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Moving from a Permanent Position to Contract Work? 295

Posted by Cliff
from the normal-paychecks-to-customer-billing dept.
duncan bayne asks: "I'm sure many developers in salaried, permanent positions have been tempted by the self-management, flexibility and higher pay that are the perks of being a contractor, while at the same time looking nervously at the uncertainty and irregular income. So, to all those in the Slashdot crowd who've made the change - what was it like, was it worth it, and what advice can you share?"
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Moving from a Permanent Position to Contract Work?

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  • Clarification (Score:5, Insightful)

    by rackhamh (217889) on Friday October 07, 2005 @08:44PM (#13744013)
    Contracting isn't exactly self-management. Many companies prefer to do all project management themselves and simply treat contractors as implementers.
    • Re:Clarification (Score:3, Insightful)

      by IDkrysez (552137)
      More likely self-management in terms of employment regulations -- IIRC, if you're a contractor then your employer is not allowed to define the hours of when you work or don't work; they can only define milestones for your progress and set times for meetings they need you to attend.

      You should get paid more, and have more freedom in this sense... and you'd need to be self-managing in terms of making yourself get the work done :)

      If you're lucky, you might've found a job where you can pretty much set your own h
      • Re:Clarification (Score:5, Insightful)

        by rackhamh (217889) on Friday October 07, 2005 @09:01PM (#13744106)
        IIRC, if you're a contractor then your employer is not allowed to define the hours of when you work or don't work
        That may be; I don't know the legal side of it. But in practical terms, on projects that require interaction with business groups, you will be working the same hours that they do. Furthermore, some companies will require that you work on-site, as a means of providing secure access to company resources -- which will also limit your working hours.

        I'm sure it's possible to build up a consulting business that avoids this kind of situations, but you may have to turn down some lucrative jobs to maintain such standards.

        • The parent post is referring to the trouble an employer can get into if they treat a contractor (1099, or otherwise) as an regular employee by defining work hours or requirements other than what the project dictates.

          This same situation is what led to the suit against Microsoft by what came to be know as permatemps. As well, an employer has to carry worker's comp insurance for employees and pay some benefits. If you are a contractor treated as an employee, the employer has to do these things.
        • by Anonymous Coward on Friday October 07, 2005 @10:28PM (#13744523)
          My consulting business took off the day that I decided that I would never again perform work on an hourly basis. It makes for difficult negotiations, but I insist on a flat fee and a set completion date. This allows me to over-perform by getting jobs done ahead of schedule, and my clients dont bother me about adhering to a schedule. I show up for meetings and any other duties at the client site, but I dont let them watch me program, and I aint there to teach anyone how to do anything for free. This way, I can manage 4-5 programming jobs at the same time, and never have to watch a clock. I get a bonus if early and a fine if I am late. If you fill out a timecard in order to get paid, then you are a temp. Plain and simple.
          • That only works if you have the same equipment, configured the same, as the employer. Most people don't have access to mainframes off site.
          • Bah, I prefer a time and materials contract at a decent hourly rate. That way the management side of things (handling change orders, scope changes, compensating for the lack of capability of others, etc) is taken care of. The client carries the risk of not having their s@!# together, not me, and if they don't I don't have to suddenly go into "reevaluation mode", I can just pull out the solution to the new problem and charge for my time.

            Giving accurate estimates for how long work will take and then meeting
    • Re:Clarification (Score:3, Informative)

      by tezbobobo (879983)
      I've actually had less autonomy. Whilst working for the company, they dictate your time and what they think you should be doing and so on. Since I went contract firm want a much stricter account of the time spent. For a person like me who'd prefer to get the job done and not worry about the paper work, that is very frustrating. All of a sudden lunch breaks and my many coffee breaks are a no-go or at east a keep secret. Same for cigarettes.

      Oh yeah, there is also the finance paper work...
  • by Anonymous Coward on Friday October 07, 2005 @08:45PM (#13744017)
    When I first started out it was definately frightening, however as time went on they kept giving me more and more responbility, eventually they ended up with a contract CEO. Don't ask. But the perk for me is that since I'm contract I can hit on the hot workers at my workplace without having to worry about any side effects. Try it sometime.
    • by winkydink (650484) * <sv.dude@gmail.com> on Friday October 07, 2005 @08:50PM (#13744032) Homepage Journal
      They can also tell you that today is your last day for no reason at all. Or worse, call you after you've left for the day and tell you not to come back.
      • "Willful employment" is a common practice, even amongst full time "permanent" employees. So what if they don't want you back. They still have to pay. They do have to honor a contract...unless there's a stipulation that says otherwise...or they can afford a decent lawyer to help them weasel out of it.
        • Most companies take some litigation prevention steps like verbal & written warnings, performance improvement plans, etc... At the end of the day, if they want to fire your butt, you're gone anyway, but, speaking as a PHB, it's a lot of work. In some companies, especially larger, profitable ones, it can be so much work, it's almost as if they want you to keep the dead wood.
          • Indeed. I contracted into SBC to analyze a migration of their accounts system to Java. It became obvious very quickly that two individuals controlled the entire system. Two "old school thought" guys who didn't want their egos bruised. I spent the last four months sitting there drawing money. They didn't give any kind of crap about what I did, so I got that time to do some online study and research.

            Last I talked to someone there (two yrs ago), they were still where they were then. Sad.
      • by nolife (233813)
        Almost any employer can do that, contract worker or not. I'd image there are variations from state to state though.
    • by kenevel (921288)
      I guess it has a lot to do with the culture where you're working now. I know guys who are happy at a small firm who have implemented XP who are well paid and have no inclination to jump ship. I was at a very large consultancy, itching for more responsibility and more design work and left without a contract to go to a couple of years ago. As soon as I had a leaving date, the interviews came in and I sorted out a contract within a week of resigning. Since then I haven't looked back.

      Where do you work to get fi
    • by nomad_monad (442915) on Friday October 07, 2005 @08:52PM (#13744050)
      Hot coworkers?

      Sorry, I think the original poster was talking about contracting for TECH companies...
    • by eln (21727) on Friday October 07, 2005 @09:25PM (#13744236) Homepage
      since I'm contract I can hit on the hot workers at my workplace without having to worry about any side effects.

      How do you figure? You can get sued for sexual harassment whether you're an employee or not. You can also be released from your contract for violating the employer's rules of conduct while you're in their building.

      Also, basically all CEOs and upper level management are on contract. They may draw a salary, but you can bet they have contracts spelling out things like severance pay and bonus structure.
  • It was worth it (Score:5, Informative)

    by RGRistroph (86936) <rgristroph@gmail.com> on Friday October 07, 2005 @08:50PM (#13744035) Homepage
    I think it was worth it to me. You have to realize that you won't always get higher pay and more flexibility; sometimes part of becoming your own one-man company is that you have less flexibility because you are the only one to do things. And while the pay may be more per hour often you get fewer hours, or spend huge amounts of time marketing yourself and doing research to setting up contracts.

    Still, on the whole it is worth it. You do have more independence.

    Traditionally people following this route have had former employers as their main clients. With sites such as scriptlance, rentacoder, guru.com, and etc., you can now get a larger client base, and even start doing it before you quit your old job.

    However, I do have to say, that if insecurity makes you nervous, maybe you shouldn't do it, or at least save up money for a while first.
    • You have to realize that you won't always get higher pay

      What are you talking about? I get paid a lot of... Whoa.. the lights are flickering. Dang, this happened at the same time last month. I'll just send this and finish when the power comes back up.. sorry.
    • Re:It was worth it (Score:3, Informative)

      by iminplaya (723125)
      I think it's worth it also, but doing your taxes can get pretty complicated, and you might find yourself paying into unemployement, workman's comp, etc. Self employment can be bureaucratic hell.
    • Re:It was worth it (Score:3, Interesting)

      by mre5565 (305546)
      Assuming you are posting from the USA, how do you deal with health insurance, given that the USA's system is biased toward employer provided health insurance?
      • benefits (Score:5, Informative)

        by lseltzer (311306) on Friday October 07, 2005 @10:06PM (#13744440)
        I've been freelance since 1998 and I'm on my wife's benefits. Yes, it would be much tougher without her (at least WRT benefits).

        There are other ways, although I haven't thoroughly investigated them, such as through The Freelancer's Union [workingtoday.org]. It's expensive there, but not really out of line for what your employer's paying for you in a "real" job.
    • The problem... (Score:3, Insightful)

      by artemis67 (93453)
      with bidding on projects on the job boards you mentioned is that you have guys from the US and guys from countries like India bidding on the same jobs. The US contractors want $80/hr, the Indian guys want $10/hr. It's very tough to land a freelance contract that doesn't require you to be onsite.
    • Re:It was worth it (Score:3, Interesting)

      by slughead (592713)
      I think it was worth it to me. You have to realize that you won't always get higher pay and more flexibility; sometimes part of becoming your own one-man company is that you have less flexibility because you are the only one to do things. And while the pay may be more per hour often you get fewer hours, or spend huge amounts of time marketing yourself and doing research to setting up contracts.

      Still, on the whole it is worth it. You do have more independence.


      I didn't find it worth it, but I never got establ
      • Re:It was worth it (Score:4, Interesting)

        by EnigmaticSource (649695) on Saturday October 08, 2005 @12:48AM (#13745022) Homepage

        Well, it seems to me that you lack the kind of skills to properly interface with the non-geek world. This unto itself limits your potential for acquiring and keeping new clients.

        It could've been just me and my inability to tell them how it is, but dealing with stingy and computer illiterate mom-and-pop's was just a nightmare.

        Stingy Mom and Pop's are exactly why I interview my clients... I never sign with anyone who haggles with me or is simply interested in doing things on the cheap. Blatant honesty helps also, during the first meeting with a potential new client I inform them that my prices are inflexible, my hourly rate is expensive, I don't do credit on material goods, I don't make any exceptions... and if they accept that they will receive a quality of work and service that they can't find elsewhere. I don't find it necessary to advertise, or even keep a website, all of my new clients are referrals.

        Despite the fact that it costs quite a bit over $1,000 to employ me for a day, I have no shortage of business (and this is in a county with a median income of about $30,000) and little to no downtime between contracts, and because I'm picky about who I take as a client, I never have the slow/late pay problems that seem to plage the people who will take any contract.

        • Re:It was worth it (Score:3, Informative)

          by idesofmarch (730937)
          I thought you were working as a heavy equipment mechanic, because you were unable to find work as a programmer in your town, or at least so you said on September 26. Do you get over $1000 per day as a heavy equipment mechanic? If so, kudos to you!
  • by jdclucidly (520630) on Friday October 07, 2005 @08:51PM (#13744039) Homepage
    I used this resource when I did what you are considering doing: "So You Want to Become a Consultant?" [unixwiz.net]
  • by HotNeedleOfInquiry (598897) on Friday October 07, 2005 @08:51PM (#13744040)
    But should be a stepping stone to having your own company that actually *makes* something. I was a consultant for about 1.5 years. Not great money because I was only doing part-time while designing my own product.

  • I went the other way (Score:3, Interesting)

    by $RANDOMLUSER (804576) on Friday October 07, 2005 @08:51PM (#13744042)
    Hell, I gave up and went the other direction (contract to employee) during Clinton's first year in office. Paying Social Security at 1.5 (then) times the rate everybody else was, paying 2.5 times what everybody else was for medical insurance, getting audited anually by the IRS for a chintzy office-in-home deduction, expected to amortize computer equipment over FIVE YEARS, fer chrissake...

    Feh!! Good luck to you. You can have it!

    • The office-in-home is a red flag from what I've heard. Of course, I'm not telling you to lie on your taxes, however, you probably wouldn't get audited for a similar deduction spread out over office supplies and mileage. ymmv.
    • by PCM2 (4486) on Friday October 07, 2005 @09:33PM (#13744281) Homepage
      Paying Social Security at 1.5 (then) times the rate everybody else was, paying 2.5 times what everybody else was for medical insurance
      Um, you realize that you're paying the exact same taxes you were paying before, right? It's just that before your employer would pay a portion of what the government wanted. Now you have to pay it all, because you are the employer. The plus side? You get to keep all the revenue -- minus, of course, the part that you set aside to re-invest into your business. But that's a whole 'nother story. If you can't even figure out your taxes, or hire an accountant to take care of them for you, and you don't know how to charge enough that you cover your costs, then maybe contracting really isn't for you.
      • by demana (753243)

        Um, you realize that you're paying the exact same taxes you were paying before, right?

        This is not true. For any corporation, medical insurance is a considered an ordinary and necessary business expense, and is deductible against income and payroll (FICA) taxes. For a self-employed person, however, medical insurance is only deductible against income tax, not self-employment tax (FICA). Thus, if a self-employed person and a corporation have exactly the same revenues and expenses, the self-employed person w

        • For a self-employed person, however, medical insurance is only deductible against income tax, not self-employment tax (FICA).

          The way around that is to "hire" your significant other (assuming you have one handy), and offer them family coverage insurance as a benefit. Then it is a wage expense instead of a self employed insurance deal.

    • by RichHolland (23236) on Friday October 07, 2005 @09:41PM (#13744325)
      Typically contracting you'll make 50-100% more per year (if you keep busy) than you would as an FTE. That MORE than makes up for the extra self-employment tax hit and benefits. You don't have to amortize a computer over 5 years -- write it off the first year as a Section 179 deduction. The rule varies in how much you can deduct each year; it's been rising from $20K up to around $25K now, I believe. One or two years in there it was up to $100K to stimulate small business spending in the economy.

      Pay for a CPA to give you advice and do you're taxes. The $1-2K/year you'll spend will MORE than be recovered when they show you how to correctly deduct things, etc.

      I've always opted NOT to deduce my home office. It's only 150 sqft of a 3500 sqft house, so I can't deduct all that much, and it's not worth the flags in IRS or the hassle in figuring out how much you have to repay when you sell the house in a few years...
  • It's a mixed bag (Score:4, Insightful)

    by TrekCycling (468080) on Friday October 07, 2005 @08:51PM (#13744046) Homepage
    I've been contracting for a couple years ago. I've discovered that contractors often get brought on board often to organizations that either are experiencing unmanagable growth or are stuck in the mud because of problems with business process. So it can be frustrating. But the money is better and it's nice to know that you can take a couple weeks off here and there (assuming you save your money, etc.).

    I think it's really a lifestyle thing. I like being permanently (although that word is a joke in this market) employed from the standpoint of working on the same project and getting some momentum for a while. But I don't have kids. Don't have a mortgage, so that's really the only advantage to me. That and if you like your co-workers a lot and want to stick with them. Those are reasons I'd rather be permanent.

    Not much help, I know. Like I said, it's a mixed bag. Permanence is about more than just stability in work. It's about stability in what you do, stability in who you work with. And depending on if the job is boring and if you like your co-workers this can either be a plus or a minus. I'm just glad I have the financial flexibility to make that choice and not worry (as much) about the financial end of it.
    • Health insurance (Score:5, Informative)

      by spineboy (22918) on Friday October 07, 2005 @09:20PM (#13744203) Journal
      One thing to consider - you might make a higher wage, because the company doesn't have to pay for your health insurance. Make sure you have health insurance for your family!!, and you. This can be quite expensive, and maybe worth sticking to the company, as opposed to being an independent contractor. You might want to look at the cost and see if you really are making more as an independent vs being a company man.
      If your life goes perfectly and you don't have any problems then great - you gambled and you got lucky. But what if you get into a car accident/ get appendicitis, or something worse? - Do you really want to pay out of pocket for medical expenses? What about eyeglasses or dental?
      People get into accidents through no fault of their own. It's nice to be an adult and PLAN ahead for the unexpected, instead of just gambling on everything being perfect.
      • Or even better, you could become a contractor in Canada, where medical is covered by your taxes. Eyeglasses and dental are extra, but insurance can be had for pretty cheap. And despite what you might hear about waiting times, the system isn't half as bad as it sounds. Waiting times are mostly only a problem on non-critical procedures such as knee and hip replacements. Sure, it's an inconvenience, but you aren't likely to die if your knee doesn't get replaced quick enough.
        • Waiting times are mostly only a problem on non-critical procedures such as knee and hip replacements. Sure, it's an inconvenience, but you aren't likely to die if your knee doesn't get replaced quick enough.

          Not to quibble too much, but if your knee or hip needs replacing (and from what I understand, those surgeries really suck), you'll lose quite a bit of quality of life until it gets done.

  • Sorry to not really answer your question, but I have one of my own.

    I am a salaried developer right now but I'm interested in doing part time work as well. What resources do people suggest for this kind of endeavor?

    Thanks.
    • The first and formeost is networking. as in people networks.

      Go to user groups that have interests and talk to them.

      Find small companies that hire out consultants. Sometime they'll need people they can call for short term projects. 3-4 days type stuff.

      Convert your curent salary to dollars per hour(based on a 40 hour week), triple it.

      Start ups can be a resource of people who need quick help now. In this case, you may have to lower your wage a little.
      In most cities there are places people running starts go to,
  • by talipdx (891867) on Friday October 07, 2005 @08:52PM (#13744048)
    I went from a cozy 3rd year job at an upstart, to managing my mom's spyware riddled m$ home network. Altho the hours are great with decent meal benefits a cozy corner office....... I for one, welcome avian flu. :[
  • by KittyFishnets (306744) on Friday October 07, 2005 @08:53PM (#13744056)
    There was a very good Ask Slashdot discussion on this topic, almost a year ago. It is worth reading:

    Switching to Contracting? [slashdot.org] KFN

  • Recommend Reading (Score:5, Informative)

    by Doc Squidly (720087) on Friday October 07, 2005 @08:54PM (#13744061)
    I recommend getting a copy of The Career Programmer: Guerilla Tactics for an Imperfect World [amazon.com] by Christopher Duncan.

    I read this after getting my first (and very bad) job as a programmer. It covers many aspects of working in I.T., including some of the differences between working as an employee or a contractor.

    Good Luck!
  • by teutonic_leech (596265) on Friday October 07, 2005 @08:55PM (#13744064)
    You actually might be better off - there are plenty of opportunities out there for talented contractors these days, especially senior people. The money is better, but you need to probably incorporate yourself to properly 'play the system' IYKWIM ;-) Bottomline is that you can probably make up to 30% more/year being a consultants, but bear in mind that you also need to buy your own health insurance, pay for your own 401k etc. So, don't be timid when negotiating your rate - if you have been making $100k/year in salary you probably should ask for at least $60/hr as a consultant, otherwise you're probably just break even or even wind up not making much more. BTW, that estimate consider approx. 3 months of no work per year. Good luck!
    • When he leaves that $100k/year job, have his former employer give me a call, k?

    • The 2 states that have contract positions paying $60/hr consistently is NY and CA. The rest of the country rarely go above $50, and that goes for even the most hardcore tech positions. The contracting market is IMHO dead compared to couple years ago when it was actually worthwhile to take some chances.

      And 401k is absolutely overrated. You save by evading tax now. But if you didn't evade tax and withdraw the amount, tons of financial companies have better ways to make greater gains with your money.
      • And 401k is absolutely overrated.

        The 401K is nice (as an employee) because it lets you save much more than what you normally could in an IRA or a Roth IRA each year.

        As a contractor (that's self employed), there are other retirement options that let you stick away as much or more than an IRA - see your tax guy!

  • by Phlatline_ATL (174344) on Friday October 07, 2005 @08:58PM (#13744082)
    I made this move a little over 3 years ago. I was in a desperate situation in that my employer at the time was axing people left and right, good people too. I ended up getting dumped an entire bag of junk and work that I couldn't perform. My coworker, who was in an architect manager role had had enough and made the jump about 3 weeks prior. I ended up hooking up with the same contracting firm he went to and got myself under a W-2 employment agreement with them. He on the otherhand already had a 1099 corp established and was able to get the appropriate agreements in place for it. I personally didn't want to go through the motions of establishing personal health care, the 1099 corp, etc. It just wasn't something I could stomach at the time.

    The jump was scary as all hell. I hopped on a new contract about 48 hours after leaving my former employer and started getting setup. Unfortunately, the position was not exactly as my account rep had conveyed with me. Nor was it as clear cut as the contractee's interview/position description stated. Needless to say, the first few weeks were a bit bumpy. I was able to establish a fairly good rapport with the client and things have been more or less peachy since. There is the temptation in some cases that, as contract, you will get paid overtime. I have to warn you. This is a blessing and a curse. When you do this stuff and go the extra mile, it sometimes becomes expected of you. While the extra money is nice, the long hours tend to really eat in to you.

    In early June, after a couple of internal management organization shifts, I was under the impression that my contract was stable through the end of the year. Well 1 week into June, I was informed that I would no longer be needed in my current role after 30 June. Needless to say I felt that I had just been screwed over, my contract firm was outraged, and I was really starting to freak out as my, then, girlfriend (now wife) had just moved in. Money coming in was VERY important. Luckily, my contract firm has feelers in all over this particular company, they were able to secure me a position quickly in C++ land, which I wasn't overly proficient at as having programmed in Java for the last 4 years, but it was work. The way the agreement was inked, I would be paid as a salaried employee up to 40 hours, get 2 weeks vacation time, 5 sick days, etc. Overtime was a bit of a sticker. I have to work something like 6% overtime or some such garbage before I get paid for it. Since my earlier experience put a real pinch on me, overtime was going to be minimal at most if I could help it.

    Long and short of this is that you should really research your options and your current situation. If you can stick it out and look for a perm position, go for it. If you are willing to "eat shit" for a while, you may come up smelling like a rose. My experience may or may not be the same that many people have. If you are confident in your skills and are able to adapt quickly to fluid situations, then you may want to try your hand at it. Make sure though that you have enough banked up to cover shortages in hours (i.e. around christmas time where code freezes may be rampant and actual work may be scarce).

    Hope my long winded telling of my last three years has not been over the top or wandering too much.
  • As long as you are confident in your skills and there is a market for them, you will usually do OK.
    I made the change about 10 years ago. There have been a couple of lean years, but generally I have been
    happy with the flexability and very happy with the money.

    Also you, to some extent anyway, can choose your work.
  • Contracting sucks (Score:4, Informative)

    by Loconut1389 (455297) on Friday October 07, 2005 @08:59PM (#13744093)
    For me, I have very few clients, one of which makes up the bulk of my income. I was sort of forced into contracting when that primary client couldn't afford to hire me full time with benefits.

    The working from home is very nice, and yet due to my 11.5 month old, I am far less productive. There's something nice to having a real office to go (away) to.

    As a contractor, make damn sure you have enough potential clients that can support your needs- for me, if my main client dumps me, I'm toast and there is no clause in the deal that they have to give me x-weeks notice since I'm not an employee.

    Anyway, contracting has its plusses- and if you've got a good client base, it can definately be better than working in a cubicle. But you're also off on your own and you assume all of the risk.

    So if you decide to wing it, work really hard to get and keep clients.
    • In most cities there is office space available for people like you. Don't asume that all office space is designed for growing companies with lots of employees. There are often spaces available where several individuals share the same facilities but do completely separate things. A Web developer friend of mine had a place like this once. basically had a common entry area that included a kitchenette (microwave, coffee machine etc.), a couch, and a coffee table with a couple of magazines where clients could w
    • Working @ home doesn't work so well with small kids around- "Honey can you change DD's diaper?", "Honey can you watch DD while I hop in the shower/run to the store/etc/etc?" Make sure you've got your own work space that is strictly off-limits to kids and significant others while you're "@ work". Otherwise you'll find your productivity is a fraction of what it should be.
  • Worth it, but hard (Score:3, Interesting)

    by TheViciousOverWind (649139) <martin@siteloom.dk> on Friday October 07, 2005 @08:59PM (#13744096) Homepage
    Well, it was definately worth it for me. - But it's not always more flexible. Sometimes a customer has a deadline, and if you promised it done to that date and are late, then you're gonna have to pull some hard work-hours the last week or so to reach it.

    Sure, there's some flexibility in the fact that you don't have to ask a boss for anything, but as soon as you get enough customers, you're pretty soon going to have the same workhours as you would in a normal job, because that's when people expect to be able to get hold of you over the phone, also it's a lot more difficult to fit in a vacation if you have lots of work piled up.

    And lastly, watch out, it's very easy to become a work-o-holic.
  • ... and I've been an incorporated independent consultant ever since.

    I consider that to be the best decision I've ever made in my life.

    No more twelve hour days at the office.

    No more wearing a leash on your neck, every weekend, dialed in remotely, and having to provide coverage and support for the preciousssssssssssssss weekend produciton job runs.

    And making twice as much money (even after factoring in the overhead of being self-employed), then the salaried schmucks who sit next to me.

    And I still have a decen
  • i have a part time salaried job and also some contract work. the contract stuff is top notch pay and sexy tech, but, it comes and goes. nothing for months, then boom, a windfall

    i keep the part time gig because it is close by to where i live and it's a nice low stress place... my hours are also flexible with them as well. i'm not making yearly bonuses like i did back in the dot com boom era, but then again, i'm not having a heart attack every day either. granted, it helps that it is a small company where the
  • I quit my 'career' IBM job back in May to take a contract job. I'd been shoved from Sprint -> IBM 6 months prior, and while it took 6 years to become disillusioned with Sprint, it took only 6 months for IBM to rip my soul completely out.

    Anyhow. The contract job is, for me, a better job by far. My work ethic is solid, my attention to detail and creativity, equally solid. I was working 60 hours a week for Sprint/IBM, and I work between 60-65 hours a week now, but the results are sooo totally different. I c
  • The pay is usally fairly good as compared to employee (even considering their benefits.) If you do not live in metro area though you may find yourself flying into a job on Monday and returning home on Friday. If you like that life then go for it. I did it while I was young and loved the travel. Now that I have a child, I don't want any part of it. Additional benefit, as an consultant I have worked for many different companies, IBM, Cap One, Citibank etc etc. I've learned a lot of business domains. As an em
  • by G4from128k (686170) on Friday October 07, 2005 @09:05PM (#13744129)
    My own experience is that some of the financial issues for contractors are a big change versus being an employee.

    1. Delays in getting paid: Timely payments are a big issue for contractors. Whereas an employee gets paid like clockwork, some contractor situations involve invoices, approvals, and getting the check from the accounting department. It may take 30 to 60 days between doing the work and getting the check. A good cushion in a savings account helps buffer irregular payments for the self-employed.

    2. Estimated tax payments: The IRS wants its cut and with no automatic deductions, its up the the contractor to figure out and make timely payments. If you get to the end of the year without making these payments, you may be surprised at: a) how much you own on the accumulated earnings, b) that you own even more due to penalties (a 50k contracting gig can easily create $10,000 in tax liabilities -- which could be a nasty surprise come April 15th).

    3. Expenses: Start collecting receipts for all the office junk that you must now buy and own yourself. You might consider devoting a room in your house as a home office (and taking the home office deduction) but there are reasons not to (we don't) and the full list of pro/cons is beyond the scope of what I can confidently discuss.

    4. Benefits: Contractors need to get their own health insurance. The downside can be the cost. On the plus side, you can get the health plan you want in terms of deductable, types of coverage, etc. For people with good financial self-discipline, a high-deductable plan and an HSA are great -- the health insurance premiums are lower and they permit much greater tax-free deductions of healthcare expenses.

    5. Retirement plan: Again, the contractor is on his own. The good news is some self-employed, small-business retirement plans are pretty nice. A QRP/KEOGH lets you sock away up to 20% of net revenues before taxes (much better than the limits on IRAs).

    • Regarding taxes, buy Quickbooks or some such, it's easy to track it all then. My S corp pays me a W-2 salary, and I withhold taxes. Every month, I pay the IRS via the EFTPS web site -- online tax payments. Make sure your company banks enough to pay the taxes -- watch your balance sheet. I take distributions as well (dividend payments) and must make quarterly estimated tax payments on those. Thanks to Bush though the tax rate on those is great.

      Retirement: There's the SEP-IRA. Very easy to set up. I use Vangu
  • by crism (194943) <crism@maden.org> on Friday October 07, 2005 @09:06PM (#13744130) Homepage
    I had a nearly-ideal opportunity; my employer was closing, and our sole customer needed a development department. I knew their offer was a panic reaction, and wouldn't last, so I offered to consult (non-exclusively) for a few months. That allowed me to launch my independent consulting career, which lasted a little over four years.

    My problem, however, is that I'm not good at sales: cold-calling, lead-tracking, pavement-pounding. Once in contact, I could generally make a sale, and deliver solid work for good prices, but it was only enough work to break even after rent and taxes. When things temporarily slowed down, I didn't have much cushion.

    I'm very glad I did it, but I wouldn't do it again without a bigger operating buffer or a sales partner. You really need to combine technical and sales skills to succeed.
  • by iggymanz (596061) on Friday October 07, 2005 @09:08PM (#13744141)
    Having done both at various times over 24 years, here's the poop for USA:

    1. you'll have to make more than 50% as self-employed as you do salary to keep about the same benefits and have same income after taxes counting time between gigs making $0.

    2. mediocre health insurance not including dental or eye for whole family: $430/month near chicago area, other posters might also give some rates.

    3. Bookkeeping will be a pain: educate yourself on estimating and making quarterly tax payments or just opting to pay penalty, keep record and receipts, know tax laws for business expensing, entertainment expense, and use of vehicle, which is complicated. Tax software for the self-employed helps a great deal, highly reccomended.

    4. Don't quit your day job and then start a business or look for contract work. Start your business while you work, or get a contract with appropriate start date and then quit job with proper two weeks notice, don't burn bridges. If you help your current employer to make a smooth transition you can usually use them as a good reference later. So no mooning/flipping the bird/taking dump in desk drawer of the CTO or your boss on the way out

    5. Having a search engine friendly resume on internet has lead to most of my 6 -8 month contract jobs in last five years, not bulletin boards or job sites or snail mail or newspaper ads.

    6. You can't restrict yourself to projects that are cool or exciting, some might involve some boring/legacy/archane junk that you've done before and the client needs someone with that hard-to-find skill. Happened to me twice in last 3 years.

    5. You're in sales/marketing now, baby! of yourself - you need to network with people to see what opportunities are there, let people you you're willing to tackle projects, aggresively pursue follow-on projects and look for other work at clients.

    • by 2Bits (167227) on Friday October 07, 2005 @09:47PM (#13744349)
      I did it for one year, almost ten years ago. It sucked, especially for #6 above. As a contractor, you are considered a code monkey, you are not involved in any part of the project except coding, fixing other people's bugs, and testing. Well, it makes sense, which company is stupid enough to let contractors do the core?

      I was contracting at BNR (Bell Northern Research, in Ottawa) once, for 6 months. My main work was to fix bugs and maintain two 2-year-old modules of the Magellan ATM switch. The Magellan switch (at the time) had a nasty problem in the back plane design that it could not handle two-way connections, you had to use 2 one-way connections to simulate a two-way connection to make a call. To make a call, you have to go thru a grid of back planes, and you had to take care of state management in HW redundance, etc, which greatly complicated things. The employee who implemented the 2 modules for billing didn't understand it or didn't have experience, it was a classical example of spagheti code. There were at least 3 emergency calls from customers every week. I could've lived on that contract for at least 2 years, if I just fixed an urgent bug a week (which reduced the response time to 1/3 already), and the manager would be really happy.

      But I was so efficient in fixing bugs that the group manager kept loaning me to other groups to fix bugs, and made quite a bunch of money on me (each group had internal budget). At the end, with the manager's approval, I just rewrote the 2 modules.

      The work was no fun, and you are considered outsider all the time. The group manager was nice enough to invite me for group activities (which was an exception), but you are not allowed to participate in core works. You know full well that you could do a better job, but you have to implement some really lousy design.

      And there's no chance for you to get promotion, regardless of your work.

      So, if you don't mind the ugly codes, the no-fun work, being considered an outsider, no way to feel being part of a team, no chance for promotion, and if you are disciplined enoguh, etc, then go ahead.

      Being part of a team is the fun part, regardless of office politics. You won't have that feeling as a contractor.
  • When I left... (Score:2, Informative)

    by nailchipper (461706)
    I left my own company because my friend and I were going to team up and work freelance. When I told my bosses that I was going to leave (as expected) they first tried to convince me to stay but after they saw that I was not going to stay they said "Well, I guess that is all" and I said "Well, not really" and explained that I can still be contracted to do some of the projects that I worked in. Then, they were really excited and we both saw that it could be a good deal. They didn't have to pay for health insu
  • by betelgeuse68 (230611) on Friday October 07, 2005 @09:17PM (#13744188)
    Prepare to be disappointed. Most contractors are implementors. That's one way. Another more albeit more negative way of looking at them is "sh*t shovelers", aka grunts. Most contractors are brought in when high level decisions and designs have been made. The contracting business is nowhere as robust as it was 10 years ago. With IT budgets slashed and the birth of offshoring, unless you're damn good and have made a name for yourself, I would not recommend it for the faint of heart.

    -M
  • My biggest advice is don't move into the contracting world until you have clients. Try to get some relationships doing afterhours work, and or try to land at least one big ongoing contracting gig without enough lead time to quit your job when you get it.

    When you can't possibly keep up with the work is when you should quit your day job, and you probably won't have either enough work or money at that point.

    Expect that you'll spend a lot of time self-marketing and that it may take a long time to substantially

  • One thing you will discover when contracting, as compared to being an employee is that the political environment changes in a beneficial way. When you are an employee, frequently your boss will dangle or suggest that working a lot of OT will be reflected in your next review. Maybe, maybe the story changes by the time of the review. When you are contracting, your rate is negotiated up front - no ambiguous incentives.

    I found this greatly improves the dialog between you the contractor and the people who hired

  • I think that people fresh out of school should seek out salaried positions for the first 1-5 years to build experience (learning the real consequences of a missed deadline is the single best lesson during this timeframe). After that, I think they should think seriously about going into the contract market. The "risk" associated with being a contractor (depending on your location) is no more than that of an employee. It's just a matter of different illusions/perceptions. The best job security, in my (not so)
  • If you work for contracting firms, you can do work that deals with various situations and diverse industries. In some ways, contracting can be safer than some corporate jobs. With all the outsourcing that goes on, it might be safer to be on the outsourcing side of things. But then again, not all companies do outsourcing or the outsourcing they do varies.
    On the flip side of things, you can encounter slow times. It really depends if you're getting long term contracts or short terms contracts.
  • Before I funded Feeling Software, I researched the market for several months. I also contacted hundreds of former colleagues, industry contacts, etc. I made sure I had enough cash in the bank to last at least 6 months. (It takes on average 2-3 months before I get paid by my clients, partly because currency exchanges from USD to CND means that checks are frozen for a month.) I read several books, e.g. "Getting started in Computer Consulting (Meyer)". I had nearly 10 years of commercial experience for highly
  • Mobility is key (Score:3, Interesting)

    by adoll (184191) * <[ac.gnitlusnocdga] [ta] [llod.xela]> on Friday October 07, 2005 @09:31PM (#13744265) Homepage Journal
    I do contract engineering work for mining and oilsand clients. In the last 5 years I have worked, in order: in Calgary, Vancouver, Edmonton, Vancouver, Edmonton and am currently in Vancouver. Two of the lean times have been very lean and forced the move from city to city, the other moves were chasing better opportunities.

    Two other comments:
    -I could never have made this work if I was encumbered with a wife/offspring.
    -I will never go back to being an employee. Well, if I get hungry enough I might, but if I'm not hungry, then I'm not interested in being an employee.

    -AD
  • I wouldn't count on flexibility and higher pay. You'll have two jobs where before you had only one: You'll be the boss, but you'll also have to be the employee.

    I've seen my income go both well over and well under what I was making before going into business for myself. Overall, I'm making less money than I used to, but I'm far more independent. If you value independence more than money, self employment is a good gig. If you value money more, stay in the korporate world.

    More money? Check the prices of health
  • by RingDev (879105) on Friday October 07, 2005 @09:41PM (#13744327) Homepage Journal
    I pulled contracting gigs from 2k1 to 2k4. And it was okay. I was a single early 20s guy, fresh out of the military with vetrans health care and a strong liver. Jump up to 2k4 and I had a wife, kid, and a house to keep tabs on. My last contract was killing me because health insurance was not included and the bill for family coverage was $980/month. So a year ago I got hired on to a local very successful and stable company, and I've been loving it ever since. No more down time with unemployment and odd jobs to pay the rent. No more putting my resume into 600 applicant positions. No more worrying about what will happen when I finish a project. Nope, I took a slight pay cut, but I gain full health insurance, 401k with 8% matching, profit sharing, a yearly bonus (depending on sales), a cubicle with a window view, and a project list about a mile and a half long. Job security is a beautiful thing!

    -Rick
  • by Anonymous Coward
    It is easy to underestimate the value of the benefits that most "permanent" employees have. I recently considered a contract position that was going to pay $70/hr. In my current position I make good, but not great, money as a Java architect. I did the math and figured up the monetary value of my benefits (stock, 3 weeks vacation, sick days, holidays, 401k) and the "break even" point for me was somewhere between $60 and $65/hr. Oh, and by the way I wouldn't see any money as a contractor for about 65 days. An
  • I got out of college and got a decent salaried position in NJ at a small online retailer. The pay was about what you'd expect. Then I quit because I was moving across the country, to Idaho. When I got here, I took a contracting position at a very VERY large computer/electronics firm here whose name consists of two letters. I was writing automated scripts in TCL to test the firmware on certain hardware devices they make. In general, contractors were looked down upon as second-class citizens, even though we m
  • Was it worth it? Yes, from an experience point of view you can see how much technical value relates to business. Like shockingly only 33% of a total gig. Successful contractors get the big picture of a problem/customer and can apply their expertise to develop a solution. That's why you're paid the big bucks in contracting. Unsuccessful contractors just get paid big bucks (and screw up the implmentation, hence contractor/consultants get a bad wrap in general--like lawyers). Then again that can sound just as
  • The first time I did this, I transitioned from an FTE to an independent contractor. There were some resentments about this, and I was seen as disloyal by some. Politics being what it is, I was soon released.

    Next time I did it right. Working at a small consultancy in a pretty independent way to start with, I started volunteering to take small projects that didn't pay until delivery, on a fixed bid basis. Then I was able to hire some guys to help me and turn around and justify being paid for these projects as
  • All I know about it is that consultants contribute a lot of code to the Daily WTF [thedailywtf.com]
  • Consulting maxim:
    You have no job security, even if you think you do

    From what I've seen, this is getting to be pretty equal in a salaried/hourly job as well. I've seen projects set back months because someone copped an attitude with the wrong person. Not to mention a highly paid consultant can get the project back on track, and for less than your annual salary in most cases. Not always true(well, really, it is, but people want to think it's not)
  • and the direct employment has included some pretty short term stuff with failing dot coms. I made good money ... and I was gone in 6 monthes. The turbulence or if you want to talk like a Republican, the dynamism of the tech job market means you wont have a lot of job security in either mode of employment.
    so why am I telling you to go for the contracting if it interests you? You MUST like honing your skills and learning new systems, languages, applications etc and if you can hack the contracting, it wil
  • Before a business partner and I decided to go on our own, I made a point to have at least six full months of money at my current standard of living *before* we made the leap. Because of certain choices I/we made in landing some of our contracts, it got dicey towards the end. Luckily, it has gone well since.

    I'll tell you what: Once I saw how quickly the six months passed with contracts dragging on and on, I've since made two pledges to myself:

    A.) to have at least 1 full year of loot in the bank in cash
  • I worked full-time for a couple years out of college and then switched to contract work because I wanted to move to NYC and have a career as an actor -- but not one where I'd have to wash dishes and temp all the time, as I figured trying to be an actor is enough stress without adding 'work twice as hard for half as much as you made before' to the mix. While the acting business isn't really relevant to the question here, it does have a couple small but important side effects: I don't have to support myself -
  • There are (IMHO) two kind of contracting/consulting jobs:

    1) 100% real independant: you find the client, you convince him, you do all the work from home.
    2) being pimped: some firm calls you, you go work "in-house" for their client just like any other employee, but you're paid much more than if you were a "perm" since you're expendable, no insurance, no retirement, etc.

    I've done both and I have to say being 100% independant is a lot tougher: you must spend a lot of time shopping the client, convincing him, ma
  • The short test (Score:5, Interesting)

    by bhmit1 (2270) on Friday October 07, 2005 @10:26PM (#13744518) Homepage
    If you didn't have the constraints of being an employee, would you work more or less?

    If you'd work more because you get paid by the hour, enjoy what you do, have a desire to understand how businesses are run, and now have a vested ownership in the results, then you're on the right path to start contracting.

    If you like having the business do the business part for you (legal, financial, insurance, management, etc), like knowing that you can leave work behind after your 40 hours a week, and you don't go home trying to figure out what else you could be doing (and not just because you signed an IP agreement) then you're probably better off as an employee.

    It's a big leap, and everyone here is right when they say you take on more costs (but you already knew that I hope), that there's more work, taxes, risks, etc. But it really comes down to a personal desire, since if you have that desire (and hopefully some ability that people will pay for), then everything else will work itself out.
  • Has been doing the job shop thing since 91. He has worked 12 of the 14 years and made better money than he did as a salaryed Engineer (EE) for Hughes Aircraft. He can do it all, hardware or software, but prefers programming. He took early retirement in 91 and gets the GM retirees discount on all vehicle purchases, plus his full pension. Right now he is in Phoenix with Honeywell for the fourth time, 60+ hours a week for hourly wages over $40/hr, thats over $100K/year. He spent 3 years in Syracuse, NY and did

  • One of the things that you'll want to do right off the bat is talk with a lawyer about startup costs and the type of business that you'll be going into.

    It might not seem important now, but the choice between SP, Partnership, DBA, LLC or S-Corp will have a big impact on your tax situation and your liability.

    Also try to get a handle on contracts (the legal kind) as you will need to know where you stand when you sign one, and what you will be responsible for. You don't want to have a large company comin
  • by NineNine (235196) on Friday October 07, 2005 @10:56PM (#13744645)
    A "contractor" is the field of programming is somebody who works at a company, doing a regular job, but gets his/per paycheck from a head shop. I worked as a "contractor" for 5 years, and was never once freelance, and I never "consulted" with anybody: I just worked.

    As a contractor, I was paid significantly more. I was paid hourly instead of salaried, so I was actually paid for my time. I got to take off time between contracts as I liked, because most of the contracting firms had tons and tons of jobs waiting. Also, I wasn't generally involved in inter-office politics. I got to "job-hop" without being damaged by it on my resume... I simply chose 3-6 month contracts so I wouldn't get bored. Switching jobs that frequently allowed me to grow my skill set and experience very quickly. I never did any more paperwork than anybody else because I was a regular W-2 employee. I had all of the benefits that I wanted because I could easily afford benefits and much more.

    As a contractor, I usually felt bad for the "permanent" schlubs.
  • by TheTiminator (559801) on Friday October 07, 2005 @11:06PM (#13744689) Homepage
    Being in my late 40's, it's almost impossible for me to find a technology or programming position with an established company. I'm either too old, too set in my ways, will want too much money, over experienced, too primadona, or too close to retirement age to be of any consideration compared to the 20-somethings out there. And since I don't want the headaches or want to play the politics of a management position, I'm basically forced into becoming a freelance consultant. With that in mind - I love it! I make my own hours. True, I usually work 60+ hours a week. But, I get to choose to take a morning off now and then without having to ask anyone for permission. Yes, the financials are a bit of a nightmare, but once you get the hang of it and keep track of every cent made, and every receipt, then it's not so bad. Also, if you have a lot of experience in a specific area of technology, and you have a knack at writing then you could also look at writing articles and books. Between writing and programming, I'm managing to keep pretty busy.
  • by serutan (259622) <snoopdoug&geekazon,com> on Friday October 07, 2005 @11:57PM (#13744864) Homepage
    I've been a contractor most of my 25 year career and I think it's the best way to go. You have no politics, fewer meetings, managers listen to you more than they listen to their own employees, and they don't waste your time as much. If you need something they tend to get it for you right away. There's also the variety, and for me the knowledge that I have a planned end date helps alleviate any frustrations and negatives there might be. I don't take jobs that I don't want, and I get free training by going after projects where I know most but not all of what's needed and can convince them that I'll be able to learn the rest quickly.

    The only downside I can think of is that sometimes I do get attached to a place and don't really want to leave. But usually I can think of a couple negatives that balance that out.

    To find jobs I use temp agencies such as Volt, and smaller ones that spring up all the time. I just send out my resume to the usual suspects when a project is winding down, and they find the jobs and arrange the interviews. All I have to do is show up. On average my projects last 6 months to a year and I have 3-4 weeks off between.

    Agencies hire you a a W2 employee, so they pay their half of social security. I work a little over 45 weeks a year. Taking health insurance cost into account, my situation is roughly equivalent to having a full time job at $70-75k/year with 5 weeks paid time off and benefits. Not bad for web/db dev, and with no downtrodden-masses feeling that can come with a permanent job. Best of all, no maintenance assignments or beeper-carrying. All my work is new dev.

    All in all it would take a mighty big carrot on a mighty big stick to lure me back to FTE.
  • by heroine (1220) on Saturday October 08, 2005 @12:13AM (#13744922) Homepage
    Many programmers like contracting because it's a way to run a business without having to deal with people. They give themselves a company name, write off their apartments as work expenses, and speak to no-one for days at a time even though they occasionally need to win clients.

    Most of all the experience of running a company/contracting is fair game for getting into corporate management later on. Most of the managers in multi billion dollar corporations are former contractors who listed their contracting job as "president of X".

    Contracting does not produce more income than full time employment. Contractors devote a substantial amount of their income to higher social security tax, medicare tax, health insurance which companies provide their permanent employees. In fact, most contractors are paid less then "permanent" employees because they don't get annual bonuses or severance.

    The payoff is the corporate management promotion. The contractors of today may be broke, but in a few year's they'll be multi billion dollar corporation, homeowning, plasma TV watching, managers while the rest of us are still sleeping in shipping containers.

  • by PsiPsiStar (95676) on Saturday October 08, 2005 @12:50AM (#13745029)
    Working for myself was nice because I could select the projects that I wanted to work on and then 'become' that type of business. I didn't make a lot of money that way since it took longer to do things, with every project being a new adventure. But it was an excellent education and I got by. Obviously, I was lacking economy of scale that larger and more assembly line ventures enjoy.

    To run your own business, you have to be someone with the capacity to make sure people pay, be able to negotiate, deal with folks who don't compensate you, etc. You have to be able to have the courage to ask for fair wages. You have to deal with clients who change their specifications constantly and don't want to pay you more for it. I've taken to getting signoffs on the specs with the understanding that changing the specs later will result in extra cost.

    This does provide flexibility and more free time, though personally I've had trouble keeping a steady flow of work which has hurt my overall profitability.

    I tend to do a lot of long term contracts, and then pick up short term work in between jobs. It's a nice thing to be able to fall back on.

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