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The Almighty Buck Businesses

Switching to Contracting? 613

Posted by Cliff
from the full-time-jobs-with-no-benefits dept.
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?"
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Switching to Contracting?

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  • Equally instable (Score:5, Interesting)

    by fembots (753724) on Tuesday November 23, 2004 @08:45PM (#10905183) Homepage
    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?
    • Just do it... (Score:5, Interesting)

      by p.rican (643452) <spammesilly@@@gmail...com> on Tuesday November 23, 2004 @08:55PM (#10905296)
      Be your own boss (kinda) while you dont have the worry of kids hanging over your head.

      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!

      • by count0 (28810) on Tuesday November 23, 2004 @09:48PM (#10905746)
        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 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.
        • Career? (Score:3, Insightful)

          by kurt555gs (309278)
          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.

          • Re:Career? (Score:5, Interesting)

            by DenDave (700621) on Wednesday November 24, 2004 @04:03AM (#10907483)
            You should carefully weigh what you feel. Do you have a natural drive or are you more interested in things outside your sphere of work? If you have the need to charge forward and can self-motivate then, assuming you have decent social skills, you could probably make yourself a better living as a contractor. As for your questions about health and retirement I would suggest you check with a local expert. Perhaps your bank or your lawyer could point you in the right direction. That direction, of course, is a decent accountant (similar to a geek but it doesn't count in binary, it counts in $).

            What is important to remember is that you really will need to have good social skills, I have seen so many "coders" try to go independant and fail because they think that they can just "geek" their way through.. uh uh uh... nope, wear that suit and articulate properly, yes, go for aftershave! As an independant, YOU are the executive and you must look the part. I cannot stress this enough!!

            Good luck and Go get 'em tiger!
      • by m101 (834048) on Tuesday November 23, 2004 @09:52PM (#10905777)
        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/ [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.
        • all of the above are moot points if he is going to be working for a consulting firm.

          I think being a W2 consultant is the best of both worlds, if you get benefits from your firm. It pays more than a direct hire position, you don't have to fool with the 1099 paperwork.

          If you're greedy go for the full 1099 or corp to corp contracting.
        • by zuzulo (136299) on Wednesday November 24, 2004 @12:03AM (#10906588) Homepage
          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 ...
          • by a factor of 2.5x - 3x to get my hourly rate as a contractor.

            Not to mention most contractors are paid on schedule 1099 which is taxed at a rate of your income tax level + 14%. BRUTAL

        • You need to pay attention to these things, but it also seems like they are looking to hire your on full time, it's just easier to get a contractor req. than an employment req. (for them). They probably want to see how you work out before they go to the hassle (for them) of hiring you on as an employee.

          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

      • Re:Just do it... (Score:5, Informative)

        by freakshowsam (647103) on Tuesday November 23, 2004 @09:55PM (#10905794) Homepage
        I've been contracting for the past 5 years as well. I've found it is better to be a contractor if you work for the right agency. Most agencies take between 25%-60% of your revenues for doing nothing but sending a bill out and writing you a check. Seriously take a look at PACE [pacepros.com]. P.A.C.E. stands for Professional Association of Contract Employees. PACE is a Virtual Corporate Back Office, Revenue & Expense Tracking, and the Best Benefits Package Available to ANY Contract Professional ANYWHERE in the USA. PACE also produces the contract employee's newsletter [pacepros.com] that has some valuable information for any contract employee. PACE bills the client for me and sends me the check. They do have a small 5% service fee, but it is well worth the benefits. PACE has also authored the The Contract Employee's Handbook [cehandbook.com]. The handbook is a MUST read for anyone considering contracting. You might also check the PACE Agency Conversion Payroll Spreadsheet [pacepros.com] for more information. Be sure to tell them that Damon sent you ! --freak
        • Re:Just do it... (Score:5, Informative)

          by Anonymous Coward on Tuesday November 23, 2004 @11:37PM (#10906437)
          I've been working via PACE for the last 3+ years. Not only do they let you keep the money you make (small 5% fee), they do ALL the paperwork and invoicing.

          But the reason I'll be staying with PACE as long as I can find the work, is the benefits. The 401(k) plan is awesome. Every year, I max out my personal cap midway through the year (~10k USD), and on top of that PACE has an unbelievable company match, so good that I can get another 10k in as company match. They also provide insurance paid 100% from your division funds, and not with your after tax dollars.

          Highly recommend going with PACE! If you don't say Damon sent you, then you can tell them Ryan sent you. ;)

          --Ryan

      • by xs650 (741277) on Wednesday November 24, 2004 @01:04AM (#10906879)
        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."
    • Re:Equally instable (Score:3, Interesting)

      by skids (119237)
      You are right. I used to consider myself pretty "secure" having a government job, but then they up and moved the facility where I was working over an hour commute away (don't say I'm whining, becase you have a longer commute. I'm an environmentalist so in addition to the time, there's the extra guilt.)

      If you are the type of person who leaves customers happy, and impresses people with your skill, you can do really well with contract work... if you make a good impression with a temp/pro-services agency wit
    • Re:Equally instable (Score:5, Informative)

      by MaineCoon (12585) on Tuesday November 23, 2004 @09:02PM (#10905361) Homepage
      As a side note, that Google 'own hobby/project time' deal involves a hobby/project that is related to work and could potentially benefit the company, and is still company owned work.
    • It's true that 'perminant' employees aren't more protected, but when it comes to lay-offs in times of belt tightening, contractors will likely go first.
      • Re:Equally instable (Score:5, Interesting)

        by avdp (22065) * on Tuesday November 23, 2004 @10:00PM (#10905837)
        Funny, where I work (I am a contractor there) the full time employees were the first to go in those belt tightening times. You see, we contractors are just overhead. We're like the ream of paper next to the printer. We don't count. PHB's seem to look at "how many employees do we have?" and we don't show up in that column. We're invisible in many ways. It is definetely an advantage when they're looking for heads to cut.
        • by gosand (234100) on Tuesday November 23, 2004 @11:53PM (#10906536)
          Funny, where I work (I am a contractor there) the full time employees were the first to go in those belt tightening times. You see, we contractors are just overhead. We're like the ream of paper next to the printer. We don't count. PHB's seem to look at "how many employees do we have?" and we don't show up in that column. We're invisible in many ways. It is definetely an advantage when they're looking for heads to cut.

          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.

    • by holt_rpi (454352) on Tuesday November 23, 2004 @09:58PM (#10905818)
      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 [irs.gov].

      Also, take a look at this PDF form [irs.gov] 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. [herald.com]
      • "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."

        try 15.3% (for the amount up to 87,500 and 2.9% on everything beyond that) self employment tax. half of that is what you would usually pay anyway as a W2 employee in social security and medicare.

        also, you can take half of the
  • by Anonymous Coward
    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.
  • don't do it! (Score:5, Interesting)

    by danielrose (460523) on Tuesday November 23, 2004 @08:47PM (#10905206) Homepage Journal
    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.
    • Re:don't do it! (Score:5, Informative)

      by poot_rootbeer (188613) on Tuesday November 23, 2004 @08:56PM (#10905312)
      On the other hand, the company I work at has hired nearly a dozen tech resources as contractors over the past two years, and except for one that was determined not to be a good fit for the position, all of them so far have been converted to full-time employees after 12 months on the job.

      Companies tend to like making contract-to-perm offers these days not to screw members of the workforce, but to make sure that members of the workforce don't screw them. Is it justified? I'm not sure.
      • Re:don't do it! (Score:4, Interesting)

        by Ohreally_factor (593551) on Wednesday November 24, 2004 @02:02AM (#10907089) Journal
        Way, way back I temped for Transamerica (you know, the pointy building on the San Francisco skyline?), with the carrot of a fulltime postion dangled in front of me if I did a good job. Well, I was a mediocre worker, at best, so they didn't keep me on, but after I had been there a month, this other temp was made permanent. He was a good worker, knew when to show initiative and when to shut up. He deserved it, I didn't. But I appreciated the fact that the management had been straight with me.

        Many times since then (and when I was much more serious about my work), I've been offered a similar proposition, i.e., contract-to-perm. And I quickly realized that for some companies, this is just the standard smoke they blow up your ass. It's a counterfeit chip they use when negotiating your contract and it's a phantasm they continue to use to "motivate" you.

        Last time I had a staff position, the owner was pretty greedy. He wanted to move me to contract status! He sat me down and explained to me how I'd be the one who really benefited for over an hour. I took him up on it, but subsequently was too busy making money working for others to ever do any contract work for him. He brought up the matter of the "NDA/Non-compete" I had signed, and I told him to look at the actual contract I had signed, not the version he kept on his computer. I had crossed out all the non-compete clauses with a red pen and initialed the changes. Someone had filed it away, and he never bothered to check it. So I was free to work for his competition. I always go up and give him a hearty hello and a handshake whenever I see him at trade shows. Anyway, I'm just rambling now.

        So, go ahead and take the contract work, but take the contract-to-perm promise with a grain of salt. There are some companies that genuinely do as they promise, but there are many that are just pissing on you and telling you it's raining. And NEVER, NEVER negotiate away anything based on the promise of eventually getting a permanent position.
    • Re:don't do it! (Score:3, Interesting)

      by Euler (31942)
      Exactly,

      There is real contracting, and then there is 'contracting' which sounds like this situation. The latter, 'contracting', is really just working as a temp or through a temp agency who's office you've never set foot in. The 'contract' is basically: "We'll hire you without benefits as long as we can and pay you a few bucks less until we determine that you are docile enough to work for us on our payroll."

      Your options are:
      - Write your own contract which is truly equitable and see if they bite.
      - T
    • Re:don't do it! (Score:3, Insightful)

      by rackhamh (217889)
      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
    • Maybe do it! (Score:3, Insightful)

      by TheMCP (121589)
      I've had a number of employers that made this exact same claim - that they'd hire me as a contractor because the approval is easier, or because they need me to prove I'm capable, and then give me a full time position later - and they've all come through. In the case of my most recent employer, the boss made up his mind about me and started pushing through the paperwork for my hire as a regular position after I'd been there about two hours.

      Look, there is no such thing as a permanent job any more. So, "full
  • by Omkar (618823) on Tuesday November 23, 2004 @08:47PM (#10905208) Homepage Journal
    Ask yourself if you really want to work decades for a company where getting approval is such a hassle.
  • Tax liability... (Score:3, Informative)

    by Anonymous Coward on Tuesday November 23, 2004 @08:48PM (#10905216)
    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.
    • Re:same boat (Score:3, Informative)

      by squidfood (149212)
      My rule of thumb is to charge 30% more for contracting than for salary ( salary / 1920 * 1.3 to get hourly rate).

      I did the calcs at two diff. jobs over the last four years, and the break-even point was around 25% in one, 35% in the other (extra salary needed to buy missing benefits: health, paid vacation, retirement).

  • 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.
  • by gorbachev (512743) on Tuesday November 23, 2004 @08:49PM (#10905224) Homepage
    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 [google.com].
  • Taxes (Score:4, Informative)

    by Ween (13381) on Tuesday November 23, 2004 @08:49PM (#10905229)
    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.
    • Re:Taxes (Score:5, Insightful)

      by killmenow (184444) on Tuesday November 23, 2004 @09:14PM (#10905466)
      Be smart and incorporate. This protects your personal assets to a higher degree and makes things a lot easier.
      Are you quite sure? Whether he is a sole proprietor or a corporation with one employee (himself), he is still personally liable for his actions. The benefit to incorporating is you are protected from the actions of employees. A sole proprietor with employees is very vulnerable. Also, I would disagree with the "makes things a lot easier" statement. A sole proprietor has a lot less paperwork to do than he would if he formed a corporation with a single employee (himself).
      You will need an accountant to help you out.
      Agreed, 100%. And a lawyer. Same thing. People will say you can do it yourself, but an accountant and a decent lawyer are invaluable.
      Every cost you incur in your business is pretax deductible. Every cost you incur as an individual is after tax.
      As a sole proprietor, all of my business expenses come off the top, just like they would were I an LLC or a Corp. Insurance costs are 100% deductible now in my state. So, again, there's little tax advantage to a corporation vs. a sole proprietorship. But you're right: running your own business opens a lot of expenses up to be pre-tax deductions.

      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:
      1. Talk to a trustworthy accountant
      2. Find a decent lawyer as well
      3. A financial advisor is a good idea as well but will overlap functionality with the accountant
      4. ask for guaranteed minimum terms on your contracts (six months or a year)
      5. 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.
    • I don't know where you come up with "a third"...

      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 e

    • Muddled (Score:5, Informative)

      by wurp (51446) on Tuesday November 23, 2004 @09:24PM (#10905562) Homepage
      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%)

      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, ... I'm sure I'm missing some stuff here.

      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.
    • Re:Taxes (Score:3, Informative)

      With a full-time gig, you have safety and the security of knowing that your income is whatever they decide to give you. As a contractor, you are in business for yourself; it's the first step to a life in which your income has no set limit.

      • [...] 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.

      Yep. And keep track of it in 1- , 5-, or 6-minute increments, whatever makes the most sense to yo

  • by Forge (2456) <kevinforge AT gmail DOT com> on Tuesday November 23, 2004 @08:50PM (#10905237) Homepage Journal
    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.
  • Contracting.. (Score:3, Interesting)

    by IceCat12 (442300) on Tuesday November 23, 2004 @08:50PM (#10905239)
    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.

  • by Cylix (55374) * on Tuesday November 23, 2004 @08:50PM (#10905241) Homepage Journal
    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.
  • Run... (Score:3, Insightful)

    by cdrudge (68377) * on Tuesday November 23, 2004 @08:51PM (#10905251) Homepage
    The position was listed as full-time but they want me to come on as contractor because the approval is easier to get.
    Let me get this straight. They post an ad for a full-time position, even yet to be approved, but they want to bring you on as a contractor because it's easier to get approval. Right. What they are really looking for is a cheap temp that they can easily get rid of in a few months when they are done with you.
    • Re:Run... (Score:5, Interesting)

      by phaire (798105) on Tuesday November 23, 2004 @08:54PM (#10905286)
      Depends on the job. Most contracts I've taken have been short-term for almost that reason: if you don't work out, they want to be able to get rid of you.

      If you're right for the job, then chances are the contract will be extended (depending on what kind of job it is). I've never had a contract that only lasted as long as the initial duration, and about half of them have lead to full time positions.
    • Re:Run... (Score:3, Informative)

      by archen (447353)
      For a company I would think that it makes sense. Where I work we continually hire VERY bad employees. Getting them through the system, getting them acclimated, only to find something very wrong, then going through the process of getting rid of them is a huge burden on the company. Now of course this is all because of the idiots in management who hire these people, but what do I know?

      Seems to me that if I contract someone and they prove that they would make a decent employee, then by all means hire them. Th
    • Re:Run... (Score:3, Insightful)

      by timeOday (582209)
      Let me get this straight. They post an ad for a full-time position, even yet to be approved, but they want to bring you on as a contractor because it's easier to get approval.
      I think you're confusing "full-time" with "permanant."
  • 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 employe
  • by karlandtanya (601084) on Tuesday November 23, 2004 @08:53PM (#10905265)
    Do the math--is the pay less bennies acceptable to you?


    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.

  • I've done both. Longest period of employment as a contractor: six years, I quit. Longest period of employment as an employee: just under five years.

    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

  • by Blasphemy (78348) on Tuesday November 23, 2004 @08:54PM (#10905277)
    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.

  • Did it myself (Score:3, Insightful)

    by j_cavera (758777) on Tuesday November 23, 2004 @08:54PM (#10905285)
    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
  • Contracting (Score:3, Insightful)

    by onyxruby (118189) <onyxruby@@@comcast...net> on Tuesday November 23, 2004 @08:55PM (#10905302)
    Once you start you can't stop. Seriously, its next to impossible to ever go back to being a "real" employee. I know people from 1 to 25 years experience and not a one of them can get a real job. The only thing anyone can get is a contract. As a result almost all of them have no health insurance, retirement or loyalty.

    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.

  • by Aggrazel (13616) <aggrazel@gmail.com> on Tuesday November 23, 2004 @08:57PM (#10905321) Journal
    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.
  • not good (Score:3, Insightful)

    by MikeFM (12491) on Tuesday November 23, 2004 @08:57PM (#10905326) Homepage Journal
    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.
  • Do the math (Score:3, Insightful)

    by darylb (10898) on Tuesday November 23, 2004 @08:59PM (#10905347)
    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.
  • by linuxtelephony (141049) on Tuesday November 23, 2004 @09:03PM (#10905371) Homepage
    It's normal for a lot of companies to start you off as a contractor before going full-time.

    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. :)

  • by wernst (536414) on Tuesday November 23, 2004 @09:05PM (#10905387) Homepage
    This is going to be short since I need to get back to work. (heh heh heh)

    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.

  • Umbrella Companies (Score:3, Informative)

    by euphline (308359) on Tuesday November 23, 2004 @09:07PM (#10905396)
    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
  • by jridley (9305) on Tuesday November 23, 2004 @09:08PM (#10905408)
    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.
  • Buy This Book Now!! (Score:4, Informative)

    by tiny69 (34486) on Tuesday November 23, 2004 @09:09PM (#10905409) Homepage Journal
    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.
  • my experience (Score:5, Interesting)

    by CAIMLAS (41445) on Tuesday November 23, 2004 @09:13PM (#10905463) Homepage
    1) First, take base pay (P), and multiply by 2/3rds.

    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:
    ((2/3)P - SP - RP - H)/52 - L >= 0.05(L)
  • by dukerobillard (582741) on Tuesday November 23, 2004 @09:14PM (#10905465)

    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.

  • by PenguinRadio (69089) on Tuesday November 23, 2004 @09:14PM (#10905470) Homepage
    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.
  • by infonography (566403) on Tuesday November 23, 2004 @09:21PM (#10905535) Homepage
    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.
  • by JoeShmoe (90109) <askjoeshmoe@hotmail.com> on Tuesday November 23, 2004 @09:24PM (#10905561)
    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
    .
  • by nathanh (1214) on Tuesday November 23, 2004 @09:25PM (#10905565) Homepage

    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.

    • If it's only going to be short term, go through an invoicing company. They will generate invoices, follow through on collection, do the leg-work for your taxes, liabilities, insurance, and give you the remainder as a salary. The fee should be $2-3/hr (that's every hour you work).
    • If you're going to do it yourself, hire an accountant. After a while you will learn enough from the accountant that you can attempt it yourself, but don't try and learn it on the run. You will make a mistake. It might be a costly mistake.
    • You're lucky and you're starting a full-time contract with a single employer. You can expect 1500-1800 hours per year of billable work. If you have multiple contracts then that time can drop down to 1200 or even 1000 hours per year.
    • If you want a $50k/yr salary then charge $50/hour. That's the rule of thumb. You will be surprised how many ways the government has of stripping your money away from you. I consider myself a socialist and I'm still appalled!
    • Invoices take between 4-12 weeks to get paid out, if you're lucky. Build up a cash reserve to cope with long delays in receiving payment. The rule of thumb is 6 months salary in reserve.
    • If you're doing this long-term then get your accountant to incorporate your business. Then your company can pay you a salary. This gives you both financial stability and reduced liability. It also makes tax-time significantly easier.
    • Wear a suit. The problem with being a contractor is that you have to appeal to both sides of the fence; techies and non-techies. The non-techies are impressed by well-dressed people and they're the ones who renew your contract. The techies will give you shit but if you dazzle them with your brilliance then they'll get over it.

    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.

  • Go for it! (Score:3, Interesting)

    by diggem (74763) on Tuesday November 23, 2004 @09:27PM (#10905583) Homepage
    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!
  • by Corwyn_123 (828115) on Tuesday November 23, 2004 @09:27PM (#10905586)
    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.
  • by Gunzour (79584) <`slashdot' `at' `tycoononline.com'> on Tuesday November 23, 2004 @09:27PM (#10905587) Homepage Journal
    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!
  • by smalloy (600866) on Tuesday November 23, 2004 @09:35PM (#10905639)
    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
  • by Timbotronic (717458) on Tuesday November 23, 2004 @09:43PM (#10905717)
    I've been contracting for the last 3 years and haven't looked back. Some points from my experience:

    • Get legal advice on the contract. Every single employer I've had has 'tried it on' in one way or another. From a miserly 3 hour notice period, to outrageous restraint of trade clauses. Most are bullshit and will be waived as soon as you raise them. So make sure you do!
    • Most modern workplace contracts for full timers really don't give you a lot more job stability than contracting. Just make sure you negotiate a reasonable notice period (eg. 4 weeks or better) before you sign.
    • If possible, charge by the hour. My hours are much more reasonable now that my employers know that the meter's running. That's great for families and you're not working overtime without pay
    • ALWAYS get your timesheet signed off. Add a reference to your contract with the agreed rate and something to the affect of "he did this work AND we're happy with it" on the timesheet. In the worst case scenario of a dispute over pay or a bankruptcy dispute, timesheets are your legal record and they have a lot of clout
    • One of the benefits of being full time is getting training. So factor in that you'll have to pay for this yourself and remember you won't be paid whilst you're getting trained
    • Enjoy the extra holidays! I'm taking Christmas and all of January off to take a round the world trip. Try doing that full time! Again, remember you're not paid for holidays (or your 401K or medical, insurance etc) so factor that into your rate
  • by cjustus (601772) on Tuesday November 23, 2004 @09:44PM (#10905721) Homepage
    ... and I've been contracting for about 10 years myself... I'll tell you why I love it:

    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.

  • by FerretFrottage (714136) on Tuesday November 23, 2004 @09:51PM (#10905760)
    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 /.

  • Your rate. (Score:3, Insightful)

    by C10H14N2 (640033) on Tuesday November 23, 2004 @10:05PM (#10905872)
    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.
  • by CatGrep (707480) on Tuesday November 23, 2004 @10:06PM (#10905879)
    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.
    • Look (Score:3, Informative)

      by yoshi_mon (172895)
      If your going to use a K5 artical as the basis for your post you could at least link [kuro5hin.org] it.
  • by alexhmit01 (104757) on Tuesday November 23, 2004 @10:30PM (#10906034)
    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
  • by arete (170676) <.areteslashdot2. .at. .xig.net.> on Tuesday November 23, 2004 @10:37PM (#10906077) Homepage
    As someone who's been contracting for a while now, I think it's great.

    You should calculate your income as your income /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.

    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.

  • by neurocutie (677249) on Tuesday November 23, 2004 @10:38PM (#10906082)
    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).
  • by l0ungeb0y (442022) on Tuesday November 23, 2004 @11:33PM (#10906395) Homepage Journal
    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.
  • Just do it. (Score:3, Interesting)

    by Thagg (9904) <thadbeier@gmail.com> on Wednesday November 24, 2004 @12:04AM (#10906594) Journal
    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

  • by haledon (43675) on Wednesday November 24, 2004 @01:42AM (#10907025)
    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
  • by defile (1059) on Wednesday November 24, 2004 @01:45AM (#10907033) Homepage Journal

    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.

  • Simple Formula (Score:3, Informative)

    by Overzeetop (214511) on Wednesday November 24, 2004 @11:16AM (#10909082) Journal
    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

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