the same company for 3 years because the hours were flexible (I was in school) and the pay was better than any other part-time job. I left this position after I found full-time employment (which coincidentaly happened to be in a completely different field). Either way, Good luck with your endeavors!
3 day work weeks and crazy amounts of money!?!? Where do you live, in 1999? My experience as a contractor at an unnamed company in Raleigh, NC has been a horrid one. You will most likely be singled out, identified by a different color badge, looked down upon by "regulars," thought of as subhuman. You can probably expect pay cuts to cut costs while "regulars" get raises. Maybe that's just 'HAL' but I'd be willing to bet others out there would not recommend contract work.
I recommend you get the "I better get upgraded to full-time" entitlement nonsense out of your head and think more along the lines of, "I'll do this until it doesn't work for me."
Contracting comes with several benefits:
- Your own hours, of course, and generally more time with the family.
- You aren't roped into working overtime w/o being paid for it, a la EA_Spouse.
- You get your own health insurance, something not lame & skin-flinty. Check out NASE and their indemnity option, which covers any doctor anywhere.
- Instead of grinding away at precisely one thing for a significant portion of your life, you get to mix and match. This is particularly good for me because I like to design, code, and do biz dev, and as an employee, you're pressured into a focused role.
- It's a phenomenal networking opportunity.
- For some reason, your opinion as a contractor is worth (marginally) more than your opinion as an employee.
- Often, when hired to do a job, you feel lame if you're not qualified to do a piece of it. As a contractor, you can simply subcontract the piece you suck at. You might make a little less, but you deliver more complete solutions, which in the long run will make you more successful.
I you want an invoice template or just to bounce ideas off someone, drop me a line.In my experience, the biggest problem with contracting isn't finding new work. It's worrying about finding new work, because Lord knows, people need to get things done, badly.
There are several types of contracts, and the type of one you have can affect the answers to your questions.
A W2 Contract is the most common around here (Austin). I'm currently a W2 employee of my contracting agency, working on premesis for . My contract agency pays me every other week, withholds FICA and SSI, pays the other half of SSI (aka self-employment tax), and deals with getting their money from . I'm paid by the hour, get no paid holidays, overtime, vacation or sick time. Any insurance or benefits would be offered by my agency, not by . Since Texas is a right-to-work state, there is 0 stability - they can let me go with no notice, and I can walk with no notice.
1099 Contractors are where pays you directly, does not do any FICA or SSI withholding, and you end up liable for the other half of SSI (which the IRS will label self-employment tax on your 1040). You might run into some things like net-30 terms where it can be up to 2 months before you receive your 1st paycheck, and, if it's a small company with money problems, you might end up getting stiffed or run around on the check.
There's also a corp-to-corp contract where you incorporate yourself and do business that way. I've never encountered this type of contract, and recommend you talk with an accountant before considering this.
As far as insurance goes, if your wife works, get insurance through her. For 1 thing, your insurance can stay the same if/when you bounce around from contract to contract. For another thing, her insurance is likely to be better and cheaper than what you'll find on your own.
For a W2 contract, I'd ask for at least a 30% bump (50% if you can get it) from what they were considering for a full-time position. This allows you to be ill, take some vacation, and weather times like Christmas when the company shuts down for a week and you don't get paid. The instability is also easier to stomach if you're making more money.
Add at least 10% more for a 1099 to make up for self-employment tax. More if the terms are net-30 or worse.
Keep some (at least 2 month's expenses) cash in the bank in case you suddenly find yourself unemployed - remember that companies like contractors because we're so disposable when the quarterly numbers don't look so good.
Good luck
is to double the hourly rate you would receive as an employee. As a contractor you are not on their overhead, so you need to have overhead of your own. It covers benefits (including vacations), taxes, insurance, down time, and other business expenses.
If your employment situation doesn't comply with IRS guidelines, they will go after the employer for back taxes. If you are a contractor you really have to be an independent business. For example, that means they have limited ability to set your hours and work location. Another example is that you should supply at least some of your own equipment and office supplies.
1) Become incorporated.
f
First of all, you can go fill out a few papers and pay $100 (the cost depending on your state) to become incorporated. Declare yourself CEO and lead contractor of your company. Become a limited liability corporation so that, in the case that the shit hits the fan, your corporation is legally responsible but you, as owner, are not. Then, you can theoretically declare bankruptcy and although you will lose everything associated with your business (if, forbid, something terrible happened), you won't lose your home, car, etc.
When you contract, you often don't have the same resources as you would working at a larger company. For instance, if you need an oscilloscope for a job, you would normally have to buy an oscilloscope out of your own money. And you will be taxed on ALL income. However, using the money you make doing some initial contract work, you can buy the oscilloscope and deduct that income from your taxes at the end of the year. You see, businesses are taxed differently than individuals; specifically, instead of being taxed on income, you are taxed on what is left over at the end of the fiscal year after business expenses are deducted. If you tie up everything in business assets, your overall worth will be much greater.
If nothing else, become incorporated (as a limited liability corporation.)
2) Factor in liability and convenience.
You won't want to do a direct conversion of salary to contract costs. You will want to charge more as a contractor, not only to cover the increased cost of your insurance and such and such (as more than enough posters have covered, giving good conversions and ideas about this), but you will also want to charge above all of that for the service (convenience factor) of your customers not having to worry about that; they get you, all of the liability is transferred to you, and they don't have to worry about health insurance, wages, raises, etc. And that brings up one word of caution: as a contractor, you take on all liability should anything go wrong. You will want to limit your liability through contracts as much as possible while retaining customers, and also consider the ability to declare bankruptcy as a company.
3) Read this book.
http://www.superb.org/book/leader/PersonBook.pd
It is a work-in-progress by someone who I have seen build great success and who has mentored many entrepreneurs. His techniques may seem counter-intuitive and sorta nit-picky, but they seem to work. (It has everything down to how your body posture affects the customer's perception of you subconsciously, which seems silly until you go out and give it a try.) His book is downloadable (for now, since its a work-in-progress) for free.
4) Find a lawyer.
You don't have to secure them. But investigate good lawyers (business law) that you can turn to on short notice if you need them. For large contracts (tens of thousands of dollars or more), you might want them to approve your contracts. You will want to factor these fees into your contracts as well.
5) Check your local law.
Be careful how you market yourself. In some states, if you market yourself as a qualified engineer but do not have your PE license (regardless of if you have a degree or not or tons of experience in the field), you can get in legal trouble. I have known of this happening. This is especially true if you conduct interstate business.
There is a lot more obviously involved in becoming a contractor, but this is a start. Without more specific questions, I could go on for hours. I just suggest you read some of the books other posters have listed (Jack Ganssle's book I saw mentioned earlier) and consult contractors local to you (since things vary by location) and ask lots of questions.
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"We are Linux. Resistance is measured in Ohms."
Take the job, and don't be a pussy.
Well, for the retirement savings, assuming your wife has any earned income at all, you'll be able to save 5 grand to each of the ROTH IRAs you'll probably open up soon (limit increased to 5k for '05). Short of the portion of 401k that is matched, a ROTH IRA is the best retirement savings vehicle available to Americans.
Isn't another reason (public) companies may prefer to hire someone on as a contractor rather than as a full-time employee the fact that for the former arrangement, the company can expense the contractor's salary (and for EBITDA or ... something with financials reporting, ...)?
I have become so jaded by exactly the sort of stuff you meantion. I have been in the industry since I was 15. I am presently 26. Being dicked around by employers has taken me to the point that I literally hate IT now. I am relocating across the country to find work in early january only to get a job long enough where I can transition to a new career or my own business. California is CRAP.
http://www.livejournal.com/users/cixel
I've done contracting (caveat: not in U.S. but with Americans/Canadians in management). The pay is higher but you may wait between jobs. Get an agreement of time frame (6 months?) to move you into full time position if they will agree to it. If you could get a guaranteed full time job that would be nice, but on the other hand if people want to make overseas outsourcing less attractive more of this may have to be swallowed. Now's the time you can explore before you have kids, but certainly I'd imagine you have more peace of mind working for a larger company. If being 10 miles away is a big concern then it is attractive I'm sure, but you aren't going to know how safe it is until you dive in.
I work for the federal government in an aquisition program office. We are mostly contractors having only government mainly for supervising and signing duties, (I am government). Our contractors are payed more (though receive less benefits). They are treated just like government in almost all situations. The government hires contractors to avoid hiring actual employee which are MUCH harder to get rid of after 6 months. Instead they chose to pay contractors 150%-200%.
I do security
Like any whore, of course, if the customer wants something that will put you or your ability to continue working your profession in serious danger, you will have to decide whether it is time to skip town.
It pays well, though, and can be pretty fun.
... when figuring company budgets is base salary plus 50%. That accounts (roughly... it *is* only a rule of thumb) for taxes, insurance, vacation/sick leave and all the little bits that fall under the general "compensation" category. That's *not* covering other expenses like office furniture and all that, of course.
I'm in the process of taking on a part-time contracting job myself, though it's a real contract job - not full-time, paid by the item rather than time or whatever, that kind of thing. It's going to run between 25% and 50% over the typical full-time salary rate, but then again I have some advantages in that it'll be a secondary household income, and expensive bennies like insurance are already covered for us.
Slashdot's token middle-aged housewife
i've also recently switched to contracting from an employee gig. i am, however, single with no dependent, so i may not be mindful of some of the concerns you may have. nevertheless, here are the pluses/minuses:
+ freedom. once the committed projects are finished, you can take off for a few months to do whatever that you do.
+ focus. your sole responsbility to the client is to deliver the project as specified. you're more immune to inter-dept politics.
+ money. this goes up and down with the market, but it's picking up quite a bit lately.
- workload. you've got to deliver, and deliver in a professional manner. no if/ands/buts.
- no benefits. health care cost is getting higher and higher. this may be an importnat issue for you, as you now have a family.
- managing pipeline. when it pours, it rains. but when it doesn't, it's fucking draught. needs to manage schedule/relationship such that you can maintain a level of stability in work/business.
as for stability, these days, i don't know if regular employee gigs give the stability they ought to/used to.
as for rate, add 20-30% over your regular employee salary to calculate your hourly rate, to cover benefits.
who knows? you may like it, and end up starting a software engineering firm? you may learn some skills acting as a salesman/project manager?
good luck,
dasa
It's impossible to really see whether or not someone is really competent in even a day long interview, so the company wants you to contract for awhile to get a better idea of what skills and abilities you really have.
Triple your previous salary.
If they hesitate, remind them that they can always hire you full time from the start if it bothers them.
They want to hire you as a contractor so they can feel you out before they commit to you. You want full time, so someone will be committed to paying your salary. Well, as a capitalist, it is your job to charge enough so that it seems like an even trade to them.
My advice is, once you start talking with them about contracting, ask for a high rate and don't cut down to normal employment. If they feel hesitant about making commitments to your employment, they will probably feel hesitant about meeting those commitments later on -- expect to laid off with no notice, jerked around on the medical plan and vacation time, etc.
Given the way many companies treat their employees these days, you are basically treated like a disposable contractor anyway; you might as well get paid like one.
One of these days I'm moving to Theory - everything works there
However, there are risks and costs to contracting and your compensation for them is only measured in money. Figure 30-50% more than you would expect to make as a FTE. This breaks down as follows:
salary: 72.5% FTE equivalent
Federal Tax: 25.0% FTE equivalent
SS Tax: 7.5% FTE equivalent
SS Tax: 7.5% (W2 employers usually pay this)
Vacation/Hol: 12.0% (figure six weeks per year)
Benefits: $x,xxx (depends on age, dependants)
Risk: 8-16% (figure 4-8 weeks to find new job)
I base such calculations against a 2080 hour year so divide your annualized benefits appropriately and make sure you allow for them to increase 15-20% per calendar year.
Of course your prospective employer will downplay the risk, downplay the benefits (since those would be deducted from your FTE paycheck) and downplay the vaca/holiday time as well. They'll also tell you that self-employment taxes are deductible, yada-yada. So try to avoid disclosing the details of your thinking there. Contracting involves risk and cost, your surcharge for 1099 vs. W2 is 50% or whatever works for you. Be prepared to walk away vs. discounting what you think you are worth.
Risks? If your contract-employer does go out of business, you'll be left holding a worthless paper invoice and will have lost 15-30 days income or more. You might even get sued for the previous 90 days of payments you already received (yes, it happened to me). FTEs have some legal protection from this and are guaranteed up to ~$4280 in priority claims by federal law. Contractors have no such protections and are merely lost in the sea of claimants.
Other tips?
These opinions guaranteed or your money back.
1) Variety, variety, variety... Rather than getting tied to the same code for years, I get to move from project to project...
2) More control over my life... I can usually stay as busy as I want, but if I want to take a month off, I just stall signing up for the next contract...
3) It's been said already in this thread - there is no such thing as job stability...
4) I am constantly thinking about adding value for my clients... Rather than thinking of myself as an expense, I think, how can the client afford not to hire me ... Everyone should do this - I think working on contract makes people think about this more...
5) Lots of tax advantages... I am in Canada, so I suspect you're able to write off as much or more than you can in Canada.
Platform independent bug tracking software
On being your own boss:
- in some ways you are, in other ways you're even more under the thumb than a regular employee. Contractors often get stuck with tasks that no one else wanted to do. You may also get shoved lower down on the reporting chain that you feel you deserve--as a contractor I've been supervised by substantially junior engineers.
On not being part of the team:- this varies a lot by company, and can range from no differnce, to having a different colored badge, to being treated differently by security and excluded from many corporate outings. You may not think you'd care about the company picnic but it's hard not feel left out when all your "peers" are off partying on the company dime while you work.
Paying your own taxes requires discipline:I wasn't clear from your post whether you would be leaving a current, stable employer to take the contracting position or not. If you're not working now, but looking for work, I'd say by all means take the contract work -- you can always keep looking while you are there. Just as you could if you were a regular employee -- it's true there is very little loyalty between companies and employees (or contractors =) these days, so I don't think you should feel that it would be disloyal to keep looking even after signing on -- especially if you feel it's less of a commitment on their part to not offer you full time employment.
I'm a contractor by choice -- recently turned down an offer of employment from the company I'm currently working for to preserve that contractor status. I've been contracting for -- maybe four years now? Or five? Starting out can be worrisome, but I like the added control over things like health insurance. Other benefits to contracting include things like that they're not really allowed, by law, to make you come into the office and work a certain number of hours at a certain desk -- you are supposed to be free to structure your time in such a way that you get the work done your way, and on your own time. Like -- well, like a contractor. I got a great book from Nolo on this when I was starting out. In addition to the accountant that other people have mentioned (definitely a good idea) I'd also recommend one of their titles. Working for yourself: Law & Taxes for Independent Contractors, Freelancers & consultants looks to be their current title on this subject. It's not not the one I got, but that was several years ago. I've never heard anything but good reviews about their books.
Telephone interview from 10 miles away???
'Just do it' doesn't have to be a blind decision. If they're only 10 miles from home, talk to the hiring manager about coming on site for a few hours.
You'll want to meet the people you'll be working with, maybe go for lunch, talk about what work is like, find out if contracting is the norm, etc. Get any promises of actions, benefits, etc. in writing-especially things like 3 day weeks. That should be in a contract, reviewed by YOUR lawyer, and include things like rate increases or other compensation for extra hours past 3 days (if that's what they're promising).
You should also try to have an offline, unofficial conversation later with some of the non-PHBs that you meet in a site visit.
You may also already know someone who knows someone who works there through local user groups, former colleagues, etc. who would be open to a chat.
Also consider your options - are you already gainfully employed, will this advance your career in a way you're interested in, what other options do you have for job, etc.
I contracted for a company for about 2 years after they had to move me back from full time employment due to money issues. I found it fairly unpleasent except for the fact I loved the work I was doing and the customers I was interacting with. 1) Having to get your own benefits sucks cause they are not as good as ones a company will provide. I sprained my ankle real bad during that time and when I went to get a brace that my doctor recommended, the insurance agency said that my benefits did not cover orthopedic unless I was diabetic or one other condition that I can't remember off hand.(This was Blue Cross/Blue Shield, they had great price on the insurance plan, but that has since changed from what I've heard). 2) Having to pay all of your own Medicare, Social Security, etc is horrible. Be prepared to be reamed. Now sure you can jack up your rate to cover this, but in the end you're still going to be gritting your teeth as you write the quarterly checks to the IRS. 3) Pay your quarterly taxes. Or be prepared to be penalized, though I believe this only happens after the first year. Don't quote me though. 4) To cover the taxes, I would suggest getting a decent savings account with a good percentage. Something like ING Direct's Orange account that offers 2.2% interest. Remember you can reimburse mileage and some other things(Check the IRS website for this) if it exceeds a certain amount. 5) Get an IRA, especially a SEP IRA. I have one called Select Fund, but can't find a link for it now. Will respond when I'm at home and looking at the documents. 6) Get everything in writing. Pay, how many expected hours, what their timeline for when you'd be brought on full time. 7) If you have to work at home, I'm sorry. I found it incredibly boring and lonely. Now being married could make it more enjoyable. Other wise, enjoy and good luck.
Form your own company--either an LLC or S-corp and do your contracting through your company. There can be many tax benefits to this (work related write-offs, lowered self employment taxes by paying sef a reasonable salary and taking the rest as a distribution, and others). Once a company, you can start your 401k plan and match it however you like up to $40000 (total) IIRC
/.
PROS
Own boss--sort of
Can play with money to lower taxes and keep more for yourself (check with CPA on best way(s) to do this)
Write-offs (internet connection, phone, travel, insurance costs, etc)
Can start your own 401K
Once you have a company, it may be easy to get contract work
CONS
Insurance (life, health, disability)
Keeping your own books (Quickbooks or the like makes this easy)
Filing tax related paperwork
Setting up a company and 401k does takes a bit of effort
PUSH
Keeping your job/contracts
Now to write off this time as professional advice...oh wait...this is
"Look Lois, the two symbols of the Republican Party: an elephant, and a fat white guy who is threatened by change."
Being a succesful contractor is a lot of hard work and can be very expensive, particularly in your first year. If you're serious about going down this path, seriously think about the following:
1. Incorporate yourself into a company
The last thing you want is employeers/customers coming after your and your families personal assets
2. Insurance
Many companies require Professional Indemnity & Public Liability insurance. For the young & inexpirienced, this can be very expensive - recent PI insurance for us was more than $6000.
3. Training
Once you're a contractor, you are generally responsible for paying all your own (re)training costs. In the short term this mightn't be an issue but it is something that should be considered nonetheless
4. Working Harder
You will work harder as a contractor. Seriously. Because contract rates are more expensive and generally because you work on specific tasks (ie write system X), you MUST show a positive return on investment.
5. No real job security
Everytime you a contract finishes it's like a job interview all over again - sometimes you could go without another contract that suits your skills/needs for extended periods. which leads me to this point...
6. CASH FLOW
If you ignore everything else in this message, at least take note of this: You may not have a regular income. Cashflow management is essential.
You need to make sure that you've got at least 1 months salary set asside in the bank for times between projects, times when your payments are late because you submitted timesheet too late/nobody authorized your payment, etc. IT HAPPENS. Don't get caught short.
As somebody who has been a full time employee (FTE), a contract employee and an employeer (plug: http://www.pstcompactor.com/ ) I can honestly say that being a FTE provides the greatest of securities... it is easier to let contractors go than FTE's.
Hope you find some wisdom in my ramblings.
I'm doing a contracting and going for some vacation is almost impossible for me.
1. Time you are not working is time you are not getting paid, and the clock is ticking on you contract.
2. During between contracts, I'm just too concerned about finding the next one. I'm too afraid that that great contract would pop up when I'm some where in Asia.
The surprise isn't how often we make bad choices; the surprise is how seldom they defeat us.
I've been a contract employee for the past 5 years working for P.A.C.E. Check them out they are the best!!! --Damon
My company uses engineering contractors all the time. Their typical hourly rates are anywhere from 2.5 to 5 times the general employee salaries, ballpark $60 to $150. This is typical in the design biz. If you are hot sh!t, you can ask for $150. It all depends on who the money's coming from.
We also sometimes hire contractors full time after working with them -- contracting is both a useful tool for professionals who want greater control of their free time AND a useful networking/recruiting tool for the contractors themselves -- we can bring someone in for a project, and if we like them a lot, try to bring them on board permanently.
Even when you pull 70-80 bucks an hour, the hustle required to keep contract work lined up without long dry spells is a lot of stress, and I know many guys who've switched back and forth several times, doing contracting or fulltiming until they got sick of the associated hassles of either.
But no question, if you're going to take a contract position and you're a real, qualified professional engineer/coder of dignity, you should look for your compensation to be at least 1.5-2x your salaried hourly wage, just to break even. It may seem like you're getting a sweet deal making just a bit more than your old hourly, but the expected value of a contractors salary is significantly lower than a fulltime worker, given that when the work is done, you're gone. Making up for a 401k and such takes a big increase in hourly rate.
Remember, the company is gaining a lot by the flexibility of hiring you short term -- charge accordingly.
It's no secret that lots of businesses like to unfairly take advantage of employees by calling them "independent contractors." I've worked for several bosses who have done just that.
The problem is that unless you're a principal or spend ridiculous amounts of money on work expenses, it's almost impossible to ever come up with enough dough to cover the 40% of your salary that you're going to lose in self-employment tax, let alone surpass the standard deduction.
The IRS has a pretty good outline of how to properly differentiate between employees and contractors (under the IRC) here.
Also, take a look at this PDF form from the IRS. It has the same series of questions, and can be filed with the IRS for a determination (even after the fact) if you should have been counted as an IC or employee for tax purposes. They can then demand that an employer pay the proper amount of your taxes, and give you a refund for what you've (improperly) paid.
There's a three year statute of limitations on filing the SS-8 form with the IRS, though, so just be aware. It's all on the 4th and 5th pages of the form.
Disclaimer: None of this is legal advice. Tax laws are weird and very fact-specific. If you need a solid answer, ask a qualified attorney or accountant or something. You could even ask Dave Barry. He has a blog.
As stated before it is easier on a company to not renew a contract or terminate it then deal with the hassle of getting rid of unacceptable employees. I came out of a rut like this 2 years ago after being led on by a Fortune 50 company before they broke their word to hire me on full time. Contracting when you have a family can be an very difficult act to balance, especially if you are contracting yourself out instead of using a head hunting company. What things boil down to ultimately, what is the honesty and intregity like of not just the company you are wanting to work for but the manager handling the account. Even afterwards I tried the same song and dance again except this time the company was true to their word. You should research them at least as deep as they intend to research you, a company that is shiney on the outside but stinks like shit inside is probably full of shit to begin with. If you have a chance, try to interview employees there to get a feel for what to expect.
Other considerations such as health insurance you should shop around for anyway, with so many ignorant buffoons running to the ER everytime they get a little hangnail companies tend to not offer the best of benefits. Check out your options and you may do better with another insurance company and you paying for your health insurance than a company's package. Other benefits such as the 401k you might have to roll over into an IRA and if not an option you may wish to consider opening an IRA to contribue to in addtion to getting some prospectus on companies who do Mutual Funds which again may out perform a company's package.
As for stability of corporate life, yes the market is still brutal and you can lose your job still. However, with a strong set of skills and solid experience and outstanding performance you will be far far better off knowing you have a job to come to and not worrying about contract lengths, renewals, and open contracts you can pick up. Nothing is more nerve wracking then trying to support a family based upon available contracts and eeking out from one contract to the next.
First, there are three, not two kinds of hire. Employees, Contractors, and Consultants.
Contractors are like employees in that they are paid for time not results per se, and are direct reports to the company. Consultants do not do either (at least not real ones)
First, assume 40% goes to taxes. Bango.
Next, assume Healthcare costs are roughly 3 times what they are as an employee. Slammo.
Finally, understand you have no real rights and so can be terminated at will.
For that reason, Contractors on site for short duration (1 week to 3 months) tend to cost about twice the loaded salary of an employee. A "loaded" salary is about 1.5 * base pay. For longer term contracts, the pay is much closer to that of the employee because that's pretty much what you're doing.
Short term example: So a $50,000/year job cost the employer around $75,000 and should be paid for a contractor at about $150,000 per year.
Longer Term example: So a $50,000/year job cost the employer around $75,000 and should be paid for a contractor at about $100,000 per year.
The best thing about being a contractor, is you get a lot of experience by moving from company to company. The worst is that you never really know your job, have no security, and may be unemployed at any time. Vacation time is hard to get, and in some companies you're dirt.
Consulting is the best -- if you have the stomache for the ups and downs, are a REALLY self motivated person, and have communication skills that come close to matching your geek skills.
The problem with quotes on the internet, is that nobody bothers to check their veracity. -- Abraham Lincoln
Work is work. Take what you can get. If you enjoy the work and do a good job you're likely to be there far longer than you think. And if you think "employee" means somehow you won't get canned if finances go south at a company, um, you'd be wrong. Be grateful, take the work.
I decided a long time ago that job security is an illusion when working for somebody else. It doesn't matter how large and "stable" the company is. Half the large corporations out there are on the verge of collapse and the other half will ship your job to India in a heartbeat if they think it'll save them $1.
I quit my job to pursue work as a contractor and I haven't looked back once. If you can't get stability, you might as well get paid.
Make sure you ask for more pay than you might normally or you're at least getting something out of the deal. Most companies just want contractors because they think they can get away with cheaper labor. If you have no investment in the people you're working for, you need to try to get more out of them upfront. You can very rarely trust them to look out for your best interests.
Also keep in mind that because this contract isn't setup as a permanent position, you'll be spending some percentage of your time checking in with contacts and making sure you have possible work when your contract ends. You'll also be spending some more time on your taxes, so as others have suggested, you may want to find a good accountant.
Having said that, if you can cover all your other costs, then go for it. I've been contracting mostly for the last 5 years. I get my insurances covered through my wife who works at a university. I enjoy the freedom of working from home most of the time, but that can also be a burden sometimes since it's harder to get away from it.
I have only seen this mentioned once and it was buried, so I wanted to tack it on here because it was a wonderful point:
d =10905562
http://ask.slashdot.org/comments.pl?sid=130655&ci
Incorporate in Delaware.
However, that user did not explain a point that many people do not know: you can incorporate anywhere. Your business does not have to be located there. Delaware has lots of nice provisions for the startup corporation. If not there, do some investigation first, and don't necessarily incorporate where you are located.
Most business courses suggest that if you incorporate, you do so in Delaware.
Good luck!
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"We are Linux. Resistance is measured in Ohms."
If they've said they'll hire you full-time, get a firm timeline from them, and book out of there if they don't meet it (assuming that full-time is still what you want). The place I work at has bullshitted me time and again about 'hiring on'... been there 18 months now, on a contract that was priced at 'get-in-the-door' rates. I'll be moving on, soon enough, but it's a lesson learned.
I'd have a personalized plate on my car, but "toxic bachelor" won't fit into 7 letters.
Just because you're a contractor doesn't mean that you can come and go as you please. Some companies don't mind this, others expect you to be there 40 hours a week. If you're looking for flexibility, be sure you ask what they expect your schedule to be.
Incorporating is a good idea if you're truly an independent contractor working for multiple clients. It's easier to claim business deductions (not being incorporated and claiming deductions is an audit flag, especially if you make over $50k or so a year).
Whereof we cannot speak, thereof we must be silent. --Ludwig Wittgenstein
Dear Cliff: Independent Contractors take care of their own retirement by opening a Solo 401k with 401kBrokers.com. For more info go to http://www.401kbrokers.com/Solo401k.htm & http://www.401kbrokers.com/FAQ.htm
You're contracting directly, treat this like it will never be anything but a contract job and you will be scaring up business again on short notice. Of course, you want the salaried position, but they're asking you to shield them from risk and they need to pony up for that. That means you need to charge at least as much as your total salary+benefits+payroll tax would be -- which is about 45% above your base salary just. If this was a $75k job ($36/hr), you need to charge the equivalent of $108,750 or ($52/hr).
If you really want that salaried position and you really think you're going to get it, you can stop here. If you have _any_ doubt whatsoever that this is going to transition, you need to act like a real contractor and frankly that means take the figure you just came to and add at least 50%. Doubling it would not be out of order, but this is where you need to feel them out. If you're gunning for a $75k job and they balk at paying you $75/hour on contract, you don't want to work for them--they'd pay yet another half again as much if they got you as an employee of a contractor and they know it. Let them know by demanding to be paid accordingly.
By law, if you have a 1099 relationship, you have to be a bona fide contractor--and that means among other things setting your own schedules and having other clients. If they are your sole source of income, demand you come in from 9-5 and otherwise treat you like an employee, you CANNOT be considered a 1099 contractor and they know it. If they want to play that game, they have to play by the rules and so do you. Act and charge accordingly. If they don't take you seriously, they never would have anyway.
Look, basically all jobs are going to the contract model. There is no such thing as a "stable" job anymore.
Hear that sound in the background? That's the sound of our standard of living falling rapidly (and that sound has been there for a few years now).
Hear that other sound? That's the sound of the falling dollar (Euro == $1.31 as of today). There is a relation between these two sounds. Why is the once almight $ now falling? Because the rest of the world doesn't believe that we'll be able to get your fiscal house in order (and they're probably right). We're running record trade deficits and record budget deficits. The US National debt (private and public) stands at about $55Trillion if you include promises made to retirees. What does that mean you ask? It essentially means that the US is a Banana Republic. Just today the Russian central bank wondered out loud if they should continue to hold on to $$s since they're losing value so rapidly. The Chinese and Japanese have to be wondering the same thing. Should these companies beging selling off dollars in a serious way, it'll spell financial ruin for the US.
So what does all of this have to do with your post? Well, it's likely that when it comes to retirement that the money that you're socking away to retire on won't be worth much when you actually retire. Also, it just reinforces the fact that there won't be any such thing as 'job security' anytime soon.
On the bright side: As the dollar plummets it makes us more competitive with India and China (as it basically lowers our standard of living).
Take the contract job. It'll probably last up to a year and you'll probably do pretty well during that year. Let the year after that worry about itself - that's about all you can hope for anyway these days. And it does sound like a pretty good gig as well. Who knows, maybe they will make you permanent after a few months if all goes well - but don't be lulled into thinking that being 'permanent' really means anything.
I worked as a contractor for 2and a half years after being enticed away from a FT position. OK the FT position I left was a dead end and I wasn't really going to move anywhere. And yes, the bigger the company the harder it is to really get the raises you think you deserve while you stay in position. But the contract I was offered doubled my pay, was hourly with overtime (base was over $75 an hour), had holidays, was temp-to-perm (permanent position was salary), had an available insurance plan that was only a $25 a week increase from what I was paying, and had a better work environment. After my second six month contract(in which I had negotiated a weeks paid vacation every six months) was drawing close to closing and a permanent position was not agreed to yet, I started looking for something else, and let that be known. The company offered an additional $10 an hour to a job I was already averaging 40 hours + 10 at time and a half + 2 weeks vacation/holidays. Of course I stayed. Within a year, the company went into a merger and permanent hires at that level were frozen. The manager who had been having me run my part of the department for him got promoted and inherited a work crew from the acquired company; albeit with less skills but an agreement to retain spelled out in the merger. The manager kept me month to month for another 6 months until I was the last contractor in IT and the top brass said pull the plug. The market had TOTALLY changed, and the only way to make that kind of money again was road work, short gigs with mad money. So I took a couple of months off, lived off savings, and looked locally. I finally found something, as my savings were hitting dangerously low, that paid about 3/4 of the contract job (without overtime) as salary. At the original position, they have lost three slots and increased workload. At the contract spot, of the 11 people in my department pre-merger (only 6 were worth keeping), 5 of those have left the department, with 4 leaving the company altogether.
So in retrospect, the contract was really no different than being permanently assigned, except you can bank more. You do have to get your requests out front and negotiate them. Hint...easy money...negotiate holidays in the contract then volunteer to work the "minor" ones as they come along, for perks or in my case time and a half (for a Thanksgiving I worked my boss also sprang for a $75 buffet at the Hilton!); you look like a hero to your boss, your co-workers thank you and you get capital! Your title usually looks better for a resume, your salary disclosure will look alot better, and often it's really the only way most IT professionals can be their own boss. YMMV
I'll be honest, I didn't read all the replies so far, so if this is redundant, it's redundant, but I did skim it, and I didn't see this yet.
Without a 401k or a 403b, how do I take care of retirement?
You probably need an IRA. Actually, your life insurance provider may be able to talk about various retirement accounts and annuities with you (so talk to 'em). I personally have a ROTH IRA investing in a mutual fund through my life insurance provider, as well as an insurance policy that has cash value that I can use for retirement. Also, someone mentioned incorporation. If you plan to make any money, you want to be a C-corp. S-corps pay at the individual tax rate, which is going to be higher than the corporate rate for many income levels, pretty much removing the benefits of incorporating.
I work in the movie biz... sometimes I'm lucky if my 'contract' lasts until the end of the week. (commercial shoots are typically two days long) So, while it's not related to software, I know a thing or two about contract work.
Expect to work longer hours, and charge more than you think the job is worth - companies place 'contractors' on a different column for accounting use, so the money comes from a different, and often less used (read bigger for you) pot. If you think the job is worth $40 per hour, ask for $120 and see what response you get... you may be surprised (in a good way), but let them know you're 'negotiable', so they are not frightened off by a unexpected rate.
You also have to be 'wired' for contract work... if the idea of not knowing where your next job will be coming from next week or next month scares the hell out of you, you probably won't do so well. If you are laid back, and trust that you have the skills and ability to get another job once your contract is up, then go for it.
Lastly, if it's what you really want to do, don't let a contract stop you. Doing something you like or love is truly something few people can say, and you will have no regrets.
Cheers,
-ben
Some people are only alive because it's illegal to kill them.
See it here. Then join PACE --Damon
Enjoy the following perks as a contractor:
1. No steady income
2. 100 hour weeks
3. No health insurance
4. No job security
5. Getting canned for any/no reason
6. Paying your own taxes (quarterlies, 1099, all that fun stuff)
7.(the best) Still getting to put up with all the bullshit you used to at any other job
Have fun!
Boycott everything - they're all trying to fuck you one way or another
I hate to be a dick, but it's hard love, you know? Someone has to shake you around and get this into your head.
It's too late to worry about stability. You should have worried about making yourself stable and succesful *before* marriage. The only thing getting married does (even without children) is slow your life down and add to your responsibilities. Yeah, the idea is that both partners do things 50/50, but we all know that isn't the way it works out. I'm sure that when you work it out in the long run, say ten years from now, the amount of hard work, hours, effort and money you've put into the two of you is more than the other partner has put in.
And you'll find yourself having children sooner than you think. In fact, the instant "she" decides you're going to. Then *her* climb up the success ladder will stop. She won't be making more and more money each year, the amount of hours she can put in will drop (if not quitting work entirely) and the weight of the entire family will be squarely on you.
The only person you can count on is yourself. Other people are going to fear your success. They're going to fear that the better you do - the less you'll want the person you were with when you weren't doing so well. Especially if that other person is a wife or a girlfriend.
In other words, you're trying to make your bed after you were already lying in it. You shouldn't have made such a committment until you were finished being committed to yourself and had achieved your dreams. I'm sure it pleased both of your families and everyone encouraged it, but that's what people do. People try to rough-ride you into the little house with the white picket fence, the wife and 2.5 kids. Just because people around you make you feel that's how you should be doesn't mean you have to remove your spine and do it.
Focus on yourself and your career. If you can't bring in enough money - then make the other half do their fair share. Or just rethink the whole marriage thing to begin with. There's nothing wrong with focusing on your career and putting marriage off until you're 30 (you shouldn't be getting married before 30, period, anyway) or 35 or even 40. Or even at all. What do you really gain from it? It's not like you need marriage to get laid. In fact, the better you do at your career (which you'd excel more at without the ball and chain) the better lays you'd be getting.
If you already manage your money well, then contracting can be very good for you. However, I know many contractors who have tax problems, bill problems, and periods of no employment because they didn't think it through.
Money: First, you should probably be at least an LLC or C corporation because you will have better control over the dispositon of revenues. The bad part is that you will have to be responsible for filing all the necessary paperwork and you will have to keep a good set of books. You can set your own retirement plan if you are a high officer in a corporation, and this can be a benefit, particularly if you are older. I recommend you know about financial ratios and manage your business according to standard. then, since you are paying youself out of the corporation revenues, you will need to know about payroll requirements, and you will have to figure out what rate gives you an adequate return.
Personal money management requires you to be somewhat conservative. You should have liquid assets enough to cover about 3 month's expenses. Most contractors don't start out with that, but if you decide to go the contractor route you should make a plan that will achieve that within about a year. In other words, don't spend it all.
Sharpening the Saw: You will need to continually upgrade your skills and tools. This can be expensive, but is usually well worth it. Figure about 15% of your time to be used to make you worth more in the future.
Your reputation: Employers are looking for "heads down" hard workers in the IT fields (particularly programming). If you are a slacker or a surfer, you won't last long as a contractor. Be sure your contract covers the scope of work, and try to deliver that work on time or early. Furthermore, you should have GOOD communications skills. There will be problems, and you will have to talk your way into getting them resolved. If you fail at any of these, you will have trouble getting your contract renewed or getting further employment.
The most successful contractor I know used to fix electronic organs and switched to programming when that industry started dying out. He took a couple of classes, subscribed to the MSDN, read Charles Petzold's book on Windows Programming, and built a niche as a highly competent programmer. After about 4 years, he was contracting out at >$200/hr, and at least once landed a contract for about $20K/wk. He arrived at that figure by recognizing the hassle in working for other people and deciding how much he had to be paid to put up with it. His contract includes 6 weeks of freedom on Mexico beaches at the beginning of each year (although he does some work over the 'net). He's been working for a large oil exploration firm for the last couple of years, and when they tried to bully the contractors into reducing their rates he said no. They renewed his contract anyway. Since I've been bullied like that before, I learned a lesson: Know exactly what you will settle for, be worth it and don't settle for less.
All-in-all, contracting is well worth it, but you have to be willing to be in charge of yourself, and not need outside motivation.
"The mind works quicker than you think!"
I had a very positive experience with my only contracting experience. It lasted six months, and I was offered a full time position at the end of my contract (though in the end I accepted a different position more in tune with my goals).
The hourly rate worked out to much greater than my previous salary (about 40% more). Since I was working through an employment firm, I was able to get some benefits, though not even close to the same league as a full-time position.
If the employer is sincere in the his full-time offer, and the employee proves worthy over the term of the contract, then it is usally in the best interests of both parties for the employee to be hired on. Finding, hiring, and re-training someone new are very costly.
I'd say if you like the company, the people who work there, and the work, then go for it! It can be a great way to get a foot in the door. A short commute is just a bonus.
Regular contract agencies are designed to rip off their clients and their people. Either go in as an independent, or go in using an "umbrella company" like www.mybizoffice.com - Umbrellas take a small fee (2-4% of gross) do your paperwork, hold your security clearance, file your 'corporate' taxes, and provide the appearance of normal employment as far as places like banks are concerned. They also sell you benefits like health insurance and really good retirement options (way better than what a regular employee can get) which you pay for with pre-tax money.
Also, as a general rule of thumb you should expect to bill your client an hourly rate equal to the equivalent yearly salary divided by 1000 - so a $75,000/yr job would equal a $75/hr rate. This rate covers your additional expenses for insurance and retirement as well as the extra taxes the self-employed must give to uncle sam and finally it also pays for the risk of downtime between gigs. You should expect to sock away at *least* three months of expenses and preferrably 6 or more to be secure.
Finally, go to www.realrates.com and check out the rate surveys and the discussion forums for advice from guys who have been contracting through the thick and thin of the last 10+ years. That forum will get you a lot higher quality of answers than asking slashdot where you have more chance of getting advice from a 12 year old poser than you do of hearing from actual contractors.
When information is power, privacy is freedom.
Do they want you to come in as an independent contractor or work through a larger consulting company? That really makes a difference. If you work through another company in that sort fo 'temp to hire' arrangement, you are unlikely to get the higher pay that usually goes with a contracting job.
Being an idependent can have some great advantages, but only if you are willing to put some extra time in drumming up business, handling the billing, etc. Definetely get yourself a good accountant that can help you set up your own retirement account, health insurance, etc. Consider incorporating, even if you are the only employee in your business. There are some great tax and liability advantages, and it is not as difficult as some make it sound. You do need to file an separate tax return for the business, but your tax accountant can help you with that. There are a bunch of great tax advantages, particularly in matching contributions that the corporation pays into your retirement. Also, there is a broad range of tax deductions available to corporations but not sole proprietorships.
I've been an independent computer consultant for nearly a decade now. I incorporated in the first year and never regretted it. I've been dumping my money back into the company. A couple of years ago I purchased a commercial property through my corporation. I live in the upper apartment (renting it from my own corporation) and rent the out the rest of the building. As a commercial property, I can deduct more of the building expenses than if it I held the property as a personal asset.
Of course if you are only looking to get your foot in the door at a specific company, the above stuff might not apply. Being an independent is not for everyone. You need to be able to really sell yourself, know how to talk to manangement types, network and collect business contacts. You also need to set aside a war chest of funds to ride out those down times between contracts.
I will say that my experience as a independent contractor has been overwelmingly positive. I make a decent six figure income, have greater flexibility in my schedule, and have worked on a variety of interesting projects (right now I'm working on embeded Linux on a flatscreen avionics computer display). Your mileage may vary... so take this advice with the usual Internet grain of salt.
Cheers,
The Bolachek Journals
It's a fabulous way to build a great resume tailored for you dream job quick since employers don't expect contractors to stay at jobs for "career" time periods. My brother did this and got into a 75k web programmer/netadmin job in fairly short order without a degree. His wife was very willing to move around a lot to find the right contracts for his purposes though.
If you wanna stay in one place and you feel like this job is your destination, then it's still great on the resume because it's what you want, and people don't expect you to have a longetivity on your resume when you contract. So once it's on your resume....shop.
There is no such thing as permanent fulltime anymore.
I started my first business in 1995 with the help of SCORE. I _highly_ suggest this. (sweet irony that I would be teaching a classroom of SCORE advisors in 2000). Also check with the IRS. No joke. They have all sorts of business plans, worksheets and help for the small business owner (Small Business Administration will even send you a CDROM with all the stuff you need) So for whether to be S-corp, C-corp or LLC is up to you. Understand with any of them you are protected. That is to say, if you screw up (right now), I can sue you for all of your company possessions AND personal property. An LLC says 'I am still a small business but I don't want you to take my house'. Do you really want to form an S-corp? what a PITA. Here read this (as just a guide): http://www.taxguru.org/corps/scorp.htm Forming a corporation also may mean that you have to account for stock (prove your worth in company) and to hold board meetings and keep the minutes on file, etc etc. RETIREMENT OPTIONS: The max limit got bumped recently for ROTH IRA contributions. Max that baby out. You do NOT pay taxes on the distributions (when you pull money out, there are NO taxes)..that's because all contributions are post-cost base (you cannot withdraw from your check before paying taxes during your earning years). Traditional IRAs and SIMPLEs are also options. I am NOT suggesting that you do anything and I am not telling you what your best options are. I have managed retirement retirement portfolios and insurance for others as a prior career. I also have stopped using accountants. I had a large sized accounting firm have one of their CPAs screw up my taxes. Good thing I always skim EVERYTHING before I sign. In 5 minutes I saved over $3000 in taxes. They took 3 days to research what I told them. (and I still had to pay them) NOTE: that still does not mean anything and you should not trust ANYTHING I SAY. I am not responsible for your actions. I have seen a lot of misinformation in this discussion, so please do your OWN research. another tip, (a BIG one..) You might find someone at the local college or university in the business division that will offer you FREE assistance in setting up your corporation or LLC).
Try using a calculator man, it doesn't compute
Thats only true if your working 16h/day EVERY DAY
your annual pay is roughly ( Hourly * 2 ) * 1000 or if you prefer you can use the (( Hourly * 8 ) * 5) * 50 (expecting you take 2 weeks off for vaca./sick/holiday/etc.)
Example, if you make 15/hour then you pull in 30k/yr
Based on 12 years+ of contracting:
1. Full time jobs and contracting jobs are about equally secure.
2. Full time jobs and contracting jobs (as software developers) require about the same number of hours.
3. The value of benefits should be weighed against their actual use, and seldom add up to more than getting paid for every hour of work. (This is perhaps false in the case of a pregnancy with complications or serious illness).
4. If you go 1099 and you are smart, you will actually end up paying less taxes than the full time employee..since you will be able to deduct many expenses that they cannot. Choose this option if you are gien it rather give away a chunk of your money to a 'bork'/broker.
5. As with a FT job, you should always ALWAYS bank savings in case of a layoff or unforseen job loss. 6 Months minimum and a year is better.
(net not gross)
6. Log on to the IT contracting forum to get more detailed info
http://pub21.ezboard.com/bopenitforum
...while they're paying contracting rates. If they're paying low rates while dangling the full time carrot then it sounds less like contracting and more like exploitation. My interpretation of contracting is a non-permanent job -- if you're looking for it to become permanenent it may not be contracting you want to pursue.
Oh no! Contracting isn't like cocaine. THIS! is like cocaine. Think drug dealers crossed with loan sharks. Be very afraid.
To me (I grew up in Europe) these are quite tragic questions for someone in a rich country to have to ask himself:
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When you are just some guy, by yourself applying for insurance they are often extremely pickey, and reject you or hike your rates for little things. Big companies have big bargaining power, and basically force the insurance companies to cover all employees (which they'll do since it averages out that they make money).
Benefits are an area you have to look at carefully, depending on your situation. If you are young, single and healthy, you can probably get them for a good rate. IF you have a family and a history of some health problem, you might find that they say no, or want a huge amount of money.
In my experience, if you're good, and people pick up on that, it almost always pays off.
On the note of a stable income and job security: although things might not be fantastic at first, eventually, in my opinion, contracting can be much more secure than full time employment. Instead of having all of your eggs in one basket and relying on one organisation for all your income, you'll instead likely end up with your income spread across many sources, making it much easier and less of a problem to switch to another source of income when one drops you.
Also (not mentioned on Slashdot very often in such topics) is that really useful and common sense concept known as... saving. One is going to worry a lot more about not having work if they didn't have the sense to save up a few thousand before going freelance. I'm sure you'll have no doubt taken that one into account but it seems that the idea never occurs to others.
And on a fairly unrelated, much more personal and none-of-my-business note (but maybe worth mentioning while there's still time), there's a lot to be said for not having kids.
Good luck with it!
You might be able to find a local contracting agency which will take the $x/hr from your potential employer, take care of social security, benefits, etc, and pay you the remainder.
You should be able to negotiate a deal or see if the employer has a preferred agency.
Note there are probably more advantages (e.g. deductibility) as an independent, but you might want to look into being your own corporation. The "Rich Dad" series has a few good books that will lead you in that direction.
uh, he was stating that you should expect to be compensated at $100/hour as a contractor if you were making $100k/year as a regular employee in a similar position. This is a classic estimate but it probably understimates the loss of benifits like 401k match that many better employers offer.
There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
Employers like the Contract to Perm model simply becuase no matter how thorough an interview is, a candidate may or may not be a good fit.
/1000 = Hourly Rate. So for $100,000 you would charge $50/hr. In my industry we will pay all the way up to $75/hr. for really talented people with a fairly commodity skill sets. For specializations in a particular product, the price goes up dramatically.
The contract to perm model allows them to evaluate you as an employee over a long period of time without the commmitment of a full time hire. If you beilieve that you are a good worker and it's a good fit take it.
As far as a rate goes. As a general rule it is 1/2 * annual salary
You can setup an S-Corp, do corp. to corp. billing and save on some taxes if you are crafty.
Also, when factoring your hourly rate, be sure to include the cost of independent health benefits.
There are other retirement vehicles besides a 401K that are available such as a ROTH/IRA. You can also setup a 401K if you have an S-Corp.
Good luck.
It lets "try out" new hires before deciding whether to keep them.
We hire them as 90-day contractors with the full intention of making them full-time employees. However, if they're not working out, you can easily cut them.
We've taken this approach with all of our current full-timers that didn't start out as interns.
I'd go for it.
I just got out of a nasty situation at a local university where my employer had me working full-time with part-time benefits (hourly wages, no health benefits, no retirement, no overtime, etc.). I accepted it because they paid me well for being a recent graduate and I could do pretty much anything (good learning experience).
That said, there came a time when some horrible person took our office manager position and had a badger up her ass about making me fit in her schema of appropriate positions / salary. I found myself working under 20 hours a week for a month and REINTERVIEWING for my own position with a lower salary and health benefits.
The salary was 25% less. I wouldn't get benefits because I hadn't been working 40 hours a week for 3 consecutive months (it apparently reset when I had my forced break). I wasn't eligible to use vacation for an additional 6 months. My boss promised to fix things in a few months with a new budget but she didn't.
The moral? Things can change in an instant when you aren't salaried. They can fire you instantly, change conditions of your employment, etc.. If you are comfortable with that, then great. I suggest having your resume in good condition until you are salaried.
Comment removed based on user account deletion
1. Increase "hourly" rate, 30% should do it to cover taxes, etc.
2. Hop on your wife's health insurance. I did that after I got married, and my business has employees with a generous health package (I pay 100% because I don't want to track contributions/opt-outs)... it was much nicer to have her company pick up half... Otherwise, find a local coop.
3. Retirement planning. 1st, Max our the Roth IRA, if elligable. Then, incorporate yourself as an S-corp, no tax implication, but it's slightly cleaner than a sole propreitorship. Then do any of the retirement plans that interest you, SEP-IRA, SIMPLE, Keogh, Profit-Sharing...
4. Learn some basic accounting, and find a CPA that will cheaply set things up for you. I skipped that, cost me a few thousand dollars and LOTS of headache to compensate for saving $250 upfront.
It's a great option, if the pay works out. Also, if you can get some of the work to be remote (which they technically HAVE to allow as a contractor, there are IRS rules for who can be a contractor), you can always later hire someone to do it. I.e. if you only have to be onsight 2 days/week, you could eventually raise your rate sufficient to hire someone to do the job and land a second gig...
Work one location M/W, another T/Th, and keep Fridays for bookkeeping.
In that scenario, you spend all your office time with "face time" and working on extending/enhancing the contract, and have your employee do the projects. Just email them the assignments and back to networking...
Just a few thoughts...
Alex
He said:
$100,000 year salary is like $100/hour, even though the gross revenue from that would be $200,000
Plugging in $100 into your formulat gets 100 dollars/work hour *2000 work hours/year= $200,000 dollars/year. Or in other words, charging $100/hour gets you a gross revenue of $200,000/yr, to use your formula.
If he worked 16 hrs/day, every day, he'd get $584,000. So you are somewhat on crack.
His point was, if you would expect a $100k/yr salary for a job, you should charge about $100/hour as a contractor. This is a somewhat sane rule of thumb to account for the additional tax burden (FICA), overhead, loss of benefits, etc, but probably not quite sufficient.
Some companies have policies where firing people is very hard. IT's not that it can't be done, but it might be that you never do something that's a firable offence, but still don't work out very well.
I work for a state university, and we have that problem. It's REALLY hard to fire someone, they have to screw up pretty good or just not do their job. So you can have someone who is incompetent and generally not good for their position, but if they do the minimum you have trouble axing them.
Hence we have a 6-month probation period where the employee is basically a contractor. At any time during that period they can say "see ya" and offer no reason. After that though, we're one step down from tenured professors in terms of firing.
So maybe this is a division of a big company that has bitchey rules on firing someone. So the division wants to try the person out, as a contractor, and see if they'll work out. If so, they bring them on, if not, see ya.
Big companies often have bureaucracy as bad as the government. It can be really hard to fire someone once they are in.
This is probably not going to be read by anyone because it's posted as anon-coward and thus modded as 0, but I thought I'd share my experience.
:-)
I quit my last corporate position in mid 2002, admist the worst economic turndown in recent memory. The job market was non-existent. Yet I quit one month after we had our first son. Why? I grew sick and tired of corporate BS, for one, but I guess I was also a bit cocky in estimating my ability to find fulltime employment when I wanted to. And I had enough money from stock to last us for a year or so.
So I've been doing this for 2 1/2 years. Had another baby since then. It has been rough for a bit, then became a little better, and now a lot better. There are several pointers to keep in mind:
- Hourly rate: you need to have the mindset that you should make DOUBLE the "per hour" rate you made when you were employed (just look at your paystud to figure out what that came to, or take your annual and divide by 2000 for a good estimate). This is for several reasons, including taxes, but also the fact that you must also make enough money to cover the times when you have no contracts. This should be your negotiation starting point, anyway. I ended up getting 10% under this number pretty regularly (I was making six figures before I quit, so its not like I was doubling 20$ an hour). There is another reason for this. When you negotiate as a contractor, if you price yourself too low, you either create suspicion (in the sense that you are obviously not good enough to charge a high rate) or make yourself expendable.
- Health Insurance: yes, you pay for it yourself. Of course, if you have something serious - I have diabetes - this won't work. The way you handle that is either by LLCing yourself and your wife, and getting small group insurance, or getting a contract that pays very little but gives you access to a group plan. Its workable.
- Liability insurance - ah. Everyone will tell you you need it. Im not so sure, not if you are the sole proprietor. Sure, if you get sued you're liable and everything is up for grabs, but honestly, remember you are dealing with people who are working with YOU, not a company you represent. I am highly doubtful that you will find someone who will be so hardcore as to be happy to throw you out of your house and leave you and your family on the street just so his company's coffers add a couple hundred K. Its all about relationships. Of course, if you screw up in a serious manner - criminal - then all bets are off, but no insurance will help you then.
- EVERYTHING is deductible. Your meals. Your miles. Your electornic purchases. Everything. Its ridiculous as to how many taxes you end up paying - 15% is not uncommon, and you can get as low as 12% or even 10%.
- The most important thing is that it TAKES TIMES to establish yourself as an independent contractor. Think a year. It takes patience, and persistance, and a lot of relationship building and nurturing. Find ways to increase your exposure, like performing speaking engagements for free (for groups like the IEEE, or IMC, or the american businesswoman's association, or what have you). On the other hand, I wouldn't bother with all those "networking groups" - I have yet to see a single contract gained from one of them.
But yes, its very workable, even with a family. And the ability to spend real, honest to god quality time with your kids is something that will payoff HUGE when they grow up. More than any "stable income" will do now. Retirement? Its over-rated, anyway
All I have to say is... contracting is good as long as you are guaranteed x number of hours. I have never had a fulltime position bring in more $$$ than contracting. EVER!
As someone who's been contracting for a while now, I think it's great.
/1.145 (self employment tax) - all actual benefits like health insurance. Generally if your own company pays for your health insurance in a situation like this, it's deductable but IANAL and IANATA.
You should calculate your income as your income
That assumes that the job is as stable as your other job (which isn't always a bad assumption, depending on your other job) If it's not, I'd use roughly the formula:
(new income from above - old income) * time before they fire you = contract severance.
You need to weigh this severance against what you current severance would be (usually a "normal" job gives you at least a couple weeks warning) and the variable probabilities of getting canned. I'd go with something in the couple months for a new job, and make sure you can afford it.
Of course, the time before they fire you is made up, and the math is really harsh if it happens quickly. If they're enticing you away from your current employer, get them to put in an early termination penalty equal to the amount you would've been paid if they kill it earlier than a year or something. This lets them not have to hire you "forever" but it gives you a reasonable amount of capital to survive them failing to come through.
Finally, up to its limit a Roth IRA (in diversified stock or an S&P500 index) is a better retirement vehicle than your 401k, unless the matching is extreme, the vestment significant, and the mutual fund choices not sucky - which is a lot of ifs. For more advice on how to save, I recommend the Motley Fool - www.fool.com But the broad principle is that your company MIGHT have been giving you a bunch of money, which would count as a benefit, above. But probably it wasn't huge and you're not massively worse off otherwise.
Looking for freelance Actionscript (Flash/Flex) or ColdFusion work and/or freelance developers. Email me, put Slashdot
We do this all the time, it's just an easy way to make sure the person is a good fit if we're not sure. A previous employer of mine did the '90 days' contract, where you'd be an employee but could be let go without cause in the first 90 days.
Contracting is fine, but you need to address the differences. If you want some of the stability, you can write that into your contract, like minimum 1 year at minimum 250 8 hour days. Or you can do it by project. As far as compensation, figure at least 1.5-3X what you would expect in a standard salaried position. This is to cover lots of expenses, from tangible factors, like FICA (9%), health insurance (for the whole family! not cheap), retirement benefits, sick time and vacation time, etc, to less tangible factors like stability, title, overtime/exempt, etc. A typical "overhead" rate is 35% (the amount over and above the annual salary that institutions charge for FICA, benefits, etc). So it is easy to see where you need at least 1.5X your expected annual salary. 2X would be better. Point is, make sure this "we'll put you on a consulting basis for now", isn't a ploy to short change you. If you were expecting, e.g. $70,000/year, then you want at least $50-70/hour for 2000 hours/year (which works out to be $100-140K).
I've always found it pretty accurate to knock off a dollar an hour for tax. Comes out quite close in my experience and gives you a better base for actual cash planning.
I've been contracting for eight years now, and I've been able to make a fairly nice living for myself, my wife, and our baby-on-the-way.
"Contracting" is an ambiguous term. You can come to expect it to mean any of the following:
1. Temp-To-Hire - They'll hire you if you perform to their expectations typically within three months. In other words, try before you buy.
2. Contract - You're there as a contractor, but you're expected to work as an employee. This lowers their operational cost significantly (no health care, no paid personal days, etc.).
3. Consultant - You come and go as you please and can charge a nice penny. This is typically only reserved for those with a large experience base.
Most likely, you're falling into either #1 or #2.
Downsides:
1. No health care. You can most likely get your own, however, for a nominal cost. You don't really need dental, etc., as most major dental procedures are done by an oral surgeon, hence fall under medical insurance.
2. No paid personal days or vacations. If you're not there, you don't get paid.
3. No 401K or retirement. Really, do you think you'll work for the same company for the next 40+ years? Those days are long over.
Benefits:
1. You get a job! You'll actually have money in your pocket, and as a contractor, you get paid more than the average employee, usually.
2. You can put this job on your resume! You can build up your resume with real-world experience and then look for your next contract or full-time position.
3. You have the opportunity of getting in with this company, or, if that doesn't happen, you at least have a place to stay until you can find a job that will hire you full-time.
If this is your only prospect, I would recommend giving it a shot. It sounds like an interesting project, and it would at least get you some income in the mean-time.
P.A.C.E. http://www.pacepros.com/ will give you a W-2 so things like buying a house, and doing your taxes becomes much easier. Their fee is EXTREAMLY reasonable considering the services offere to contractors. They give you all the benefits of being a contractor, and an employee at the same time. Tell them Scott Skaife referred you....
For retirement you want a SEP IRA. It's very similar to a 401k, but designed for self-employed people. The contribution limits are generous and you get the same tax benefits as a 401k. You can augment the SEP with a Roth IRA if you want.
Check health insurance rates in your locality. You could end up paying from $2,000 to over $10,000 per year for health insurance, depending on the plan. Individuals get worse rates on insurance compared to employees of a large company.
I just finished a six-month contract. The recruiting company I went through actually provided a 401k. Pluses were a relatively flexible schedule and not worrying about the company. Minuses: no paid vacation time (suckage) and I had to pay for health insurance. If you have a family, that will cost about $700/month.
I figured for a rough estimate, multiply the hourly rate * 40 * 52wks. This obviously doesn't account for vacation time or benefit cost.
I went to a full-time job because the commute was better. For some reason, I feel less indepedent. Contracting isn't so different from full-time...you just need to realize you might be hired because they need to get a project done, then you'll get canned (happened to another contractor).
I would never go back. I just wouldn't dream of it. What is better?
- the money - my rule of thumb is hourly rate = at least full time anual wage / 1000. e.g. if the fulltime job is worth 80k per year, ask for at least $80.00/hr (works out to about $160k/yr). If you really like the job, don't be afraid to go in a bit lower to close the deal.
- the intellectual stimulation - people don't hire contractors to do nothing. The work is usually interesting and stimulating.
- the lifestyle choices - this year I spent 5 months on the shores of the Mediteranean and still grossed over 80k in the other 7 months. In a good year I gross over 200k. Anybody offer you a fulltime jobn like that lately?
Contract work is not for everyone. You should be good at what you do, very responsible, and not afraid to sell these qualities. Also, if you are the worrying type, think carefully. Considder this scenario - This employer takes you on on a contract basis. After 4 months, they decide not to renew your contract. You spend 6 weeks landing your next contract/job. By the end of the 6 weeks, are you the type that is ready to have a nervous breakdown? If so, think twice, but remember this; Whether you are full time or contract, your only job security is the marketability of your own skills. It is tragic to see someone stagnate in a fulltime job and then lose it only to find out that their skills are no longer very desireable. Result - retrain, take a big pay cut, big hit to self confidence.
Regarding taxes, saving for retirement and insurance, the bottom line is, if you are independant, the scenario is better all the way around. You pay less tax, can save more, and can afford better insurance. However (and here's the catch) you have to learn about these things and get them taken care of yourself. If you are too lazy to plan your own financial future, keep track of all of your tax deductible expenses, and make sure you have the right insurance, stay full time. By the way, the most important insurance you can get is long term disability insurance. The most valuable thing you have is years of earning potential. What happens to you and your family if you get seriously hurt and can't work any more? Get LTD insurance immediately.
One final note about money: You should be getting paid significantly more as a contractor (see above). With the extra cashflow you should:
- buy insurance of several types
- accumulate a "war fund" - at least 3 months (6 is better) of money that is readily available to smooth out those periods between assignments.
- pay for accountant, financial planners, etc...
- save, save, save...
Buy the house you live in and save as much cash as possible. Keep your expenses low and save the excess cashflow. Build your net worth quickly.
In summary, contract work is not for everyone. But, if you are capable, organized, responsible, highly driven, and tolerant to some risk, then what are you doing in that fulltime job?
I wouldn't worry too much about that 401k. The world's economy is changing so much that I don't think it would be available to you in the future anyway - some executive or politician would steal the funds. Best you consider being more creative regarding funding your retirment. I'm thinking creating several small businesses that I could eventually hire people to run for me.
If you sell your services at too low a price, the company will have no incentive to make you an employee.
Contribute to civilization: ari.aynrand.org/donate
I've been contracting for the past two years and that formula worked for me. My difference was that I work through an angency so I file W2 for my taxes. In that situation my formula works because they pay for my payroll taxes.
Also there is something to beware in Washington State. There is a law here due to a lawsuit against microsoft that as a contractor you may only work for a company for one year then they must let you go by law.
I have contracted as a W-2 and 1099 for 8 years. It is great but please keep your spending level down or preferably below what you would if you had a comparable salaried position. Save, Save, Save! Even if recruiters are ringing your phone off the hook or filling up your inbox, the day will come when YOU fail to get THEM to return your calls. I speak from experience. Good luck.
I was just recently moved from a contractor to a full time employee. Not that they wanted to, or I wanted to, but because it was required by law. Since I was taking day-to-day direction by my 'employer', I was deemed an employee and was required to be hired full time or the company would face government fines. Anyone recall the big Microsoft scandal regarind this a while back? Also there was the mention of taxes. This is relative to your country/province. Here in Ontario you cannot claim Employment Insurance if you were self-employed, either as a sole-proprietor or a major shareholder in your own corporation. Ask them to write the time-frame into the contract as to when you will be eligable for full-time employment. Then you get all the health benefits (big if you are in the US), retirement contributions, stock discounts, etc..
betweem full time employment and self empluyment is that with full time you only have one client.
If your contracting, keep track of your mileage. Check with your tax preparer, but you might be able to deduct it from your business income - no sense in paying self employment taxes on deductible items.
A fine is a tax you pay for doing wrong and a tax is a fine you pay for doing all right.
I would walk away. It shows the company wants disposable people and it shows they are not stable enough to offer you full time right from the start.
I'd go on a Vegan diet but the delivery time from Vega is too long. --brownkitty
One way to resolve the issue is to ask the employer to fill out IRS Form SS-8", "Determination of Worker Status for purposes of Federal Employment Taxes and Income Tax Witholding." Workers can also fill out the form directly. This initiates a process at the IRS in which the IRS sends forms to both sides and eventually issues a letter opinion resolving the issue.
If an employer proposes that you should be an "independent contractor", but it's really a job (they tell you when and where to work and how to do the job), this is a useful form to show them. It scares HR departments and their lawyers. If the IRS decides that a class of "independent contractors" is in fact employees, the employer has to pay back employment taxes. The IRS tends to view anything that looks like a job as a job, regardless of what the employer says.
If you've been an "independent contractor" recently but no longer have a connection to that company, you can file an SS-8 form, and may save some money on taxes if you're retroactively reclassified as an employee.
If you're charging $100/hour, you'd better plan on sending the Federal government at least $30.30/hour and the state whatever they demand (I figure $10/hour in Iowa).
A fine is a tax you pay for doing wrong and a tax is a fine you pay for doing all right.
I'm 32 and have been an IT contractor since 1993 and only deal with direct clients NO AGENCIES -- so I think I could lend some much needed insight to this post.
Here's my 10 commandments:
Thou shalt LEARN TO SPEAK ENGLISH!!!!
Time and time again, I get the contract over those from India and even other Americans BECAUSE I CAN TALK TO A CTO/CEO/VP/Director in PLAIN ENGLISH and not mumble, talk in lingo/jargon and not act impersonally.
Thou shalt not do a personal website if you have 1+ yrs experience -- be it a wedding site, a blog, a mom and pop shop or joe shmoe trying to setup an "Enterprise Application". These "people" are DEMONS and will fight tooth and nail and try to bleed bleeed bleed every last detail ESPECIALLY if you are doing them a "favor".
You shalt give your client nothing more than due in your most rightous and holy contract. Face it: if the money comes from some one's personal bank account, YOU DO NOT WANT THIS MONEY. these people will fight tooth and nail about parting with it, no matter how "nice" they seem.
Thou shalt not work for less than 2x the amount you can get as a fulltime employee with salary+benefits including medical with dental and atleast a 2 week per year vacation package. To do less is cutting yourself short. As a contractor you pay your own medical insurance (mines 260 a month for a PPO), you have no employment insurance (no work means no money, don't bother trying to collect unemployment -- unless you've been paying your own UE insurance), what about your retirement? You better account for PUTTING MONEY AWAY in savings.
Any contract over 1 month REQUIRES SUB-CONTRACTORS!
Face it, no one man can be king of all things, nor should you want to be. If you are a contractor, the end all and be all goal should be delivering what you promised ON TIME and ON BUDGET. So this requires that you adhere to the previous commandments and calculate ATLEAST your rate+20% as a lesser skilled subcontractor cost UPFRONT. If your subcontractors are SPECIALISTS, you shalt pay them your at least your rate and tack on 20% to cover thine ass.
Thou shalt write off EVERYTHING that has any silicon inside it.
A 42" Plasma TV is a "presentation device" a 40G iPod is a "data transfer device", a dvd read/write/player is a media transfer device. Thusly it is devinely mandated that your home entertainment system is a tax write off. Just provide hook-ups to your devices.
Thou shalt NOT host for free. You are a developer NOT in ISP. if your client needs permanant hosting, charge them for your service of procuring a list of acceptable hosting/colocation services if they require it. DO NOT offer permanant hosting or support -- you are a developer and developers religiously beta new services/features in order to develop for the upcoming language/software specs -- YOU ARE NOT AN ISP unless you have 5+ servers and can offer 24/7 tech support without a fee and still sleep and eat.
Thou Shalt not price compete. Bottom dollar developers are just that. Customers that tell you that your rates don't match up with a newbie are not clients you want in the first place. NO MATTER HOW BROKE YOU ARE. Remember -- clients come in packs. one pr two of the pack will be ones you want, the others can eat tripe.
Thou shalt not hop projects. You take a project, you finish it.
Bottom line: keep your promises. If the client can not fulfill the needs of the project or breaches the terms of the project and no remedy can be agreed apon: SUE THEM. Do not take a hit because the client hurts the project, charge them and let them know about it before you do. Extra work or delays in the project are BILLABLE. Remember -- you are a service provider and you do not have to accept any harm from your client in regards to profits.
Thou shalt collect money UPFRONT! At the bare minimum you shall invoice all flat rate projects at 33% at project start -- 33% upon an agreed mid-development milestone -- 33%+REMAINDER upon completion. Smart and more skilled negotiations will get you 50% AT START -- 25% at mid and 25% upon completion.
>
If you get a high salary from a stable company and are a competent worker then you have little to fear.
Biggest load of cr@p I've ever read. Was AT&T a stable company five years ago? How about the IBM Boca Raton plant 10 years ago? Here in Denver, the General Dynamics office where I worked went from about 80 people, to about 35, because of one lost contract. I could go on and on.
No, Virgina, a big company, does not mean job security in today's job market. And the highest paid are usually the first to go.
If your work for yourself, expect to work more than 40 hour weeks. You are typically your harshest boss.
A fine is a tax you pay for doing wrong and a tax is a fine you pay for doing all right.
"His point was, if you would expect a $100k/yr salary for a job, you should charge about $100/hour as a contractor."
I thought that went away with the failure of the dot.boom?
Should I be bitter now?
I was contracting when it was good back in the 90's. I miss it. Not because of all that stuff above about 1099 vs W2, getting insurance (don't forget disability), etc., etc., etc. Not that it isn't Important. It is very important. Do the math and don't forget to budget time for vacation, sick time, Social Security, etc.
But here's what I loved about contracting: You get paid for when you are working and you don't get paid when your not:
Up against a deadline? They pay. You are there with all those full-timers getting there dinner on their own time. They pay you and you get the dinner too. I always used to tell my boss, if I'm here, and I'm not eating lunch, you are paying me.
But there's more: perfomance appraisal time is when they renew the contract, no BS. No BS company meetings, no six-sigma/Q+/pick-your-quality-program nonsense, no company gatherings on your time, they don't want you there and you (well, I) don't want to be there. I like doing my job, they can keep all that other crap.
You are there to do X and thats what you do. When X is done, and If they like you, they find Y for you to do. Its a good system.
That much said, here in the Boston area, rates still seem way down (but I haven't been looking all that hard either).
Finally, if you go through an agency, ask them what their mark-up is. Most will refuse but some do answer. If they refuse, I'll ask if its more than 35% (high typical on a W2). Most will answer that with a no but some will be lying. I have known agencies back in the day to mark up by as much as 65%. I doubt they can get away with that now. Its best to talk to someone that has worked with a particular agency to find out if they are good or bad.
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When considering contracting, you also have to figure down time in addition to lost benefits. Also, make sure that they consulting firm or body shop you're working with is paying you a decent wage.
When I was a recruiter, the company that I worked for charged a minimum of a 70% markup for contract work. Were our consultants getting decent wages? Of course they were. We submitted them at the rate that they wanted plus our markup on top. Did we deserve the markup? Of course we did. Phone banks, software, computers, office space, salaries, etc. don't pay for themselves, and consultants rarely understand the intensity of the workplace. Think Boiler Room. I placed dozens of consultants in the year that I worked, and not once did I ever use Dice or Monster for anything other than resumes. I wanted less competition for open spots, and I did that by networking.
However, I also had instances where consultants would complain to me that other companies had come to them and offered rates at much less than they were used to.
My advice is this: NEVER undersell yourself. If I'm a recruiter, I'm going to ask you what you made on your previous jobs and what you did on your previous jobs and who you reported to because I want to (a) build a work history, (b) have references ready for you, and (c) network your contacts. If you tell me you made $55 bucks on your last job, I'm going to see if you'll take $50 on your next. Contract recruiters get paid on the percentage of the spread. Perm recruiters negotiate the spread on the front end and then make a percentage of the salary.
They won't convert you from a contractor into an employee. Why would they? Contractors are less expensive and they can be fired on the spot (firing employees is not as easy for some reason, especially if an employee is hispanic or black or gay). Even if they like you _a_lot_, even then your probability of becoming an employee is pretty slim.
Wash. Post article, "Permanent Job Proves An Elusive Dream". (Free reg. may be required.)
Get used to it. This is the "trend". There is a shortage of perm tech jobs. I have been type-cast[1] as a "contractor" and cannot break out. Contractors have the reputation of earning big bucks and full-time positition managers feel that this creates wage-spoiled employees. I cannot seem to prove to them that if one factors in lack of benefits, travel, uncertainty, gaps between, etc., contracting is not net better. But they don't seem to believe me.
[1] As in Bob Denver trying to get a serious part in a show or movie.
Table-ized A.I.
And while you are seen as overhead, as a salaried employee, I am seen as "free" labor. I was having a conversation with a director the other day, who happens to be my boss. I was trying to get across to him the concept of planning, and how there are 4 things:
Cost
Functionality
Schedule
Quality
You can Optimize one, Constrain one, and you have to accept the other two. I was using a current example, where we were constrained by schedule but wanted to get the most functionality in the release. Therefore, we had to accept the cost and the quality. His response? "Cost doesn't factor into this, because as a salaried employee, your cost is free. You can just work overtime and you don't cost any more. Problem solved."
That is how salaried employees are treated.
My beliefs do not require that you agree with them.
Too much stability is a good thing. You don't want to be condemned to a life of working for "beltway bandits" if that's the sort of contractor position you're talking about.
I had a similar problem, i never make money as a contractor in the long run, tho employers always seem to try to tell me that i'll make more as an IC.
fuckwads.
You've gotten a tremendous amount of good advice from long-time contractors, and I'd advise you to take it to heart. Taxes, insurance, and retirement are things that you will have to do on your own, and that's a substantial burden.
On the other hand, you're young and have no kids. This is a time for experimentation. If you are really hot shit, then you will thrive as a contractor. If you were working for some big company, you'd never be appreciated (read: compensated) for that, most likely. As a contractor, you can really see what you can do, in your most ideal work environment.
If it doesn't work out, oh well. You can try to get a more stable job somewhere else. Note well those that have said in previous comments that the idea of a "stable job" is almost as extinct as the dodo and passenger pigeon.
I own a small visual effects company, and pay my contract employees more than I take home myself -- and happily do it! No kidding, it's the way of the future, and can work out well for all concerned.
Thad Beier
I love Mondays. On a Monday, anything is possible.
Insist on using your own equipment (it's deductable) and lock it out from their network monitoring and sysads. Get a Blackberry and cell phone for non-customer related communication. You're not an employee so don't let them treat you like one. The contractor gig was their idea, you'll need to remind them once in a while. Gently but firmly. The more you enforce the separation, the sooner they'll turn you into a permanent position. Seems counter-intuitive but it works.
For insurance if you have Blue Cross/Blue Shield in your area they used to have short-term coverage you can buy that's pretty reasonable. Lot cheaper than COBRA from your last employer.
The hours are longer, the work is harder and job security is a thing of the past. But a bad day working for yourself is better than the best day you'll ever have working for someone else.
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage
You are your own manager.
Full time work has its advantages, as does contract work. None of them are stable.
Just make sure that the deal you sign is good for you. Take everything, from commuting, to workspace, to environment into consideration.
If in doubt, turn to Gerry Weingberg's "Secrets of Consulting", and "More Secrets of Consulting".
--
Juanco
-- Juanco
I had contracts for 3 months and they moved me to 6-month contracts.
:D So I feel like non-expendable (hee hee). Well i feel like Peter Parker. "With a great power comes yadda yadda."
Maybe my case is particular, but since i'm the only web developer around, and there isn't a replacement...
But I don't live in the US, so I really don't know how is it there. But still, 3 or 6 months as contractor is much better than 3 or 6 months unemployed. In the meantime, if there's nothing to do, you could do those 1-day or 1-week jobs posted on the web. Like http://www.php-freelancers.com/.
Multiply hourly rate * 2080 to compute yearly salary. For example, $20/hour * 2080 = $41,600.
http://tomgould.com/
In Canada, some large companies (IBM comes to mind) use only contractors for certain positions (office workers, etc). If you treat your contractors like employees, then under Canadian law they actually *are* employees--this has negative tax consequences for the corporation (as well as opening them up to benefits claims) so they tend to treat contractors badly. At the same time, they use contractors for front-office staff etc for a max of 2 years, and don't renew the contracts after that.
Its much harder to fire a full-time employee, than to simply not renew a contract.
Move to India!
- Rent is cheap.
- Healthcare is plentiful and cheap. Americans go there for cheap surgery.
- Work for any American company you want!
Yea, it's sarcastic... but sadly, it's true.
Talk to a good accountant.
Maurice W. Hilarius Voice: (778) 347-9907
The position was listed as full-time but they want me to come on as contractor because the approval is easier to get.
Bullcrap, dude! They want a contractor because they are cheaper! Make sure they pay. Other posts here have mentioned the extra costs you incur as a contractor; make sure they pay for those!
At the same time, make sure you are not locked into an exclusive work agreement and/or mandatory overtime; either will limit your ability to make up any more money with outside contracts.
To me this sounds like an attempt to hire a full-time worker without compensating the worker for full-time rights.
As long as he's willing to accept the decreased quality associated with making you work overtime.
paintball
Are they offering you temp-to-perm or contract? My advice is to read the book Secrets of Power Negotiating by Roger Dawson. This business about, its easier to get approval for contractor, that is their problem. The fact that there are several hundred thousand H1-B workers willing to take the same job is your problem. Get them to make the first offer, if they make you move first, your ballpark hourly rate is $70/hour for a $70,000 job. I want to emphasize that temp-to-perm is in practice different than pure contracting. You're kind of in purgatory for an indefinite period. Because you're on a short leash, your power relationships with your colleagues will be compromised. With temp-to-perm, they try to get the best of both worlds, you will have to behave like a model employee, possibly work extra hours, but with none of the security. I don't like it. The promises of the "to perm" half in practice make life worse than being a purebred contractor.
>but it probably understimates the loss of benifits like 401k match that many better employers offer.
SEP [Self Employed Penson] is better. You can put in much more than a 401K (up to $40K/yr). Use a High deductable Health Insurance to keep the cost reasonable.
I make $100/hr and a gross about $160-$175K a year (minus Insurance and business operating costs). However, I do my own sales work. I do not use agencies to find jobs. If you can sell yourself its a great opporunity. If you can't, you're better off with a FTE position.
The place I work takes on lots of contractors. They are frequently are number one place to look for new or repeat hires!
Best thing is in our area of the country is the chance to meet and network with people. Don't hold out for a permanent job if you can take work as a contractor. Several of the folks in my area of all programmers have done the contractor gig, and half of them with my our current employer.
The networking aspect is huge in the IT industry overall, and like I said, better to take some money than none at all while holding out for a permanent job.
Be well, and good luck whichever way you go.
Tojosan
A wise old contract employee who worked for me 20 some years ago said:
"Bill, we're all temporary employees here, it's just that only some of us know it."
Go to www.ceweekly.com and read the "Intro to Contracting" article.
Life's too short to miss out on opportunities because of fear of the unknown....
... or their largest customers go bankrupt and they suddenly want to "downsize", or who knows?
.com crash, a lot of major changes happened. Businesses started reconsidering how much money they should pump into computing, and focus shifted towards running with less human intervention and simplifying things to get less downtime. Off-shore outsourcing really got going too, and businesses that could get away with it dropped full-time I.T. employees in favor of contracts for "on call" workers if and when things broke.
Sure, you might not get the 401K plan and whatnot... and yeah, that sucks. But I've done both, and right now - I'm working for a start-up type company that can't afford things like 401K plans, and I really may as well be a contractor, all things considered. (I do on-site service and pretty much have say-so on when calls are going to happen, within the client's wishes, of course. Nobody's really looking over my shoulder either. I just get the jobs done and turn in the time tickets afterwards.)
As many folks already said, there is no real "stability" out there in I.T. anymore. You can have the best job in the world for a huge company and next week, someone buys them out and your job vanishes
Around 2001, I had to make a tough decision; stay in the industry I love and I'm most knowledgeable in, or get out and start over with a new career choice. I chose I.T. - and I realize when I did, I was choosing not to ever really "get rich" or have a stable, comfortable life. After the
Computers have become a commodity item like a microwave oven or a TV set. When it breaks, people can pitch it out and get a new, faster one. Repairs and upgrades look much less appealing than they once did. Profit margins are too slim to support good pay for those working with them.
That's just the facts... The days of your long, hard labor in this field paying off big are practically over -- at least until the "next great thing" comes along, the size of the Internet or "Multimedia". Who knows when that'll be?
I have been contracting for the last couple years and can't stand it. It was the same contractor to hire, but nobody has been moved from contractor to full time. Contractng hourly pay, no benefits, no vacation, no nothing. Also the first year the company hiring us decided they wanted to save money and told contracting firm they were going to pay less, so contractiong firm cut our pay. You say you had a contract. You do, but they say don't like it, quit we have others who want the job.
Many companies are starting to use the contract to hire model. Mainly to basically addition people for a job. As a contractor they can let you go on a moments notice. If they hire immediately it is a lot of money to get you into the system for benefits and etc. If you don't work out more work canceling those benefits and etc.
As for job security full time does have a little bit more, but not much these days. A company numbers hicups and contractors get the boot. The number hicup again and full timers start to go. The days of companies standing by their employee in rough times are over and visa versa.
Life insurance is there to ensure that your family can be taken care of it you aren't there. Without any kids your wife can always remarry (or gasp, support herself).
This is what a life insurance salesman told me anyways.
Scott
Simply take m, the amount of money you want to make, and divide by t, the amount of time you want to work. Couldn't be any simpler.
I was applying for an internal position at my employer and to treat me as equally as the other applicants, my co-workers sat in the conference room and gave me a phone interview while I was in my office a few hundred feet away.
Yearly rate divided by 2000 gives roughly your hourly rate as a full time employee. So 80,000 a year is $40 an hour. As a contractor your hourly rate should be half as much again to 3 quarters as much again.
I worked in the recruiting industry for many years and that was the conversion rate I witnessed again and again. So in the above example your contracting rate would be between $60 and $70/hour
It's what I would measure my own contracting rate on.
If your going to use a K5 artical as the basis for your post you could at least link it.
Really, I know what I'm doing...Ohhhh, look at the shiny buttons!
What will happen the first time you tell them you can't come to their meeting because you have already made an appointment to help another one of your customers?
Will they even let you have other customers, or will the contract lock you into a single customer arrangement?
Many companies dangle the word "contractor" simply to avoid paying basic benefits. Most "contractors" aren't aware how much those benefits are worth and sell themselves short.
Look, there is no such thing as a permanent job any more. So, "full time" really just means "with benefits". Contractors are supposed to get ueber-high pay so they can pay for their own benefits.
This leads me to answer the questions of the writeup:People who do the "3 day work weeks and crazy money" thing are generally doing that as a strategy: they have some very specialized skill that they can charge gobs of money for, and they're confident that they're able to bring in regular clients or have a stable set of clients. In that regard, it is more or less as stable for them as any other job. If they start feeling concerned about their ability to bring in regular clients, they tend to move on to a "regular" job.
All of that said, that's not what you're talking about doing. You're talking about going into what's often referred to as a "temp to perm" situation. So, if you feel the company can be taken at their word, it's just as stable (or unstable) as any other job. If you don't feel they can be taken at their word... well, then you can't trust them to keep you around in an ordinary position anyway.That depends on the needs of you and your family, your spouse's working situation (if she's employed, can she put you in *her* insurance instead of paying extra?), and how long you and the company anticipate you being a contractor. Since the employer is talking about this in a convert-to-perm-later context, negotiate with them now what your permanent salary would be if you reach that stage, and then your contractor rate should be 1.5 times that rate if you're contracting full time, 2 times that if you're working part time. For full time contracting, your rate is supposed to equal what your salary would be plus the cost of providing your own benefits, and benefits are supposed to be 50% of salary, thus the 1.5 factor.Again, you're not talking about this as a long term contracting situation, so why are you worried about long term plans for retirement saving during contracting?
The only other advice I can give is, discuss in advance with the employer how long they expect it will be before they could convert you to full time, and how long you're willing to wait. One of my employers had me contracting on and off for six months, followed by full time for six months, before they hired me, and it was very stressful to me. What made it change was that after about three months full time there I basically started asking "are you ever going to hire me?" and then after about the fourth month I told them "If you're not going to hire me, I'm going to move on." That finally shook them up, and then it just took two months to make the paperwork happen. But, it was nerve racking for me. In successive jobs, it worked out much better for me because I sat the boss down before the hire and we talked out when I could expect the conversion to perm, and what my level of flexibility regarding slippage of that date was. Because of that, I eneded up moving from "contractor" to "employee" in about a month to a month and a half, instead of a year. Having this conversation with them also makes plain that you're serious about working for them, instead of just taking their money, so it may help improve your chances for getting hired... especially if you phrase it as "I really want to stay here, so let's talk about what timeframe you're thinking about converting me to a regular employee."
During the Internet boom contracting was the only way to go. Bubble's burst. The money is not "crazy" unless your definition of crazy is pretty low. Beware the hidden cost of running a business. Right now getting a perm job is almost impossible. EVERYBODY tells the same story: initially contract then we'll hire. BS! It's the new staffing system. Small number of perm FTE's and then backfill with contractors. And with the number of H1-B visas out there it keeps the contract rate very low. The ITAA says we need more. What a load of crap. The companies can't find enough people they say. Reading between the lines they are saying that companies can't find enough CHEAP people. Thank you Reprobates, er. Republicans.
I am reading such a lack of understanding, experience and total misinformation when it comes to contracting that I couldn't resist posting. There's a lot of garbage, but some very good truth posted here. If you can't tell the difference, or take the time to research the differences, then you probably shouldn't be contracting.
I used to own a 15-person company that operated in the health insurance field. I am now an employee of one, working at home, and I'll be starting an MBA program shortly after the new year.
The one major benefit I can point out, and one that many business owners are unaware of comes down to health insurance. If nothing else, incorporating can save you a lot of money when it comes to health insurance. (By the way, there are many, MANY benefits to incorporating, and in this day and age, anyone operating a serious business as a sole proprietor should have his/her head examined.)
Contact any insurance broker you can find in the yellow pages. In the span of about 15 minutes, you should be able to channel through a few different brokers to find what you are looking for. You want an insurance broker that handles group benefit administration. This is the entity that can help you get health insurance.
The premium that I pay for my health insurance is pretty cheap. (Working in the health insurance industry, I know what to look for, so trust me, I have GOOD health insurance, not some crappy, no-name HMO plan with no coverage.) What I found out in my experience, and what many small business people don't know is that group health benefits can be setup to cover a single person (you), or two people (you and your wife, but from my experience, most of the time, it's cheaper to setup two different individual policies for each of you.)
Another interesting fact is that the premium you'll wind up paying (I pay around $285 for a top of the line, brand-name PPO plan with a tiny deductible, modest office co-pay, full pharmaceutical coverage, and 100% hospital coverage. Vision and dental are also included) won't change until your small business group benefit program reaches 25 - 50 employees, depending on the insurance carrier.
What does that mean? That your company of one pays the same as most companies with fewer than 25 employees, which constitute the majority of employers in the United States.
Once you find a good group benefit admninistrator, the vendor can also put you in touch with a payroll processing company (which I use, and which is great for cash flow management. Also, your payroll company assumes 100% of the liability for withholding payroll taxes. Trust me, the last thing you want to deal with is getting a letter 4 years from now telling you that you withheld too little and now owe the difference plus fines.)
A good administrator will also be able to put you in touch with a lot of the other insurance product you might need. A group administrator can also help you setup a variety of retirement accounts. (I saw one person point out that you can contribute more into a 401(k) retirement account than you can into other self-employment accounts. This is true, but you can combine different types of accounts (like the IRA accounts), and in a year or two, Congress will be enacting a whole new slew of retirement products. Additionally, VERY few people max out their retirement accounts.)
Like I said, there are a lot of resources out there that should allow you to filter the garbage from the truth, but the area of health insurance is kind of a black box.
If you (or any other Slashdotter) have any questions, contact me. I'm more than happy to help answer them.
By the way, it's about 12:30 in the morning, and I'm a bit fried at this point. (Sorry for all the () marks and rambling.) I don't know everything when it comes to healthcare, but unlike many of the backseat drivers on Slashdot, I've walked the walk. I'm self employed, incorporated, and my company has gone from 1 - 15 and back down to 1 person over the course of 3 years. I work in
i want to live life, not just go through the motions
There's a saying -- going freelance is trading the illusion of job security for the illusion of freedom.
In any case, what I really enjoy about freelancing is that it's very easy to take multiple clients and combine a lot of your overhead to reduce/write off costs.
Also, with multiple income streams, you can effectively eliminate the one client who is starting to become a nuisance without threatening your way of life too badly.
Summer's coming along? Drop down to one client and take it easy. Need extra cash? Work like a dog and see the results in your bottom line.
Pinch pennies for a year and you've got a comfortable cash cushion that'll smoothen out most unexpected employment mishaps.
Requires a strong can-do attitude and self-control.
It was a bit scary at first, but once I started believing in myself, getting the work became pretty easy and I'm generally a much happier person now that I made the step.
At this point, you'd have to kill me before I would agree to work a fixed 40 hour/week schedule.
My wife was declared terminally ill within 10 days of my firstborn. We had no insurance at the time. We had an appointment with an agent but it turns out my daughter was born prematurely. So my wife was in the hospital giving birth when the agent was to come over. Hense no insurance about 2 weeks later when she went back into the hospital for a grand mal seisure.
Childbirth was fine. It was the brain tumour that did her in.
Well, even without the insurance we did ok but life would have been a lot easier if I could have afforded a nurse because for 10 years I had to provide 100% supervision, support my family and raise my kids.
I did this through contracting. I was paid 2x what employees were paid - but I did absolutely excellent work (from home). My time was my own, my clients wanted me to clone myself, I had some of the most interesting project one could ask for, and I did have the support of my clients who really did do their best to help me out from time to time.
That being said I was so burned out from the stress after 10 years that I could no longer work. It took 3 years to recover - probably Post Tramatic Stress Disorder! Other than clients lifting work deadlines - I got no help from anyone. Insurance would have made a difference because if I were assured of a policy payout then I would have been willing to take on debt to hire help during the tough years.
Now if any people think that making 2x salary is enough in a situation like this.. forget it. Had I a normal day job I would have needed about 12 hours per day coverage and nursing staff are not cheap. Even with 2x salary I could not have ben able to afford 1.5 nurses salaries along with maintaining my own household.
My ONLY option was doing it all myself - or a premature nursing home - and that 2nd option was not in the cards.
So all in all - You do need insurance if you are married because if either gets sick its on the other's shoulders. Contracting is a good way to go - just make sure you do a really good job because your tenure is a 5 minute phone call.
As for steady employment? Well - I had to interview and hire my supervisor - but made 2x his salary. I didn't think that was a bad idea and I was able to STAY COMPLETELY AWAY from all office politics... everyone knew I was not after anyone's job!!!
The life of a contractor can be bliss.
there are down sides, there are too many benefits to not. Just about everything becomes a deduction. Retirement is better - Look into SEP IRA, you can contribute 40% up to $25,000. Yeah, you don't get holidays, but that gets worked into your rate.
One thing though, Incorporate (S-Corp). It will save you money. You pay yourself a reasonable salary and then get the rest through disbursments. Then you only pay self employment tax on the salary portion (about 15% on up to $84,000).
I've read a few posts and I think people are getting the situation a little confused. I did an 8-month Co-op work term with a company in Calgary, Alberta. Rather than put through all the paperwork to get me on payroll for eight months, they hired me on as a contractor. The only real difference was that I would invoice for my hours and I had to take care of my own income tax and other such deductions. I was paid hourly, told what projects to work on, and I still had to ask for days off and such. According to Canadian law, I was technically an employee of the company. I was still covered by their liability insurance and had all legal benefits of an employee. You'll want to check with a lawyer to ensure that this is the case where you are. Other pieces of advice: - Ask to talk to one of their contractors. - Review the contract carefully before accepting, talk to a lawyer if there's anything you don't completely understand. - Their basically putting a lot of the tedium back on you, so don't be afraid to negotiate. Incorporation is a good idea if you're signing a lump sum contract (i.e. I will complete this project and you will pay me a bajillion dollars) because if for any reason you cannot complete the project, all the assets of the contracted body are up for grabs: better that be the meager belongings of your corporation than everything you and your wife own. If you're contracting for hourly pay, it becomes much less risky, since, if something goes wrong, and the contract is properly written up, you stop working and they stop paying you and that's that. I'm not a lawyer, I'm just taking a business law course right now, and this is bang on topic. Richard
Many places are adopting policies that prevent you from contracting for more than a year. Reason being, if you work there 12+ months, it can be construed that you are an employee then by default, and should get benefits. Simple solution for employer is to term. you at 12 months. So, unless you have been made full time by the 12 month date, watch your back.
1) Look into your state laws. Know your rights. Find out what your state defines 'contract' employee as.
;)
2) Get an accountant. seriously, know what you can write off...don't listen to these clowns.
3) When at the company, meet other contractor, improve your network just in case funding falls through and they don't hire you.
4) Take the damn job. Be smart. if you want to work for them, make your self valuable. Improve your people skill and make it so after some period of time you can go in and get an answer as to whether or not there ARE going to bring you on board. Be prepared to walk if that say 'no'.
5) Save you money. Take spend only what you think yoiu will be gringing home when you go salary, put the rest in the bank. Don't waste this opportunity to create a little emergency fund. Yes I know there is a lot of stuff you want, but there will be lean times ahead. Build your house out of brick, for when the wolf comes a knockin' you will need to protect family.
The Kruger Dunning explains most post on
I don't have the experience to comment on your other points, but the following one I can say without hesitation. Stick to giving advise on other subjects. Your financial advise is horrible.
/rant off
I wouldn't worry one bit about not having a 401k. There is only one benefit of a 401k -- the tax exemption. The rest of it is invested in our securities markets, which is basically a sexier slot machine. The only weak spot in my portfolio for years without variation has been my 401k and stocks. Complete losers -- blue chips or not -- its all the same -- the stock market is nothing more than speculation. Remember the tortoise and the hare -- invest wisely in long term CDs. They are guaranteed, and you won't be telling your future son "oops" when you lose his college money when he's a junior in high school.
First. Using a 401k isn't bad, but it isn't the greatest either. First, never commit more to your 401k than your company will match. The 2 best things about 401k are the tax break, and the company matching. A 401k isn't a great retirement tool, but with company matching and the tax bring it isn't one to brush aside either. What is the problem with 401k? They are mutual funds. Dealing with stocks is like playing poker. Mutual funds are like having Bob pick 50 poker players and praying at least 26 of them are winners. You might as well play the lottery. Investing in individual stocks are better. The trick is to research. Know the company that your are investing (risking your future) money in. I CANNOT STRESS RESEARCH ENOUGH!!! Think of a stove top. Would you touch it without checking to make sure it was off first? If you pay someone to advise you on your investments, you're a fool. If he was a billionaire from investing (Warren Buffet) then you might take his advise. (btw, Warren Buffet will tell you to invest in individual stocks too!) Otherwise, why would you ask a man who works for a living where to invest? If he was that damn good, why is he working to make you money instead of himself? If you fully research your investments then you will probably win. My advise? Learn to research investments. Take *any* advise towards *any* particular investment with a dump truck full of salt. If that deal was so great, why would they share the money that could be made with you? Most financial advisers get paid to sell certain investments. Ever heard of the bait and switch? Bait 5,000 ignorant investors to buy a stock you own. The price goes up as thousands of the stock get bought up. Once the buying slows. The sell for a substantial profit switch to the next stock you're going to bait.
As for investing in CDs. I have one word that will prove that CDs are a horrible investment. Inflation. Inflation runs between 3-4% a year. If your CD is earning 2.5% and inflation is 4% you're losing buying power on each and every dollar (euro, mark, yen, etc) you have invested. In otherwords. After one year your $10,000 will be $10,250 dollars but will only buy $9,850 worth of goods at last years dollar value. Albert Einstein once said, Compound Interest was the greatest mathematical discovery of all time. Now think about the fact that CDs are compounding negative earnings. You lost $150 the first year. Next year your not only lose another 1.5% of it's diminished value, but you lose any and all interest (and compounded interest) you could have earned if you would have *invested wisely* as you put it.
Anyway,
I work with a team of approximately 60 developers in a corporate setting. When we go out to hire for new positions, I strongly favor the "temp to hire" model. Here's my thinking...
Even after having my gurus grill someone for a couple of hours, and I interview them on "soft skills" using the Critical Behaviours approach, it's still possible for people to flame out in the job. If they flame as a contractor, it's much less work to cut them loose. Even though my company has a 90 day "probationary period", it is still difficult to terminate someone without an acre-foot of paperwork explaining exactly why they're not working out.
I think it's more instructive to look at how frequently the manager has converted folks. This reflects both on their ability to run the corporate hiring gauntlet as well as their skill in picking people who will "fit". On our team it's close to 90%, which I'll attribute to the fact that most of our perm positions are still being filled on a referral basis (still the best source of recruits). The other 10% would have been expensive mistakes.
Its a blast and tax freetacular all the way if you do it the right way
Want to see every step I took to start my company? http://www.rowdylabs.com/blogs/pitchtothegods
This is a common scam tech companies and recruiting firms (Particularly recruiting firms!) pull to try and either get out of paying benefits during probationary periods or bring extra money to the recruiting firm. The easiest way to get them to drop the contract BS is to get an offer and then accept it contingent on real employment. Simply refuse to go contract. They WILL cave. Usually within fifteen minutes, sometimes it might take a day or two, but if they want you, they'll give up on the scam and cave in.
What about mine?
This may be redundant, but I really don't care to read 400+ comments to find out.
Contract to Hire is what you're describing, and it's done all the time. It's typically win/win for contractor/company because it gives each time to get a feel for the other.
Believe me, once they know how good you are (assuming you don't suck), they'll want to keep you. In fact, companies typically have a harder time coercing contractors to become employees than the other way around.
.sigs are for post^Hers.
First of all let me just say that I have been in this industry since 1991 and most of it was contract either w2 or 1099 in Silicon Valley.
1. Incorporate yourself into a company The last thing you want is employeers/customers coming after your and your families personal assets
Welcome to self employment tax and a big stick in the butt. This is a pain in the ass and don't do it unless you are forced to go 1099. W2 contracting is the way to go. Even if you get a gig where they want to pay you 1099 there are places out there willing to process payroll for a small fee. So unless you are good with taxes and plan on having a lot of expendatures to write off, fuuuuuuhgedaboudit. The lawsuit thing as engineer is just FUD, ignore it.
2. Insurance Many companies require Professional Indemnity & Public Liability insurance. For the young & inexpirienced, this can be very expensive - recent PI insurance for us was more than $6000.
Never have I or anyway I have done business with on the entire west coast ever required this. Maybe it's an Australian thing.
3. Training Once you're a contractor, you are generally responsible for paying all your own (re)training costs. In the short term this mightn't be an issue but it is something that should be considered nonetheless
This carrot promptly disappears after you sign on to be FTE. Managers want to see people sitting in cubes, who cares of they are actually doing anything. But they definately don't want word to spread within the company that certain people got training becuase EVERYONE will start bugging their managers for "training". Ironically on long term contracts I have had my 2 of my CCNA classes paid for and some other rather pricey software certifications.
4. Working Harder You will work harder as a contractor. Seriously. Because contract rates are more expensive and generally because you work on specific tasks (ie write system X), you MUST show a positive return on investment.
Wrong. Here in California you are required by law to get paid time and a half overtime, so guess what? After 40 hours you get to go home and like it. IF you have a $50/hr contract the CFO is going to pee all over the place when you start billing $75/hr, and that's YOUR cut not even the agency's.
5. No real job security Everytime you a contract finishes it's like a job interview all over again - sometimes you could go without another contract that suits your skills/needs for extended periods. which leads me to this point...
Laughable. Perhaps you have haven't been paying attention in the last 10 years. This is an illusion. Go find out about this thing called 'at will employment'.
6. CASH FLOW If you ignore everything else in this message, at least take note of this: You may not have a regular income. Cashflow management is essential.
Yes because making a bunch of cash and then having time off to enjoy it is a terrible terrible thing.
Puleeese, the difference between a "Career" and a "Job" is that with a "Career" they can screw you out of your overtime.
I have another comment for the insurance, retirement question.
Buy it, start an ira if you actually have enough left over.
I have been self employeed since 1989. Some times it gets a little lean, but I can say that I would not trade the freedom ofr double the money.
Go for it.
* Carthago Delenda Est *
To calculate the equivalent contract rate of a base salary, divide your yearly base salary by 2000 and that will give you your hourly rate.
Example:
($100,000 / 2000) would be $50 per hour
Natural Selection: self-destruction of the poor and lazy
I've worked at a startup for the last seven years and as they burned the millions my salary bumped from 55k to 60k per year. During that time there were periods of sparse capitol. I'd be unemployed for periods of months, 1 to 6. During the last year I was unemployed for 8 months but worked for the same company as a onsite contractor at only $50/hour. Blissful dreams of SIX FIGURE income. I didn't want to be greedy. I was so happy till I read /.
They rehired me Nov 1. :) at old salary :\
Next time I'll ask for $60/hr.
thx /.
In the beginning, there was nothing. Then it warped. The alternate dimensional theory of the Big Warp.
If they are trying to lowball you on your hourly rate, don't take it. Otherwise, don't worry about getting stuck contracting. If you price yourself properly it doesn't matter.
Some previous posts said take your hourly rate as a salary and go 2.5 - 3x as much as a contractor. That's wrong. You need to bump it up some because of the extra 7% self employment tax you have to pay as a 1099 and you have to look at your medical benefits situation (can you jump on your wife's companies plan?) but in reality you don't need to go much more than about 10-20% higher to break even if the job is stable.
The 2.5-3x thing is appropriate if you are doing spotty contracting work with lots of down time or when you are working though someone else who is taking a big cut. The rules are different for a contract-to-perm position like this. Contract-to-perm isn't all that uncommon. I really like it when my employer hires people this way. It makes it much easier to get rid of someone if they turn out to be useless.
First, I'd decide what salary I want to have while you work there (nobody gives real raises anymore). Aim a little high, It sounds like you are early in you're career so I'd look for about a 10K jump. Then add on the 20% and divide by 2000 hrs/year for your hourly rate. eg, $50k salary -> $60k contractor -> $30/hour. Feel free to feel them out. Ask what range they were looking for and ask for a little more than that.
Remember, you are trying to build a relationship with these people and coming in and asking for huge money won't impress people. Ask for enough so that you will be comfortable with it and yet there is a little pressure to make you full time. Make it so that you'll be fine if they don't take you full time and so will they. The perpetual contractor gig isn't bad as long as you are making enough money. Also, make a good impression. Work hard for at least the first month. They say "jump", you say "how high?". The great thing about this is if you end up working long hours, it's big money because you are hourly. Plus you end up making an impression of a hard worker right off that will last.
Some basic contracting tips: Remember to save a bit over 1/3 of your income for taxes. The taxes are only about 7% higher than when you work for a company but if you are 1099 your employer won't take anything out, you have to do it. Start squirreling it away right from the start, somewhere separate from your spendable money so you don't feel richer than you are. Don't forget quarterly estimated taxes. Every 3 months the IRS expects you to send in what you owe. You can just guess, as long as you don't get it too far off you're fine. Everything gets settled up when you do your taxes at the end of the year. There's a reasonably small penalty for underpaying, nothing for overpaying. You can skip this but it costs more than it's worth.
Also, keep track of your business related expenses. If you buy a laptop for work, it's expense gets deducted from your income. In a lot of cases you can also write internet service and cell phone service off too. These are powerful deductions, much better than itemized deductions. They come right out of your income, you actually count as making less. This makes work related expenses 30% off for the year since you pay no tax on any money you spend on business expenses. Things you buy, you have to be using for work only though, so don't count that new Radeon X800 XT. It may not fly if you get audited. The business expense thing is rather simple but there are rules so if you want to take full advantage of it, talk to someone who's dealt with it before. Try to lump hardware together into big purchases since every purchase will have to be listed and named on your tax return. A co-worker who's done it before or even just H&R Block would be able to point you in the right direction.
When you are talking salary, once they come back with a number it's negotiation time. Vacation time, monster computer,
set softtabstop=4 shiftwidth=4 expandtab nocp worlddomination
I don't get why people are so afraid of contracting, especially W2 contracting through a temp/pimp firm.
I'm an Oracle DBA with 10 years experience, both development and operational. I'm very good at my job. As a "permanent" (what a joke) employee of a very large telecom company, my group was shuffled through 3 reorgs, with a boot of our jobs to an outsourcing firm (EDS). Same pay, same job, same desk, different employer.
I stayed 3 more years, the last 1.5 out of laziness and a fear of losing some stability. I was paid 40% of my gross salary as bonuses over 12 months for taking and staying at the new job. How can you pass that up? But I hated my job, I found something I liked better, and it's back to contracting. I've done it before and I always liked it. Why?
1) I get paid for the hours I work. No more, no less. It's fair and equitable. I will not have to work 70+ hour work weeks anymore -- and if I do, all the extra money softens the blow. Believe me.
2) Never seemed any less stable than a permanent job to me. I've known people to stay at contracts for 3+ years, some even longer.
3) More money. I see people say they want twice their rate as a permanent employee... Make $90K/yr salary, bill $90/hr contract. I think that number is high -- I'm leaving a job where I made $94K/yr to bill $59.75/hr, 40 hours a week. 48 weeks (4 weeks vacation a year), which gets me $114,720/yr gross. I'm a W2 contractor, so I'm losing $5.25/hr in pay, but my pimp firm gives me some nice benefits -- like good PPO health insurance for $85/month (pimp firm pays the other $225/month), they pay my social security, medicare, etc. I'm not force to pay my accountant to deal with my quarterly estimated taxes. I'm getting something for my $5.25/hr extra that they're keeping. If I was willing to go 1099 I get $65/hr. I'm free to change between W2 and 1099 at will whenever I want.
I highly recommend starting out as a W2 contractor, where you are pretty much an employee of your pimp firm. It's much simpler to handle when you're starting out.
Some pimp firms do keep a huge amount of money from your hourly, so be aware. I'm in a uniquie position -- I brought my pimp firm this job already sewn up, I just needed them for billing and such. The kicker? My new company has a deal already in place with the pimps to cap the percentage they keep at a very reasonable rate. I know they're paying $72/hr for me (I asked my new company, I suggest you do too -- oftentimes they'll tell you exactly what they're paying per hour), I can get $65/hr straight up 1099, $59.75/hr as a W2. This is a good deal as far as I'm concerned. They handle my hassles for that money, and I get some benefits as well. Seems fair to me.
Overall, I'm looking forward to going back to contact work after many years of being abused as a salaried employee. I'm looking forward to doing an honest day's work for an honest day's pay. Think of yourself like a plumber, electrician, or any other skilled worker. That's what you are. But if you can get a full-time contract gig with a single company, it's pretty much like being a permanent employee, only with more fair terms between work and compensation.
Your mileage may vary.
I was brought on as a "consultant" (a contractor) on the development team. 6 months later, I was told I was being "loaned" to the research team for awhile. The research team was going great guns, & I was involved in a very busy project, when the development team boss pulled me aside and said I was "let go". Seems he was told to cut his contractors by 'one', so he picked me, as I was still part of his headcount, even if I was not part of his team at that point.
I've been a contractor for a solid 15 years (with a go at a startup that didn't make it once), and I'd have to say to disregard most of this advice. Much of it is flat-out wrong.
If you're not making a lot more money as a contractor, you're doing something wrong.
There are about 2000 working hours per year (assuming you take a reasonable vacation, and 40 hours per week). If you can't bill that, you are doing something wrong. That includes knowing how to set up back-to-back contracts so that you minimize your downtime.
Invoices vary. The most I give is net 15. Anyone doing net 12 weeks is doing something wrong. A newbie shouldn't do more than net 30. Longer than that, and you might not get paid (depending upon the situation).
Sorry to say it, but you're running your business wrong.
I'm not sure I'd want promoted in a company that treats current employees exactly the same as outsiders when a job needs filled.
Just then the floating disembodied head of Colonel Sanders started yelling Everything You Know Is Wrong!-Weird Al
he 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.
You can approach this from a wage negotiation point-of-view. Figure out what additional expenses (taxes, insurance) you'll need to pay in order to get the same benefits as any full-time employee. Sum up your expenses using Excel. Then show them your calculations and say, I'll need X % more gross income because of this, this and this, and because the job position is less secure. Chances are they will either back off and hire you as a full-time employee, or hire you at the higher wage but then fire you when the project is done, at which point you'll have some savings to live on until you find a new job. Or they may re-hire you as a full-time employee at a "normal" wage because that's easier for all of you.
--Bud
They are not lying, it is easier to get approval, because it is easier to get removal. I do not know why I am commenting on a 300+ story, but here goes:
:-)
:-) its embarrassing. I know people who go the other way, they are on a team, but jump into consultancy when a company is going downhill, the boss gets his man count down effectively, and gets his bonus, the emplyeee gets more mulla, and the company has the same net workforce, but is paying more. WHen the guy gets fired, and hiring freeze over, he comes back from a vacation back into his old desk, old money!
They will move you up to fulltime if you become invaluable to them, not expendable.
However, if they pull you in to 'setup this' or 'setup that' then the likelyhood is that 'maintain this' or 'maintain that' is only a possibility. However, if you are good at embedded linux, and thier business is embedded linux then you are onto a winner!
Also, if you start as a consulty-type and then move full-time, they can't just go cutting you too much money..
doh
!
#hostfile 0.0.0.0 primidi.com 0.0.0.0 www.primidi.com 0.0.0.0 radio.weblogs.com
In some countries, there are employment laws that have a test whether you're really a contractor or not to stop employers calling everyone a contractor and avoiding payroll taxes. Make sure these don't apply or you could end up in the worst of both worlds. I don't know whether this applies in the US (I've seen some posts alluding to some 1099 tax code which taxes contractors higher than regular employees - this may be the approach that the US takes to clawing in the payroll taxes *somehow*).
What contracting does is lets you get your toe in lots of doors if you do work for >1 company for possible future permanent positions. It puts you ahead in the queue in any new permanent job in your field that opens because you're a known quantity. Never underestimate the network effect.
Oolite: Elite-like game. For Mac, Linux and Windows
Good advice overall, but your comments on which state to incorporate in are off. Delaware also charges a franchise tax, albeit not as large as the one in Texas. The most business friendly and economical state to incorporate in right now is Nevada, particularly in regards to corporate taxes, although there are some substantial credibility and auditing issues with that state you should consider.
Good starter references on Delaware vs. Nevada:
Quick MBA
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Pal this is a oportunity! Take it!
I hadn't the slightest objection to his spending his time planning massacres for the bourgeoisie... (P.G. Wodehouse)
As anonymous coward, I ask you what's next to be posted on slashdot? Will this posting I'm typing be censored? Why does slashdot, a "news for nerds, STUFF THAT MATTERS" care about some person in the middle of an employment transition? I don't mind the guy has questions, but then, sir, ask your friends, and make sure you get everything in writing from that company, and go to some forum where IT MATTERS, since it don't belong here. No personal offense meant there. ..and please slashdot, Don't sell out. What's gonna come next? Some sob story about a woman who can see the image of god on a "#%&/ toastbread? Crud, it sits in my eye like a cricket on a white bedsheet. Other than that, thanks for a REAL great infosite and loads of inspiration. Keep it up!!
MadCorpse
Most companies currently prefer to start people out as contractors. You will probably be going through an agency. This is not a big deal. Some agencies provide benefits, some don't. I've worked through several different agencies and also worked as FTE. In my current position, I started with the company as a contractor and was switched over to FTE after a year.
It's not that big of a deal. Contracting gives you a chance to see if you like the company before committing to work there as a full time employee. It gives them a chance to evaluate you without having to commit to either the position being around long term or you being the right person long term.
One place I was a contractor, I decided to leave after the contract was up because I didn't like working there (didn't care for the boss and didn't care for the project). Another place I did like, but they ended up canceling the program. In my current position, they decided to continue the program and I liked them and they liked me, so we made it permanent. Recently we hired three new people who are also all contractors. If they work out and we continue the program we are on, they will probably get switched over eventually.
I'm currently at a profitable, publicly traded technology company. At our company, the story about it being easier to get approval to hire contractors is 100% true. It is very hard to get our company to commit to bringing on permanent people. Contractors are much easier to get approval on.
When I was at startup companies during the boom (and even after the boom) it was far easier to hire FTE, but we also laid off lots of FTEs regularly. At other places (like where I am now and some other larger companies), I have not seen FTE layoffs.
Avoid Missing Ball for High Score
Why would you contract in the first place if what you're looking for is a full time position?
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I am not sure if someone has covered this yet, but you will want to get to your incometax professional right away so they can advise you on how much you should be holding back and set you up on estimated tax payments. They can also give you advice on the types of things that will be tax deductable while you are working as a contractor. I have worked as a tax pro for many years, and if you dont plan ahead, you could easily end up in some serious hot water with the IRS. Good luck and congrats.
The problem with incorporating is you can't get money out as easily. The corporation then takes payment for your work, and has to pay you (the employee) accounting for taxes, etc. At the end of the year, you have to declare that as individual income (and get taxed accordingly.) Plus pay corporate taxes and paperwork overhead.
That's where the cake and eat it too thing is.
In the US, you only pay corporate taxes if you have a C-corp. That's one of the major disadvantages of owning a C-Corp; you get taxed twice, once at the corporate level and once at the personal level. If you have an S-Corp, LLC, LLP, Partnership, or Sole Proprietorship all the tax occurs at the personal level. The corporation as an entity pays no tax directly. This sounds bad but it's actually good. It means you only get taxed once. You generally only form a C-Corp if you have to and most small businesses do not have to.
Incorporating is easy to do (generally) but carries some significant overhead in the form of paperwork, accounting and legal costs. Getting money out is not difficult, simply pay yourself a salary. Sure, you can get clever about it and do fancy stuff with assets and dividends but it doesn't have to be that hard. If you need to do the fancy stuff, get a GOOD (and probably pricy) accountant so you can defend yourself in the event of an audit.
Research incorporating thouroughly. It's expensive to start, expensive again to stop, and in order to be done properly has a fair amount of bookeeping overhead, and strict discipline with seperating personal and corporate finances.
Actually incorporating in the USA is very inexpensive. Even if you hire a lawyer to look over the paperwork (a very good idea BTW) it will only cost a few hundred dollars. Perhaps you were referring to the cost in the overhead of accounting, legal fees, time, paperwork etc. That I will agree can add up, though it can be kept under control. The time and paperwork commitment is the biggest hassle IMO. Stopping a business is even easier. In some cases you can just let your registration lapse. In others you have to file some paperwork but generally it isn't too hard to cause a corporation to cease.
C-Corps, S-Corps, LLCs and LLPs provide some protection from liability. Sole Proprietorships and Partnerships provide NO protection. Unless you are quite certain there is no significant liability concerns (rare), its a good idea to use one of the forms of incorporation with protection. And be careful, for example if you start working with a buddy for a few months and then decide to incoporate, guess what? For liability purposes you have effectively formed a Partnership from the time you started business activities and are liabile under those rules until you actually incorporate.
I've been contracting/consulting through a third party. They've got me listed as a W-2 employee which simplifies things for me as well as gives me a 401k (with employer match) and health insurance. The down side is that at times the hours can vary all over the board.
Easiest way to figure out your salary equivalient as an hourly rate is to work on a 2000 year (basically 50 weeks of 40hrs/wk). Now since I'm as a W-2 I'm not sure what the increase would be to account for say health care, insurance, taxes, etc.
As long as the contract stipulates how overtime is paid (i.e. straight time, time+1/2) life is good.
Sorry if I'm rambling here. 3:46AM is quite early.
Even if you're an employee, you can still be layed off or fired on little more than a whim. Being a contractor simply makes the lack of promise explicit.
More obvious maybe but definitely not more explicit. The law is actually quite clear on this. In fact, if you have a contract you may actually be more protected than a "real" employee depending on the terms of your contract. In most places employment is considered "at-will". The company can dismiss you for whatever reason the management wishes. (with a few exceptions related to race, age, gender and some other criteria) Likewise, you are free to leave the company whenever you like, for whatever reason you like. There is no promise of continued employment or continued work by either side unless you explicitly work out a contract that says otherwise.
This is not generally well understood but absent a contract there never has been any sort of "promise" between you and any employer you ever had. Any feelings of loyalty you or your employer might have had are kind but ultimately empty gestures. You agreed to perform certain services in exchange for renumeration, most likely of a financial nature. That's pretty much as far as it goes. If you felt loyalty to a company you are probably a good and decent person, but that is a very naive view. You should expect no loyalty from a company, and believe me, the company probably doesn't expect it from you no matter what they might say.
That tax rate is only perception. If (and I stress IF) you are paid via 1099, then you pay self employment tax which is at the 14% rate. But if you're a regular full time employee you already pay 7% and the other 7% is paid by your employer.
However, if you're paying the self employment tax, then you can take (yep - you guessed it) half of it as a deduction.
Now if you're incorporated as a C or S Corp, then you're in a different category. You're not using 1099s anymore; rather, you file a separate tax return for your company, as well as your individual return.
But there are pros to each. With an S-Corp you can funnel money to yourself as dividends and keep your salary (and corresponding tax bracket) rather low. With C-Corps you can take advantage of things like using company funds to cover medical bills and use that as a tax writeoff. Plenty of good books on the subject. Needless to say, you can do quite well on your taxes as a contractor IF you are smart about it.
The real reasons you want to ask for a lot more money as a contractor are that you aren't getting:
- retirement benefits
- medical coverage
- unemployment insurance
Anyhow sorry to bore you all with tax garbage but the parent's fearmongering was unwarranted. IANAL, just a small business owner.
Check out the Angry Coder.
This guy has written a series of articles "Going Independent" where he describes the pros and cons with a no-bull-shit attitude. Well worth reading.
Offtopic, Inflammatory, Inappropriate, Illegal, or Offensive comments might be moderated up.
I work as a freelancer, and I have to fish for jobs almost every day. Every job I get is 2-16 hours of work. Mostly translating (human languages, not computer languages), some software development as well.
:-)
I also happen to have an 18 month old son. When we decided to have a baby the idea that I would quit freelancing was never brought forward. I have no problem at all, my income is just fine, and I save money for my retirement without government assistance, thank you very much.
My girfriend has also been a freelancer (a makeup stylist) for the last 3 years. I supported her during her pregnancy and the first 12 month since the baby was born. We have been living together for 4 years now.
I'm Czech and I was brought up during communist times to work in a factory and to rely on the government for my retirement, not to be a freelancer. I was 21 when the Berlin wall fell. I guess my indoctrination did not work out very well in the end.
I believe that if you, the citizen of the enterprising North America, will find courage to try this, you will be rewarded and that your family will do just fine. But, I may be quite wrong
Comment removed based on user account deletion
Sorry for the anon post, I don't normally post on Slashdot but this topic required me to respond. I've been contracting in IT for six years... let me say now, walk away. Contracting is -not- the way to go. It may sound great, and a few years ago contractors -were- actually making a lot of money, but these days employers have contractors entirely because it's easier for them, not you. Here's some reasons why you really don't want to contract:
- You have to pay your own tax, your own retirement fund, your own sick leave and holiday leave. You have to do the maths yourself and you are 100% responsible if you screw any of it up.
- You have zero job security unless stated otherwise in your contract... most contracters can be hired and fired on a day's notice.
- Get used to being treated like a second class citizen by the full-time employees there. Contractors are expendable, and many people still think they earn ridiculous amounts of money which causes resentment (it may look that way, but once you take out all your compulsory deductables it's rarely better than a full-time wage, and usually worse).
- Wake up one morning and feel really sick, or just need a day off? You have to spend all day thinking about the fact that you're losing money, and if you can't afford to lose that money you have to go to work no matter how crap you feel.
- Prepare to be screwed by all manner of management types on everything from 'free overtime' to your rights to intellectual property.
Contracting is done entirely for the employers benefit. The fact that they're not willing to put you on full-time immediately shows an inherant lack of respect. Unless your written contract with these people is bullet-proof and has been inspected by a laywer I would stay well away.
I'm a contractor myself, although in the EU, but I think it's pretty much the same in the states.
1. Incorporate yourself as a company -- get professional tax advice on this. Over here a LLC limits your liability to EUR 12,500 but in addition to fees it is taxed extra hard.
2. Insurance is preposterously high over here hence the LLC.
3. Training... If you're between contracts this is what you do but I have not had anyone really harp on certifications. Most clients are more interested in what projects you did before you came to them and couldn't any care less about certifications. What fellow freelancers is your take on this??
4. You will work your ass off, expect to work overtime and salaried employees turning over their work which was due yesterday to you on friday evening just as you were about to leave. Do it with a smile. Even though the work, the people and everything else sucks, they're paying you by the hour. Oh and btw... most companies over here work hard to make you feel unwelcome. Be prepared for some of the worst cubicles (if you get one), having to share a desk with another freelancer and not even being able to buy coffee because you need an employee tag to use the coffee machine. Btw... Do us all a favor and try to treat your fellow contractors not so much as "competitors" but as colleagues. The permanent employees do their best to make life miserable so most of us opt for "cooperative mode". Keep in mind, you might be working with them at a different project at a different customer just couple of months from now... On top of that, sometimes another freelancer who has been working at the customer site for some time now will most likely help you get setup and maybe even get you a special contractor tag so you can get coffee and buy lunch. On the other hand, don't get to cozy with them either. The guy sitting next to me for the past 12 months was a real asshole, picking his nose and rolling his boogers into little balls of snot, surfing the net all day and doing his best to make me look incompetent in the eyes of the customer.
5. No job security whatsoever. Usually you get a contract which runs for three months and gets renewed. Sometimes they renew it on the last day, sometimes they'll throw you out for a couple of weeks and then give you another contract. On the other hand if you get a "permanent" job there is no job security whatsoever either. They will fire you when the project is over. It happened to me and I am no longer interested in a permanent position. If you ask me nowadays the real difference between contracting and a permanent position is that as a permanent employee you are not expected to work as hard as but are also paid a lot less. I have turned down offers for permanent employment because it was obvious that they were trying to get the same work done at lower rates. (A salaried employee costs them EUR 50 an hour maximum, don't let them tell you crap).
6. Cash flow. Some customers will delay payments for 6 months and longer, some will even try every trick in the book to delay payment.
7. If you get recruited for a contract, expect to get 10-20% of what you're making. If they want more then they're obviously trying to exploit your newbie status. Don't expect to acquire a direct contract with a large company. They will not do business directly with you.
8. Hourly rates. Over here working for a fortune 500 class company is EUR 100-120 an hour which means you make 80 - 100 EUR an hour. Medium sized businesses will most likely accept EUR 80-100 an hour. Your customer will most likely try to argue that since the project is long-term you, they are not prepared to pay so much. EUR 70 an hour is good money too but let them negotiate your hourly rate down, don't do it for them.
In 2000 I was out of a job and nobody was hiring. Contracting was the _only_ way for me to go back then, but tell you what I don't regret it. If I were you I would definitely go for it.
I'll go slightly off-topic here.
I would be more concerned that they are willing to hire you solely on the basis of a phone interview. Anybody with reasonable intelligence and Google could pass a phone interview on just about any position.
Think.
Even if you are a skilled developer, the others around you may not be. They were probably hired the same way. I agree with other posts that you really should get out to the site and meet the people first.
My comment is based on my own experience. I took a job where the only action by the employer was a phone interview. When I got out there I saw that almost all the other developers were complete hacks. Their code was in pathetic condition, showed an obvious lack of understanding of fundamental programming skills, and they thought everything was fine.
I gave notice on the third day, I felt that a company that found that type of practice acceptable would be a black mark on my resume.
----- If communism is a system where the government owns business, what do you call a system where business owns govern
They advertised the job as full-time regular, but then told you it was contractor, with a possibility of conversion to full-time regular. They've already told you an untruth; why should you trust anything they say to you know?
Uh, hi,
I am an unemployed software engineer. I live in the Detroit metro area, but I am working for $7.50 an hour at a sporting goods store (If you're in Utica, you know where to find me!).
I have almost no capital to start my own contracting work, or write my own software and sell it online, and other software jobs are close to nil around here. Right now, work exhausts me so that I don't have enough energy to spend 10 hours a day working on potentially profitable personal enterprises.
I'm a pretty good coder too.
Sincerely,
zephc at hotlinehq dot com
"I would say that 99 per cent of what my father has written about his own life is false." - L. Ron Hubbard Jr.
If you know your stuff and you are socially merited, well, what I would do is keep interviewing and take the job. That way, 3 months later when they have an offer, you might have an alternative.
get a couple of good hardware books, and start hiring yourself out at 20 to 40 / hour fixing people's machines on the side.
"It is a greater offense to steal men's labor, than their clothes"
Roughly 80% of the technical people we've hired over the last four years have been on contract to hire terms.
This arraignment works well for us, because with a six-month contract, we can get a good feel for how well someone will "really" fit in to our culture.
It is essentially a six month paid interview.
Of the people who we started out as contractors, about 95% of them went on to become full-time employees.
More importantly for us, none of the people we've hired over those last four years has moved on. We expect minimal personnel losses.
In the course of every project, it will become necessary to shoot the scientists and begin production.
My last position was a contract one (with a former employer). They paid me through an agency, which made me an employee of the agency. This has at least three advantages for me, 1: taxes, I don't have to take care of my own, especially FICA. 2: some agencies offer some form of health insurance for their employees, some even offer vacation pay. In my case they had both, but the health insurance wasn't very good (at least it was cheap). 3: When my contract would be up I could collect unemployment off the agency. Of course they could contest it (their policy was that if they couldn't find you another gig after your contract was up, they would not contest it, but you had to report to them by phone once a week to check). I lucked out and found a full time job on my own that picked up the day my contact expired.
Good luck to you!
Worked for a contract company, Tek Systems, who contracted me to Compaq, who contracted me to G.E. (try to get reimbursed for a business trip, 2 months). HP buys Compaq, contractors are let go. Again, Tek Systems, contracting to Sun Microsystems, sub-contracted to Lucent (1 year). Three months in, Lucent plant pretty much closes, I'm out the door. Currently contracting to Honda (Not a bad place to work at all, I highly recommend getting on the IT staff here).
Advice: Be VERY careful with your non-compete, it's a trap. My NC originally pretty much stated that if I went to Tony's pizza in pocatella Idaho and installed a copy of Windows 11 months after I quit my contract, I would still have to bill hours to my contract agency.
I switched to contracting five years ago, and I've never looked back. I've had steady work throughout the economic mudslide, and I feel that the breadth of experience I've received has made me a stronger developer than I'd be if I'd been in a FT role the whole time.
You mentioned that the client was stable. That's key. I've had a lot of gigs where the money dried up after the initial 3 months, and it's a royal pain to look for new work so frequently. Finding stable clients *usually* means less moving around.
As far as the cash waterfall goes, the days of 'two salaries for the work of one' rates are long gone. Even so, I find I can make more than I'd earn as a perm guy. Many assignments cap contractors at 40 hrs/wk, too.
Rates vary by staffing agency, too. I've seen one agency offer $65 for an assignment, and another offer $45 for that same assignment. This may be an extreme example, but it's 100% real. A contractor has to do his homework, keep his finger on the pulse of the market and establish a network of reputable recruiters.
I incorporated, because it's nearly impossible for individuals to get health insurance in MA. As a biz, I can get group rates through the local Chamber of Commerce, etc. An easier option is going 1099, but many staffing agencies will only work with you as W-2 or corp-corp. If you decide to incorporate or go 1099, your first step is to find a good accountant.
Also, if you're a biz (corp or 1099), you can set up a SEP-IRA, which is the self-employed equivalent of a 401k. Your bank can give you more info.
The best thing about contracting, IMHO, is that you can concentrate on the WORK. No politics, fewer meetings and very little ancilliary corporate bullshit.
Good luck!
I think that was a legal thing? I've heard something like that in the UK, where you can't offer a job or something to anyone inside the business without advertising it or some crap.
Really really not sure of the details tho?
- http://www.milkme.co.uk
Those things said - if the job looks interesting, go ahead and hire on. If you follow my advice above, you will be able to deal with whatever curves they throw at you - promotion to regular employee, lay-off, whatever.
www.eFax.com are spammers
Many employers now do this. First, it lets them see you work with the company, other employees, and the customers. Second, it lets them get rid of people that look good in the interview, but are lousy people. If we did this where I work, I doubt we'd have 70% of the people we do.
Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.
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A friend of mine was in a similar situation 3 years ago. She was hired as a contractor because it was easier, and was told in 6 months they would make her a permanent employee (with all the permanent benefits and perks). Three years later, she's still a contractor at the same company, and every few months they threaten to end the contract. So far, it keeps getting renewed, but only in 3-6 month increments.
UK public sector organisations are obliged to advertise positions and treat internal and external candidates equally.
Of course in practice, they simply mould the person specification to fit the internal candidate they want to give the job to.
Yeah, I'm horrible at figuring out my own taxes. The problem is that so is just about everyone else. And while I misspoke by characterizing the 40% as the self-employment tax, it's no exaggeration to say that if you're a simple IC, you really have to put about 40% aside to cover the quarterly payments to the IRS and to make sure you don't risk penalties later.
:)
My argument against working as an IC if at all possible (in most situations) aren't about the numbers themselves, but more about how employers love to dangle this golden carrot out in front of you and tell you "You'll take home more money as an independent contractor!" and "Independent contractors get hot women!"
I don' t know of anyone personally who has left an employer and then filed an SS-8, but I heard from a coworker that someone had done it once to one of my former bosses. He (former boss) was reeeeeally pissed about it. Come to think of it... it hasn't been three years yet, and I have the day off today. Maybe it's time to file.
One link I had referenced in the past was http://www.cehandbook.com/. I found the site to be helpful for virtually all aspects of contract work.
Mind you, I've been a direct employee now for 4 years so its usefullness may have diminished a bit.
Good luck and I hope you do well.
I'm not a nerd. I'm a geek. Nerds make more money.
Often times contract interviewees are not allowed on-site for interviews. Strictly phone only.
What do you code in? Email me a resume, might be able to get you some sub-contract work.
The company has lied to you, and offered you no security. Treat them like they treat you.
"Start as a contractractor and then we'll switch you to full time. It's just easier for us that way." Kinda pegs the ol' BS-O-Meter, doesn't it?
There are more provisions saving for retirement than for the employed. I use a SEP IRA. This is like an IRA or 401K but the limits are much higher. 15 percent of your gross. But you have to be careful about the rules. I think, but I'm not sure that if you're "elegible" for a 401K during the year you can't do this so if after 6 months they want to bring you on as an employee and it's in the middle of the year, you'd probably lose your chance at a SEP IRA or Keogh.
So you may want to insist on whole years as a contractor, ie 2005.
Also I doubt they'd give you a great rate but be careful there are expenses that you should consider. Health care is the biggest but dont' forget self employment insurance and if your state requires it Workman's comp insurance. The good news is that lots of things become deductable.
Best of luck
Andy
Many people have offered advice about contracting. I'll suggest something simpler.
If they are that close, I would ask them politely if they had time for you to drop by and have a look around at the place. It would give you an opportunity to find out more about your potential employer before signing anything. If you are going to work for them, as contractor or salaried, more information is better.
I have worked several contract jobs. Right now I work a contract for a large insurance co. in FL. I work four 10/hr days and make 3 times as much as my 'permenent' counterpart. If your wife has insurance for you both go for it!
Without a 401k or a 403b, how do I take care of retirement?
Simple solution:
Go to your local bank. Open a savings account. Deposit a portion of each paycheck into it. When it reaches a certain amount ($1000 is a good round number), use that money to buy savings bonds, treasury bills, certificates of deposit (CDs) or the like - something that can only really lose money if the government goes bankrupt before you plan to redeem your investment. If that happens, you'll probably be more worried about something other than your retirement funds anyway.
Slightly more elaborate, possibly more efficient option:
Talk to a financial advisor. Talk to another financial advisor. Talk to a third financial advisor. Take their recommendations and weigh them against one another. Strike a balance of risk versus ROI that you're comfortable with. Do not invest in anything that's "hot" - that's how some of us *cough* lost $37,000 one year when the dotcoms went bust.
"Alcohol, Tobacco, & Firearms" should be a convenience store, not a government agency.
I've seen a lot of the comments mention how this can be a good thing if you're working via invoice. That is to say the company is paying you directly, rather than through a contracting firm. Here in the midwest, where jobs are scarce, almost all new hires come in through contract...but then they never get hired-on. Getting hired on requires you to be very vocalabout their contract situation. Make no mistake (again midwest rules) they are bringing on people as contractors so they can let them go easily. Also, around here at least, there's no pay premium, but you do get overtime. No real benefits, no 401k, etc.
I came in as a contractor and was hired in only after constant pressing. I too was told I'd be hired in after 6 months in my interview. Those months came and went and there was no push. Finally, after months and months and a change in top-management the opportunity came around. Not 6 months later they let go all of the contractors (along with some full-time people.) I'm a supervisor now and I've been told that there's a goal to keep 10% of staff on contract so they can be eliminated quickly. In most situations it's not a 100% cut but you have to be in a key role to avoid the axe. Did I mention that a raise means terminating your contract?
On the other hand, when I was living on the East Coast contractors worked for a specific duration and made 2x what full time people were making.
The whole "you'll be hired in after 6 mo." thing is a carrot. If you're worth it to them they'll hire you on direct. Chances are though that HR is pulling all the strings and the department hiring you on has weak management. As sad as it sounds, it might turn out this company is looking for the most desperate person for the job.
I was contracting for the past 3 years and moved out of that. Here's what I've reckoned:
Compared to a permanent position, paying for retirement, an accountant, your own holidays, health insurance and such is a lot of hassle, and very often, doesn't fill the difference between your salary and what you end up getting in your pockets.
Permanent employees generally HATE you since they think you make much more money than them for the same amount of time.
Having to find your next contract is a pain in the arse when you come back home from a long day of work and have to deal with all that.
So unless you find a niche where you can make a lot of money in a very specialized field, it's hardly worth it. But that also depends a lot on your personality. If you are willing to cope with accountance and such, and managing your own business, go for it. It can be fun too
However, in all of the "we'll bring you on as a contractor temp-to-perm" cases that I have seen, you'll be hired through a temp agency. Basically, you are a full-time (or part-time) emnployee of the agency (Manpower, etc.), and the agency is a contractor of the employer. This way you need worry about none of the extra taxes / paperwork. You just cash checks, as a regular employee does (some of the agencies even offer benefits). The tradeoff is that the agency skims off of every hour (sometimes by a rather large amount).
This is usually because, if a company hires "independent contractors" that do the same work in the same way as employees, the IRS tends to frown upon that. I had to do some work for a certain business machines company where I used to work full-time, and I had to get a temp agency because they don't deal in IC's for these reasons. (Boy, was it fun to convince the pimp to take me. "Look, you get to make money on every hour, and you didn't even have to hook me up with the job! I know they don't have a posting. Trust me, they already asked me, and nobody else in the world can do this job without a lot of training. Dammit, just talk to the manager!")
You correctly identified the extra things you have to buy normally covered under regular jobs. These include self-employment tax, insurance of all kinds, vacation, retirement, training, conferences, and perhaps some computer equipment. If you changing jobs every week, the gaps and turmoil will be higher , necessitating about double a regular employees salary. If you have a stable contract more than six months, then these can be lower.
I contracted for several years during the "bubble" and enjoyed it. I also converted to full-time on at least a couple of occassions. Generally, this employer is correct. It's much easier for a manager to get a contractor in the door than a full-time employee. FT's have to go through HR. Also, many companies require a specific amount of time for opportunities to be offered in-house. This is all good and for good reasons. Manager, however, may have special needs that means getting a specific type of candidate. Utilizing the contract process, they can get a specific skill set, then once that person is working, start the actual "hiring" process. My opinion is, if you're getting decent assurances that you will go perm, take the job. If the contract is lucrative for you, save the extra money and hedge your bets.
Apply for a small business grant.
Mod point free since 2001
I contracted for 3 years. I made lots of mistakes, but overall it was good.
The pricing rule of thumb everyone is quoting is pretty close. If you want to make $60k a year, charge $60/hour. But that assumes that you're billing 40 hours a week every week. There were plenty of occasions where I billed 20 and times where I billed as much as 80. I'd take that $60 rate as a base. If a client is going to use you for a steady 40/week or more, give them that rate. If a client is going to trickle work to you at times, charge them $80 or $100.
I actually went three years without health insurance after my COBRA ran out. It isn't a great plan, but if it would cost you $500/month for insurance, sock that money away into a rainy day fund instead, especially if you don't have kids. Maybe find a Blue Cross-ish catastrophic coverage plan and just pay out-of-pocket for most needs.
I didn't incorporate because my primary client insisted on contracting with me personally. Some clients do that. It makes taxes simpler, but costs more.
I fell behind on taxes during lean times. It's easy to do. If your spouse is working a "normal" job, increase their withholding. Learn the tax laws and make your quarterly payments. If you get behind, make some "good faith" payments rather than just skipping them.
I had no deductions. It drove my tax advisor nuts, but I really had no expenses. My travel was maybe 14 miles a week on a busy week. We could have taken a home office deduction, but he felt that opens you up to audits and wasn't worth it. If you can lease a car, lease hardware, etc., you can increase your deductions, but for most software developers, it's hard to find any deductable business expenses.
I didn't take a vacation for 3 years. You really need to take one. You might as well plan to take one around Thanksgiving and Christmas, since your client will probably force you to take those days off, without pay, anyways. Plan for that and go enjoy the days off instead of worrying about the money.
A lot of people here are going on and on and on about contracting in a very general way, or making large assumptions about your situation.
I did the same thing recently as you would do in this case. I came from a full time job, and I switched to a company as a contractor.
But don't let it confuse you. You're not a company, you don't have to incorporate, you won't have to charge 10x a normal salary because of "up times and down times."
Basically, you'll be working for this one company, on an hourly rate, with no benefits. The benefit will be a migher pay rate. If this company is like the one I'm working for now, contractors aren't treated any different then a normal employee. The company hires everyone as a contractor first (and, it goes on different budgets so it's easier to get a contractor quicker) and if you're any good, they will hire you in a resonable amount of time - that is, unless you like the way the contracting works.
I think that's the same situation as this job you're looking at.
- It's not the Macs I hate. It's Digg users. -
Beggars can't be chosers, but outsourcing to YOU is the first step to outsourcing to New Delhi. The "contractor" title is flattery, and that's what you'll get: No bennies. No health insurance. No dental. No eyeglasses. No 401k (although a poorly managed retirement IRA at Sharebuilder can be made to seem like a reasonable substitute, for a while). "Easier to get approval, and we'll move you to employee status later" is a joke. Either you're talking to (*expletive deleted*) or that line is now generic pointy haired goose crap. The MAIN thing you'll miss is weekly meetings and daily or hourly contact with somebody at the company; in lieu of human interaction, you'll get last minute rush revisions in the specs, and YOUR missed deadline will cover THEIR managerial incompetence. Ugh. Yechhh. Yrp. Gah.
``Tension, apprehension & dissension have begun!'' - Duffy Wyg&, in Alfred Bester's _The Demolished Man_
The only difference between and employee and a contractor is that the contractor usually knows their termination date, for the employe it is a surprise. Take the risk now and never think that your are anything other than a contractor, even when you are a direct W-2. Good luck.
Bullshit. They want a "flexible" employee i.e. they want to ditch your ass at their convenience. Be prepared to get jerked more than a 12 year old penis. If you take this job expect to be a contractor permanently.
Beyond that, keep your debt low, and save as much money as you can put away. If you and your spouse both work, that is even more security. If you have or plan to have kids, try to arrange for one of you to work part-time. In my case, because we had the cars paid-for and a mortgage that could be paid by one of our full-time incomes, we weathered a year-long layoff with only minor lifestyle adjustments. Good luck!
"Who controls the past controls the future. Who controls the present controls the past." -- George Orwell
Be wary of their use of the word "contractor" because in many cases it will be more like a temp job than an individual contracting position. Is the position itself (full-time as well) contract based (maybe a 5-year govt. contract or something of the like) or will you simply be filling a slot and making money for the smaller hiring company? In past cases where this has come up for me I have feigned disinterest in working as a "contractor" because it was more like a temp position and they have pressed on and said "Oh we can get you full-time to start then no problem." They just want to make money off of you for a set amount of time (probably 3 months or so). If you take the job and they are adamant that you will get hired on full-time then get that in writing from them with a firm date set for the full-time transition. Otherwise you may be screwing yourself.
News Reporters Make Tasty Polar Bear Treats!
Whether you decide to work on a contracting basis or take a full time job...form a Board of Directors for your career. This is the only way you're going to get the best advice for your unique personality. It takes a special type of person to do contracting work sucessfully, and the decisions surrounding this type of work have to be made by people that know you and your situation. When you find three or four people that you trust, ask them to join your "Board" and then let them run your career. The first thing they'll probably have you do, is to write a mission statement and a 5 year business plan. This "forces" you to make some decisions about what you want your future to be and then a strategic plan on how you're going to get there. There's a good reason why successful companies have a Board of Directors...because they work! If you treat your career like a business, you'll soon realize that it doesn't matter whether your full-time / part-time / contractor / whatever ... instead of waking up each day and "trying your best"...you have a solid business/career/life plan in place.
I did this for myself about 10 years ago and the difference is like night and day. The downside (if you want to call it that) is that I can't walk into my boss' office today and quit...such a move would need Board approval. I needed Board approval when I wanted to get another graduate degree. As usual, the Board wanted to know costs...benefits...timeframe..etc. before making a decision.
The fact that you posted your question shows that you have the right frame of mind. We all like to think that when it comes to our career, only we know what's best for us. Forming a Board of Directors is going to be a lot more work and it takes a lot of humility...but it's worth it.
As a "contractor" I am an independent businessman. I'm only one, but I am a corporation.
When I price myself, I take into account the following:
Of my 100% fee, I must subtract:
Direct compensation (salary)
Direct Benefits (10%)
Indirect Benefits (vacation/sick) (5%)
Downtime/Admin (15%)
Marketing (5%)
Insurance, business, all types (10%)
Other Expenses (10%)
Taxes (5%)
Profit (10%)
As you can see, my rate is 30% salary, 70% other expenses. In this scenereo, my breakeven point is about 100/30=333% of my salary. If a full time employee would be 60,000/yr, the hourly rate would be 60k/2087*3.33=$96/hr. Which, just so happens to be close to the $90/hr I actually bill.
QED, YMMV
Is it just my observation, or are there way too many stupid people in the world?
There is a big difference between being a contractor and doing the "contract to fulltime." Contract to fulltime is just a way to shift budget money around until they have an FTE position approved - which mean you work the same hours and get *maybe* slightly more than you would salaried for benefits. Its often for a short period of time 3-6mo for example and if the budget dosent come through...bubye. And being a contractor isn't exactly glamourous either - if you do have these miraculous 3 days weeks its because you are on a plane the other 2 going back home to see your family for the weekend...not to mention depending on your costs for health insurance etc the pay isnt exactly grandious either.
I work for a big wall-street firm. I was originally hired as a contractor and have become permanent. Since being made permanent my total compensation has increased massively and there is more-or-less no upper cap on how much I can earn if I continue to deliver the goods. They are a fantastic company to work for, the environment is great, I get to work for and with some very very smart people and I do interesting work as well as being well-paid. The fringe benefits are great too. Why am I telling you all this? Because I would not have taken my job had I used a single short-term criterion such as this to decide my path. How did I get here? By thinking of the big picture. Think of your career in the long term, don't base your decision on something dumb like how long it takes for the company to approve a new headcount. Due to the desire to compensate people really well in the long term, my employer takes forever to approve new hires and to begin with I could only be taken on as a contractor. If I had allowed that to put me off I might feel like I'm real smart getting one over The Man and not letting The Man screw me over, but in actual fact I would be materially worse off. Instead, think about your career in the long term and invest in the big picture. If there are good prospects, don't let short-term stuff get in your way. If you are good enough, you will be rewarded whether you are a permie or a contractor. I have been both and their are plusses and minusses to both sides. Just be sure to put your own priorities at the top of your personal employment agenda and you'll make the right choice. Good luck whatever you do.
To clarify, you're actually not "just overhead"...which is actually a more costly option to a finance person than a contract worker. Overhead is the stuff the number crunchers try to reduce - rent [real estate], utilities, capital expenses [materials the company 'owns'], etc. This stuff can stay on the books for longer than the actual 'purchase' [or employment] of the item/person, which adds to the expense of running the business. If you were overhead, you would be more expensive to the company - insurance, severance and whatever other bennies are in there.
Contractors are more like a line-item expense...need to reduce it? Then let a few go next month. Have budget for a new project? Then add a few.
Who put this thing together? Me, that's who.
I know I got luck when I left a full time job for a long-term contract position (one year contract). I took a 45% pay increase, left things like vacation pay and holiday pay behind and had to pay the full load for insurance but with that heft increase, I still came out way ahead. It was made clear to me that I was not going into a contract-to-hire position but I figured if I got in there and became indispensable, I may get hired on.
My first year came and went. After the first year, I got a modest raise if I were to stay on. I said "sure" but the job would be an "open" contract from this point on out, it was not renegotiated for another year. I felt free to lobby to be hired on at that point and that is exactly what happened just a few weeks into my second year!
The job offer was kind of unusual, I took the exact same salary I was making but got benefits and vacation (180 hours!), holidays, and all the other perks of being an employee.
The key to contracting is that you have two bosses to make happy. It isn't much harder than making one boss happy. It is important that you negotiate _everything_ up front and that you have a clear understanding of what is expected of you.
It really helps if you have exceptional work habits and if you are very well qualified for the position you are going into. Your best bet is to treat the contracting time as an extended job interview and be willing to go the extra mile for both your employers.
After I became employed, I was able to work myself into a 13.5% raise and then a 20% raise in a short time. I was promoted to get the 13.5% raise but reached a 4.0 proficiancy rating for the second raise. I am now stuck at the top of the ratings and have to accept much smaller raises or get promoted. I like what I do and where I am at so I am in no real hurry for a promotion.
If you offer your services as a contractor, you don't have to be dedicated to one company- you can bounce around to as many (or as little) as you'd like.. Most companies like this method of business now days because they don't have have to put people on a full time payroll (because american companies are cheap). Also, you never have to worry about your job being outsourced to India (job stealing bastards) Most commercial banks have good 401k programs, thats not an issue- however health insurance might be a little high (especially someone like blue cross blue sheild). Overall, I think its a better route- thats what I will be doing within a few months, I tire of the crappy pay, and the fact that no one in my department works other than I. Congrats on the recent marrage- I know the fears, I just got married in Oct, and we can't survive on what she makes, but then, you have to ask yourself, would you rather be misrable for the rest of your life (I always come home in a bad mood), or do something truely fulfilling and rewarding?
I'm curious that if they haven't paid in 6 months, why wasn't the initial contract written that after non-payment for 1 month, all work would stop right then?
Is that just not ever done, or has it been tried and been a big problem?
After working "on contract" with a company for over two years now, I've discovered there is a major difference between working "as a contractor", which most people think is great, and working On Contract.
I too have had the "full-time" carrot dangled in front of me, but in general, being on contract means the same pay without any benefits, bonuses or options.
The approval for a contractor is easier to get, because it isn't a permanent allotment of income or benefit $$.
However, I've also discovered that, when a full-time job is available, it's much easier for them to higher a new person full time, than make a contractor full-time and try to hire a new person on contract.
Make sure you're very clear on what benefits, if any, there are from being on contract. Also try to get a clause for the maximum amount of time you can be kept on contract without being made full-time.
no clue
you seem like a nice guy so ill give you some great retirement advice. Take 10% of your pay and buy as much SCOX stock as possible, I hear they own Linux...
First off, let me establish my credentials: I'm a part-time licensed Life, Health, and Accident Agent in the state of Indiana. You can check here to learn about the Ray Wall and Associates agency, ID 1954880 where I work as a 1099 independent contractor: https://secure.in.gov/apps/idoi/search/servlet/age ncyCriteria
:). Whole life also accumalates a kitty that you could use in extremis for money or note as an asset for collateral.
I've seen lots of good feedback about experiences with various life, health insurance, and Errors & Omissions (E&O). Here are some observations:
Do not skip buying insurance unless you have a lot of personal or 100% reliable family reserves to back you. The statistics -- 50% of bankruptcies are due to medical bills and 50% of divorces due to financial issues -- are against you; you're better off sharing your risks across a large pool of folks.
Insurance is cheapest when purchased through a group affiliation, either a pass-through like PACE or professional society. You may be best served by getting your insurance through a professional society group affiliation, such as the IEEE http://www.ieeeinsurance.com/USA2.asp or ACM http://www.acm.org/membership/insurance/. For the cost of ~$120 USD per year, they let you buy life, health, and E&O at drastically reduced rates and automatic qualification. IEEE's health insurance is comparable to a Fortune 500 firms, both in benefits and cost per month. Only downside is you must be a member for a two years to get the IEEE health, by far the best deal!
Cover all the bases. I personally place health and disability first for Get health insurance with a High Deductible (2600 indiv / 5200 family) and Health Savings Account (HSA) unless you have expensive health conditions such as Attention Deficit Disorder (ADD) or diabetes. Nutshell is the money you would pay first due to the deductible is yours to keep over the years in in the HSA, earning interest and/or dividends, if you don't spend it. It's like a mini 401K if you are reasonably healthy!
Buy a limited amount of whole life insurance to permanently cover you, then get the rest in term to be less expensive. Insurance never gets cheaper, so you'll want the whole life to make sure you always qualify and can be buried when you die at a ripe old age
I'm not an investment advisor, but I do suggest getting into an Individual Retirement Account now while time and compounding interest are on your side.
Hope this is helpful!
Although it is generally true that a C corp or a corporate-taxed LLC would allow you to pay some of your money as dividends, if you are the sole owner of a corporation, the IRS deems it an "insignificant entity". That means you might get the benefits of limited liability, group health insurance, and other corporate perks, but that the money it earns will be treated as self-employment income.
1099 work is not corp-corp, and most companies will not pay a corporation with one shareholder/employee, since that makes them somewhat liable for your tax evasion (they don't report checks to corporations to the IRS). Microsoft got busted with paying non-declared corp-corp consulting fees a couple of years back, and now there is a huge set of hoops one has to jump through to consult for them.
Talk to a CPA or tax attorney when you set up your payment structure, or just take 1099 work and be done with it. Remember, 1099's are declared to the IRS like W-2s, so you need to pay those taxes.
My account always says that the difference between tax evasion and tax avoidance is 3-9 months in Camp Fed.
I still owe like $800 from 1 months worth of contracting work. More importantly health insurance was very expensive independantly. I wouldn't contract again.
I work for a large corporation and it is common practice to ask for a contract for hire. The employer views the practice as a hedge against the good interview bad performance scenario. In most cases at my place of employment if the canidate performs as expected during the 90 day contract the canidate is always hired. I would recommend you review the contract agreement carefully.
I've been a contractor for almost two years now, and I would be hesitant to leave my position for an employee position. The important thing to look at is the contractor. How do they treat their people? Are they just a body shop or do they try to keep their talent? I'm getting great benefits and more pay. If my contract ever goes belly-up chances are I'll be moved to another position elsewhere or the next contractor will pick me up.
It's the short term temp contracts that are bad news for someone looking for long term work.
"Yes, contracting is scary" ... and not least because of the frightening number of new acronyms you'll have to learn ;-)
If you use these places, you become their employee, and wave bye bye to all of the benefits of being self employed. So you have all the hassles, and none of the bennies, huzzah! The upside is that they pay the taxes for you. This may sound attractive, but it really isn't. Since they just pass whatever you bill on to you as salary (after taking their cut) you ave no opportunity to leave equity in the company, or pay yourself a salary and let your company mke a profit (taxed 14% less than salary). You also lose to option of setting up a SEP IRA (how does putting away an additional 25% of your salary for retirement sound?). If you're frightened of filling out the forms and making a mistake, or remebering to pay the taxes, get QuickBooks. The program is like $200, and for an additional $200 a year it can be set up to automatically do all of your required fillings, and even electronically make your tax deposits. You can even set up direct deposit of your paychecks. All for much, much, less than these companies will take.
Probably because you've worked through agencies, and they maintain the insurance. All of my contracting customers require liability insurance, and all of the contractors we hire must have liability insurance. Also, if you are willing to take money to mess with other people's shit without protecting yourself....dumb.
Well, there's no such federal law. Contractors and exempt employess don't get overtime. I suspect that you only got overtime because you weren't really a contractor. It's possible to be paid on a 1099, but still be subject to the FLSA. If you set up your own company, and pay yourself a high enough salary, you can work an infinate number of hours without overtime. Of course, you may want to negotiate a sliding scale for your billing rate, but you don't necesarrily have to pay yourself any more that your salary. read, more profit for the company.
Si vis pacem, para bellum
The only thing more annoying than a Libertarian is an (un|mis)informed Libertarian
Without a 401k or a 403b, how do I take care of retirement?
The problem with tax-deferred schemes like these is that if taxes go up by the time you retire, you would have been better off paying them up front.
Of course if taxes go down, you have it made. But considering the fiscal and monetary stupidity in the US right now, I'm not betting on lower taxes in the long term.
There are plenty of other ways to save and invest your money. The most important thing is simply that you spend less than you make, and you invest the difference in a diverse set of places. Make yourself a spreadsheet to predict your net worth over time assuming various rates of saving and interest.
"The danger is not that a particular class is unfit to govern. Every class is unfit to govern." - Lord Acton
Ask them if they'll pay your corporation instead of you. That way you can get more tax breaks. If you contract then you ALWAYS PAY DOUBLE SOCIALIST INSECURITY!
It is well worth your while to incorporate if they're not going to hire you right out.
-- I am. Therefore, I think!
If I go contract, how do I get clients?
I think I'm damn good, and I've got paper (degrees and certifications) and some experience to back it up, but I'm not sure what I would have to do to market myself.
What tips and tricks are you using?
Does it all boil down to who you know?
.... expect that the little guy (employee, contractor, small provider) always expect to get freebies they themselves will never give?
Why is it mercenary to demand to be paid for a work you are performing if the initial agreement was to be paid by time?
Why sombebody working under those conditions should give a free ride to the pesron/company contratcting them?
WHY?
IANAL but write like a drunk one.
Short answer: It's a bait-and-switch. Don't bite.
Longer answer: Contracting is a business. I was in it for almost twenty years. It's fine if you know how to negotiate contracts, are willing to take the risks, and value the independence. But going into business for yourself -- which is what you're doing when you accept a contract -- only because an employer is too cheap to pay you for a regular job is a mistake. Add the fact that the employer didn't tell you that till after the interview, and it's a thoroughly dubious prospect.
I've been doing contract and consulting work for 5 years. Guess what, I can't get a perm position since my resume says I'm a "job-hopper".
Fcuk contracting and fcuk the shi+head retards in HR.
Fcuk the managers who pay you only 8 hours but you are expected to put in as much as salaried employees.
Fcuk the budget teams for offering you contracts just so they have more budget for next year and all you have to look forward to is a contract extension (if you are lucky) or finding a new place to move to (since you have to pay a full months rent but only will have the position for another 5 days).
Fcuk I.T. Fcuk contracting. Fcuk consulting. Fcuk the idiots that are stupid enough to think there is money in this.
Fcuk having a nice house, nice car, loving spouse/mate or kids, fcuk having a beautiful bed and feather down pillows and comforter when you live in hotel rooms 5 days out of the week.
Fcuk the weak-ghey-idiots that still get bullied by others and make this entire I.T. field suck because they are afraid of standing up for themselves.
If the prospective company advertised for a full time position and now is offering a contract job, beware! This is false advertising. If they did not keep that first (implied) promise why should you believe that they will keep a promise to make you a regular employee later?
The excuse that "contract is easier to get approval" is flimsy at best. If the position isn't yet approved how did they get approval to post an advertisement for it?
You can make more money selling subscriptions to Vibe.
"Well, there's no such federal law. Contractors and exempt employess don't get overtime. I suspect that you only got overtime because you weren't really a contractor. It's possible to be paid on a 1099, but still be subject to the FLSA. If you set up your own company, and pay yourself a high enough salary, you can work an infinate number of hours without overtime. Of course, you may want to negotiate a sliding scale for your billing rate, but you don't necesarrily have to pay yourself any more that your salary. read, more profit for the company."
e rt ime-exempt.html
--------------
Well the poster was not talking about federal law. I think the word "CALIFORNIA" is somewhere in there towards the front of that statement. It used to be anything more than 8 hours a day was required by state law to be paid time and a half overtime. But that changed in 2001 and now it's anything more than 40 hours requires time and a half overtime.
http://www.management-advantage.com/products/ov
Nowadays unless you live in an advanced civilization like India, contracting to hire is the way it's done. All your bosses are going to be hired that way and most of the programmers. Most of the contractors end up "permanent" unless they're complete terrorists.
Contractors do not get paid more than "permanent" people. In fact they're paid much less considering the lack of bonuses, vacation time, and insurance plans. Even with the loss of benefits since 2000, the benefits that staff members get are still far more than contractors get compensated for.
The advantage to contracting is that you're your own boss, you essentially run your own business. You can apply to any management position and say you qualify because you ran your own "business". This is how most programmers get into management.
It's exactly the same in Australia. I no longer bother to apply for public service jobs, as you have to provide an enormous set of documents which "address the essential criteria", and the interviews are mostly theatre. I just got sick of being fucked around by bureaucrats to fail to get a job that didn't pay very well anyway.
What a long, strange trip it's been.
well, u never left an email, but I code primarily in C, C++, Python and occationally Objective-C. I also have Perl experience, some LISP, and can probably pick up quickly whatever you throw at me :-)
"I would say that 99 per cent of what my father has written about his own life is false." - L. Ron Hubbard Jr.
I worked for a couple of consulting firms over a period of 8 years. I'd need a spreadsheet to figure out how many rounds of layoffs I survived at those two copmanies. I've been contracting for almost three years now and I've worked for all of that period except for about three months. What it comes down to for me is that I need to make money, so I'm either always working or looking for work (usually both at the same time). I like the flexibilty that contracting offers, but I do spend time finding new projects. With a "solid" job, you have the illusion of security. With a contract job, you have the illusion of freedom.
Let me get this straight. You worked seven years for the same company and your pay went from 55,000 to 60,000? Geesh! You were short changed! Most of the guys I know have easily doubled their salary in about 5 years. Granted, it took jumping to 3 different companies, and involves Gov't contracting type work, but still...
This is not legal advice as I'm not a lawyer but I have set up corporations for various purposes. There are many issues you have to be aware of. As you get closer to being full-time employment the less you have to make over salary BUT there are a number of pitfalls to be aware of.
Some say just go into business and worry about the rules later, if you get caught failing to do something usually you can ju
The lessons of history teach us - if they teach us anything - that nobody learns the lessons that history teaches us.
This is a dilemma. Keep working and risk getting not paid for example because the company folds or walk out and at least get paid for the month you put in. Depends on your customer. Personally I would take a 6 month delay from the likes of Deutsche Telekom or DaimlerChrysler, but I wouldn't take it from medium or small businesses.
advice, why didn't you first say so!
No wonder your advice is bad.
Here's a hint. Instead of accusing others of living in a bubble, step
outside of your own first. Slashdot is in the US in case you didn't notice,
and most of its readers are from there.
Giving advice on how to contract in the US without identifying that your
experience is based on the Austrialian environment is at best misleading.
No wonder why I smelled a rat. It might be great for Australia, but some of it
is just not applicable for the US. In Silicon Valley, showing up to work in a suit
and tie will at best get you laughed at in many places; particularly
in startups.
Sheesh; just showing up in a suit and tie for a technical interview will
at least make people wonder about you here (though you might
get away with it if you're a foreigner).
And yes, I might be a arrogant; and yes, you might find my opinions objectionable.
But I'm constantly sizing myself up against the competition, and so I know
I'm good. That's why I always get top dollar here in Silicon Valley for doing the
cutting-edge work; and why I beat out the competition world-wide. And I'm constantly
turning away work.
Please feel free to ignore my opinion. When you can beat me out of a hot contract, I'll start considering yours.
That's a very interesting link. I think you should read it. Scroll down to the part about the exemptions. Since we're discussing contractors, if the OP starts his own company, and his customers pay his company by hours worked or by the job they are not liable for overtime. His company might have to pay him overtime, but that depends on whether he's exempt or not. HTH. HAND.
Si vis pacem, para bellum
The only thing more annoying than a Libertarian is an (un|mis)informed Libertarian