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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?"
Ask yourself if you really want to work decades for a company where getting approval is such a hassle.
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 ?
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
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"
While this is definitely a possibility, some companies just like to bring people on first as contractors, or through a temp agency, because it gives them a chance to safely conduct a "working interview". If they like you, then they hire you.
Keep in mind -- once you've been there for a few weeks to a couple of months (or longer), they've already invested in your training, and you've had a chance to make a good impression. At that point you have a fair amount of leverage to start pushing hard for that full-time position. If you hate your job, you can walk out and leave them starting over from scratch -- and if they're smart they'll realize this.
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.
As for me, I quit my full-time position to start contracting (for my former employer and a new customer) in October. I had had enough. I actually expected my employer to be petty about it...but they surprised me and have been very cool; so I'm still working with them...only not as an employee any longer.
I was freelance for a while a few years back anyway; so, it's not as scary to me. It is somewhat scary, though. I have three children and one on the way. One of them has a genetic disorder. My wife is a stay-at-home Mom. But my job was really that bad. And besides, ownership has always been my goal.
Insurance is going to be a b***h no matter what. Look into COBRA. If the guy's married, but his wife has employment that offers insurance, he should check into getting covered under that. If not, he should look into getting coverage minus dependents. As a last resort, if he would incorporate (form an LLC, S or C corp) he could include his wife on his payroll (if she really does help out say 25 hrs/week) and then qualify under group plans instead of individual plans. The benefit there is that an insurer can generally turn you down just because they don't like you for individual plans. But for group plans, they can't.
Again, the best advice I could give you is this:
- Talk to a trustworthy accountant
- Find a decent lawyer as well
- A financial advisor is a good idea as well but will overlap functionality with the accountant
- ask for guaranteed minimum terms on your contracts (six months or a year)
- work your tail off
I like working for myself tremendously. But the money only comes in if I work. For instance, if I don't work this Thanksgiving, I don't get paid.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
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.
The other big thing to remember about contracting is that you have to charge enough to live - the best rule of thumb for me (handed down from a truly old hand at the contracting business) has been to take my hourly salary as an employee and multiply it by a factor of 2.5x - 3x to get my hourly rate as a contractor. This takes into account medical, retirement planning issues, corporate overhead, and hot and cold job cycles.
;-)
...
Sounds like a lot early on, but you quickly realize how much of that pay differential is essential to maintaining a comparable quality of life.
Keep really good time sheets, and be sure to document all of the work you do. Very different from being a full time employee, since frequently the client will never see you doing any work at all. Good hourly and daily logs really go a long way to show you and your client what you are doing to earn your keep. This is in addition to coming through with the contract deliverables in a timely fashion, of course.
Another thing to realize is that if you are a successful contractor, you are almost certainly going to get offers for full time employment from satisfied clients. Think long and hard ahead of time about if you are interested in full time employment, and if so which clients you would be willing to work for and which you would not. Figure out how to tactfully decline prospective employment offers you are not interested in.
Know when to cut your losses with a specific client. Some clients are more trouble than they are worth, and often young contractors carry poor clients for far too long before cutting them loose. It is hard to let a paying client go, but freqently in the long term a problem client will cost far more in emotional distress and work disruptions than they are bringing in financially. Figure out how to cut problem clients out gracefully.
Get someone competent to handle billing. I cannot overstate the importance of this. You might be lucky enough to have a part time bookkeeper who will be willing to handle this for you. Do *not* assume that you are going to be as good at this as you are at doing what you are paid to do. You most likely will not be. heh.
Unfortunately, you are most likely going to have to learn most of these things the hard way
"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety."
As long as he's willing to accept the decreased quality associated with making you work overtime.
paintball
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."
If that's the case -- and you need to be the judge of this -- you may want to make their lives easier by being pretty easy going about it all.
I've been on the hiring side of this, and contractors -- to avoid being burned, or because they've been burned -- can be pretty mercenary. We're way more likely to hire someone on full time who basically doesn't *act* like a contractor (who will stay late without charging for each minute, etc.). (This assumes it's an hourly contract, not a per-work contract.) That said, my company is pretty fair and cool place to work. There are a lot of places that *will* take advantage of you.
If you think there's a reasonable chance of being hired on as an employee, I would not sweat the retirement planning unless your contracting phase goes over 6 months. You'll have to pay double for medicare and social security taxes, so you'll need say 20% - 40% over the "hourly" rate you'd want as a salaried employee. The advantage is that you will be able to deduct EVERYTHING. (Talk to an accountant or tax prepare to learn the correct way to do this.)
Good luck!
Dude, I think I can see my house from here.
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.
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 *