The Rise Of The Contract Workforce (npr.org)

An anonymous reader shares a report: A new NPR/Marist poll finds that 1 in 5 jobs in America is held by a worker under contract. Within a decade, contractors and freelancers could make up half of the American workforce. Workers across all industries and at all professional levels will be touched by the movement toward independent work -- one without the constraints, or benefits, of full-time employment. Policymakers are just starting to talk about the implications.

[...] It's not just business driving the trend. Surveys show a large majority of freelancers are free agents by choice. John Vensel is a contract attorney at Orrick who grew up a few miles from Wheeling, on the other side of the Pennsylvania state line. In his 20s, he was a freelance paralegal by day and a gig musician by night. "I actually wanted to be a rock star," he says. But these days there are no edgy vestiges of a former rocker, only a 47-year-old family man cooing over cellphone photos of his children, Grace and Gabe. In the two decades in between, Vensel worked full-time corporate jobs. But he was laid off in 2010, on the eve of his graduation from his night-school law program. He graduated with huge piles of debt, into one of the worst job markets. For a time, Vensel commuted three hours round-trip to a full-time job in Pittsburgh. But more recently, he quit and took up contracting to stay near home in Wheeling.

Comments

Re:What do you want us to say?

[cayenne8]

Someone choosing to contract over being a W-2 truly is disadvantaged in many ways. This includes taxation (pays the full FICA tax), benefits (no individual health insurance market worth a damn), worker protection, vacation/sick/parental leave and retirement savings (401k's way superior to IRA's).

Even if the hourly rate is 2x, it still isn't quite enough to close that gap.

I'll agree that independent contracting is NOT for everyone, but if you want the freedom and wish to put in the extra work, it can be quite lucrative and satisfying.

First, with regard to the FICA (and medicare, the "employment taxes"). Yep, you have to pay both sides of this, HOWEVER there is a way around this somewhat.

You can form a S-Corp. With this you pay yourself (as sole employee) a "reasonable"salary, and you only have to pay the employment taxes on that "reasonable salary".

Example: Say you bill out $100K annually.

You pay yourself a "salary" of $40K. Throughout the year, you pay fed and state taxes and both halves of the FICA/Medicare taxes ONLY on that $40K.

At the end of the year, the remaining $60K, you deduct your business expenses, etc....and then the remainder falls through on your personal taxes, and you only pay federal and state taxes on that. That is your "disbursement".

Yep, takes some paperwork shuffling, but can be done.

For vacation/sick and health and retirement, well, you have to know what your bill rate is to negotiate.

And it is likely quite a bit more that double as you'd mentioned.

Over the years, I've been quite happy with my insurance I buy..I get a "high deductible" policy, usually with like $1300 deductible. With this I can open a HSA (Health Savings Account) that I fund fully each year Pre-tax. I pay my routine medical costs with this and the insurance policy is there for emergency care. Actually, after Obama care, the insurance part got MUCH more $$...due to the requirements to have stupid coverage I don't need (I don't ever need prenatal or maternity coverage, I'm a guy and not having kids)....but even so, you do your bill rate to cover that. It's not that difficult, and the coverage MORE than serves me well with my medical needs. And I am a bit older now, some pre-existing stuff, but still...is not that much a strain.

I have investment accounts set up and I put money way pre-tax to the max, and some that is post tax. I have in my bill rate enough to cover me to take off about 3 weeks a year sick/vacation.

Yes, it takes more of my time, but I get the benefits of making my own hours, taking off when needed. I'm fortunately enough to work remotely, so I can really set up shop wherever I want..I can be working from a bar in Key West if I wish....

:)

But no, it isn't for everyone....but it can be a nice and rewarding way to work. You bring in a LOT of $$, but you have to be disciplined enough to save for taxes, retirement and expenses....but even after that, you can make enough to have a good bit of disposable fun money too, depending on the field you are in.

It helps if you have people skills too...to get and KEEP longer term gigs.