Slashdot Mirror
Moving from a Permanent Position to Contract Work?
duncan bayne asks: "I'm sure many developers in salaried, permanent positions have been tempted by the self-management, flexibility and higher pay that are the perks of being a contractor, while at the same time looking nervously at the uncertainty and irregular income. So, to all those in the Slashdot crowd who've made the change - what was it like, was it worth it, and what advice can you share?"
Contracting isn't exactly self-management. Many companies prefer to do all project management themselves and simply treat contractors as implementers.
When I first started out it was definately frightening, however as time went on they kept giving me more and more responbility, eventually they ended up with a contract CEO. Don't ask. But the perk for me is that since I'm contract I can hit on the hot workers at my workplace without having to worry about any side effects. Try it sometime.
I think it was worth it to me. You have to realize that you won't always get higher pay and more flexibility; sometimes part of becoming your own one-man company is that you have less flexibility because you are the only one to do things. And while the pay may be more per hour often you get fewer hours, or spend huge amounts of time marketing yourself and doing research to setting up contracts.
Still, on the whole it is worth it. You do have more independence.
Traditionally people following this route have had former employers as their main clients. With sites such as scriptlance, rentacoder, guru.com, and etc., you can now get a larger client base, and even start doing it before you quit your old job.
However, I do have to say, that if insecurity makes you nervous, maybe you shouldn't do it, or at least save up money for a while first.
I used this resource when I did what you are considering doing: "So You Want to Become a Consultant?"
I've been contracting for a couple years ago. I've discovered that contractors often get brought on board often to organizations that either are experiencing unmanagable growth or are stuck in the mud because of problems with business process. So it can be frustrating. But the money is better and it's nice to know that you can take a couple weeks off here and there (assuming you save your money, etc.).
I think it's really a lifestyle thing. I like being permanently (although that word is a joke in this market) employed from the standpoint of working on the same project and getting some momentum for a while. But I don't have kids. Don't have a mortgage, so that's really the only advantage to me. That and if you like your co-workers a lot and want to stick with them. Those are reasons I'd rather be permanent.
Not much help, I know. Like I said, it's a mixed bag. Permanence is about more than just stability in work. It's about stability in what you do, stability in who you work with. And depending on if the job is boring and if you like your co-workers this can either be a plus or a minus. I'm just glad I have the financial flexibility to make that choice and not worry (as much) about the financial end of it.
I went from a cozy 3rd year job at an upstart, to managing my mom's spyware riddled m$ home network. Altho the hours are great with decent meal benefits a cozy corner office....... I for one, welcome avian flu. :[
Switching to Contracting? KFN
I recommend getting a copy of The Career Programmer: Guerilla Tactics for an Imperfect World by Christopher Duncan.
I read this after getting my first (and very bad) job as a programmer. It covers many aspects of working in I.T., including some of the differences between working as an employee or a contractor.
Good Luck!
I think I think, therefore I think I am.
You actually might be better off - there are plenty of opportunities out there for talented contractors these days, especially senior people. The money is better, but you need to probably incorporate yourself to properly 'play the system' IYKWIM ;-) Bottomline is that you can probably make up to 30% more/year being a consultants, but bear in mind that you also need to buy your own health insurance, pay for your own 401k etc. So, don't be timid when negotiating your rate - if you have been making $100k/year in salary you probably should ask for at least $60/hr as a consultant, otherwise you're probably just break even or even wind up not making much more. BTW, that estimate consider approx. 3 months of no work per year. Good luck!
I made this move a little over 3 years ago. I was in a desperate situation in that my employer at the time was axing people left and right, good people too. I ended up getting dumped an entire bag of junk and work that I couldn't perform. My coworker, who was in an architect manager role had had enough and made the jump about 3 weeks prior. I ended up hooking up with the same contracting firm he went to and got myself under a W-2 employment agreement with them. He on the otherhand already had a 1099 corp established and was able to get the appropriate agreements in place for it. I personally didn't want to go through the motions of establishing personal health care, the 1099 corp, etc. It just wasn't something I could stomach at the time.
The jump was scary as all hell. I hopped on a new contract about 48 hours after leaving my former employer and started getting setup. Unfortunately, the position was not exactly as my account rep had conveyed with me. Nor was it as clear cut as the contractee's interview/position description stated. Needless to say, the first few weeks were a bit bumpy. I was able to establish a fairly good rapport with the client and things have been more or less peachy since. There is the temptation in some cases that, as contract, you will get paid overtime. I have to warn you. This is a blessing and a curse. When you do this stuff and go the extra mile, it sometimes becomes expected of you. While the extra money is nice, the long hours tend to really eat in to you.
In early June, after a couple of internal management organization shifts, I was under the impression that my contract was stable through the end of the year. Well 1 week into June, I was informed that I would no longer be needed in my current role after 30 June. Needless to say I felt that I had just been screwed over, my contract firm was outraged, and I was really starting to freak out as my, then, girlfriend (now wife) had just moved in. Money coming in was VERY important. Luckily, my contract firm has feelers in all over this particular company, they were able to secure me a position quickly in C++ land, which I wasn't overly proficient at as having programmed in Java for the last 4 years, but it was work. The way the agreement was inked, I would be paid as a salaried employee up to 40 hours, get 2 weeks vacation time, 5 sick days, etc. Overtime was a bit of a sticker. I have to work something like 6% overtime or some such garbage before I get paid for it. Since my earlier experience put a real pinch on me, overtime was going to be minimal at most if I could help it.
Long and short of this is that you should really research your options and your current situation. If you can stick it out and look for a perm position, go for it. If you are willing to "eat shit" for a while, you may come up smelling like a rose. My experience may or may not be the same that many people have. If you are confident in your skills and are able to adapt quickly to fluid situations, then you may want to try your hand at it. Make sure though that you have enough banked up to cover shortages in hours (i.e. around christmas time where code freezes may be rampant and actual work may be scarce).
Hope my long winded telling of my last three years has not been over the top or wandering too much.
For me, I have very few clients, one of which makes up the bulk of my income. I was sort of forced into contracting when that primary client couldn't afford to hire me full time with benefits.
The working from home is very nice, and yet due to my 11.5 month old, I am far less productive. There's something nice to having a real office to go (away) to.
As a contractor, make damn sure you have enough potential clients that can support your needs- for me, if my main client dumps me, I'm toast and there is no clause in the deal that they have to give me x-weeks notice since I'm not an employee.
Anyway, contracting has its plusses- and if you've got a good client base, it can definately be better than working in a cubicle. But you're also off on your own and you assume all of the risk.
So if you decide to wing it, work really hard to get and keep clients.
Two wrongs don't make a right, but three lefts do.
I had a nearly-ideal opportunity; my employer was closing, and our sole customer needed a development department. I knew their offer was a panic reaction, and wouldn't last, so I offered to consult (non-exclusively) for a few months. That allowed me to launch my independent consulting career, which lasted a little over four years.
My problem, however, is that I'm not good at sales: cold-calling, lead-tracking, pavement-pounding. Once in contact, I could generally make a sale, and deliver solid work for good prices, but it was only enough work to break even after rent and taxes. When things temporarily slowed down, I didn't have much cushion.
I'm very glad I did it, but I wouldn't do it again without a bigger operating buffer or a sales partner. You really need to combine technical and sales skills to succeed.
Having done both at various times over 24 years, here's the poop for USA:
1. you'll have to make more than 50% as self-employed as you do salary to keep about the same benefits and have same income after taxes counting time between gigs making $0.
2. mediocre health insurance not including dental or eye for whole family: $430/month near chicago area, other posters might also give some rates.
3. Bookkeeping will be a pain: educate yourself on estimating and making quarterly tax payments or just opting to pay penalty, keep record and receipts, know tax laws for business expensing, entertainment expense, and use of vehicle, which is complicated. Tax software for the self-employed helps a great deal, highly reccomended.
4. Don't quit your day job and then start a business or look for contract work. Start your business while you work, or get a contract with appropriate start date and then quit job with proper two weeks notice, don't burn bridges. If you help your current employer to make a smooth transition you can usually use them as a good reference later. So no mooning/flipping the bird/taking dump in desk drawer of the CTO or your boss on the way out
5. Having a search engine friendly resume on internet has lead to most of my 6 -8 month contract jobs in last five years, not bulletin boards or job sites or snail mail or newspaper ads.
6. You can't restrict yourself to projects that are cool or exciting, some might involve some boring/legacy/archane junk that you've done before and the client needs someone with that hard-to-find skill. Happened to me twice in last 3 years.
5. You're in sales/marketing now, baby! of yourself - you need to network with people to see what opportunities are there, let people you you're willing to tackle projects, aggresively pursue follow-on projects and look for other work at clients.
One thing to consider - you might make a higher wage, because the company doesn't have to pay for your health insurance. Make sure you have health insurance for your family!!, and you. This can be quite expensive, and maybe worth sticking to the company, as opposed to being an independent contractor. You might want to look at the cost and see if you really are making more as an independent vs being a company man.
If your life goes perfectly and you don't have any problems then great - you gambled and you got lucky. But what if you get into a car accident/ get appendicitis, or something worse? - Do you really want to pay out of pocket for medical expenses? What about eyeglasses or dental?
People get into accidents through no fault of their own. It's nice to be an adult and PLAN ahead for the unexpected, instead of just gambling on everything being perfect.
..........FULL STOP.
Breakfast served all day!
Typically contracting you'll make 50-100% more per year (if you keep busy) than you would as an FTE. That MORE than makes up for the extra self-employment tax hit and benefits. You don't have to amortize a computer over 5 years -- write it off the first year as a Section 179 deduction. The rule varies in how much you can deduct each year; it's been rising from $20K up to around $25K now, I believe. One or two years in there it was up to $100K to stimulate small business spending in the economy.
Pay for a CPA to give you advice and do you're taxes. The $1-2K/year you'll spend will MORE than be recovered when they show you how to correctly deduct things, etc.
I've always opted NOT to deduce my home office. It's only 150 sqft of a 3500 sqft house, so I can't deduct all that much, and it's not worth the flags in IRS or the hassle in figuring out how much you have to repay when you sell the house in a few years...
I've been freelance since 1998 and I'm on my wife's benefits. Yes, it would be much tougher without her (at least WRT benefits).
There are other ways, although I haven't thoroughly investigated them, such as through The Freelancer's Union. It's expensive there, but not really out of line for what your employer's paying for you in a "real" job.
If you didn't have the constraints of being an employee, would you work more or less?
If you'd work more because you get paid by the hour, enjoy what you do, have a desire to understand how businesses are run, and now have a vested ownership in the results, then you're on the right path to start contracting.
If you like having the business do the business part for you (legal, financial, insurance, management, etc), like knowing that you can leave work behind after your 40 hours a week, and you don't go home trying to figure out what else you could be doing (and not just because you signed an IP agreement) then you're probably better off as an employee.
It's a big leap, and everyone here is right when they say you take on more costs (but you already knew that I hope), that there's more work, taxes, risks, etc. But it really comes down to a personal desire, since if you have that desire (and hopefully some ability that people will pay for), then everything else will work itself out.
My consulting business took off the day that I decided that I would never again perform work on an hourly basis. It makes for difficult negotiations, but I insist on a flat fee and a set completion date. This allows me to over-perform by getting jobs done ahead of schedule, and my clients dont bother me about adhering to a schedule. I show up for meetings and any other duties at the client site, but I dont let them watch me program, and I aint there to teach anyone how to do anything for free. This way, I can manage 4-5 programming jobs at the same time, and never have to watch a clock. I get a bonus if early and a fine if I am late. If you fill out a timecard in order to get paid, then you are a temp. Plain and simple.
A "contractor" is the field of programming is somebody who works at a company, doing a regular job, but gets his/per paycheck from a head shop. I worked as a "contractor" for 5 years, and was never once freelance, and I never "consulted" with anybody: I just worked.
As a contractor, I was paid significantly more. I was paid hourly instead of salaried, so I was actually paid for my time. I got to take off time between contracts as I liked, because most of the contracting firms had tons and tons of jobs waiting. Also, I wasn't generally involved in inter-office politics. I got to "job-hop" without being damaged by it on my resume... I simply chose 3-6 month contracts so I wouldn't get bored. Switching jobs that frequently allowed me to grow my skill set and experience very quickly. I never did any more paperwork than anybody else because I was a regular W-2 employee. I had all of the benefits that I wanted because I could easily afford benefits and much more.
As a contractor, I usually felt bad for the "permanent" schlubs.
Being in my late 40's, it's almost impossible for me to find a technology or programming position with an established company. I'm either too old, too set in my ways, will want too much money, over experienced, too primadona, or too close to retirement age to be of any consideration compared to the 20-somethings out there. And since I don't want the headaches or want to play the politics of a management position, I'm basically forced into becoming a freelance consultant. With that in mind - I love it! I make my own hours. True, I usually work 60+ hours a week. But, I get to choose to take a morning off now and then without having to ask anyone for permission. Yes, the financials are a bit of a nightmare, but once you get the hang of it and keep track of every cent made, and every receipt, then it's not so bad. Also, if you have a lot of experience in a specific area of technology, and you have a knack at writing then you could also look at writing articles and books. Between writing and programming, I'm managing to keep pretty busy.
TheTiminator
I've been a contractor most of my 25 year career and I think it's the best way to go. You have no politics, fewer meetings, managers listen to you more than they listen to their own employees, and they don't waste your time as much. If you need something they tend to get it for you right away. There's also the variety, and for me the knowledge that I have a planned end date helps alleviate any frustrations and negatives there might be. I don't take jobs that I don't want, and I get free training by going after projects where I know most but not all of what's needed and can convince them that I'll be able to learn the rest quickly.
The only downside I can think of is that sometimes I do get attached to a place and don't really want to leave. But usually I can think of a couple negatives that balance that out.
To find jobs I use temp agencies such as Volt, and smaller ones that spring up all the time. I just send out my resume to the usual suspects when a project is winding down, and they find the jobs and arrange the interviews. All I have to do is show up. On average my projects last 6 months to a year and I have 3-4 weeks off between.
Agencies hire you a a W2 employee, so they pay their half of social security. I work a little over 45 weeks a year. Taking health insurance cost into account, my situation is roughly equivalent to having a full time job at $70-75k/year with 5 weeks paid time off and benefits. Not bad for web/db dev, and with no downtrodden-masses feeling that can come with a permanent job. Best of all, no maintenance assignments or beeper-carrying. All my work is new dev.
All in all it would take a mighty big carrot on a mighty big stick to lure me back to FTE.
Working for myself was nice because I could select the projects that I wanted to work on and then 'become' that type of business. I didn't make a lot of money that way since it took longer to do things, with every project being a new adventure. But it was an excellent education and I got by. Obviously, I was lacking economy of scale that larger and more assembly line ventures enjoy.
To run your own business, you have to be someone with the capacity to make sure people pay, be able to negotiate, deal with folks who don't compensate you, etc. You have to be able to have the courage to ask for fair wages. You have to deal with clients who change their specifications constantly and don't want to pay you more for it. I've taken to getting signoffs on the specs with the understanding that changing the specs later will result in extra cost.
This does provide flexibility and more free time, though personally I've had trouble keeping a steady flow of work which has hurt my overall profitability.
I tend to do a lot of long term contracts, and then pick up short term work in between jobs. It's a nice thing to be able to fall back on.
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It's the end of my comment as I know it and I feel fine.