Moving from a Permanent Position to Contract Work? 295
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?"
It was worth it (Score:5, Informative)
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.
Good link on the subject: (Score:5, Informative)
Previous Ask /. discussion (Score:5, Informative)
Switching to Contracting? [slashdot.org] KFN
Recommend Reading (Score:5, Informative)
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!
Re:Funny you should ask (Score:3, Informative)
Re:I went the other way (Score:2, Informative)
Money money money (Score:1, Informative)
Contracting sucks (Score:4, Informative)
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.
Re:It was worth it (Score:3, Informative)
Re:Clarification (Score:3, Informative)
Oh yeah, there is also the finance paper work...
Lots of benefits, some headaches, but worth it (Score:2, Informative)
Financial side of contracting (Score:5, Informative)
Both a techie and a salesguy be. (Score:3, Informative)
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.
the good, the bad and the ugly (Score:5, Informative)
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.
When I left... (Score:2, Informative)
I sent them a proposal and quote for how much it would cost to finish a major project they wanted me to work on. I quoted them at half the rate that it would cost for someone internally to do. It was a lot of money for me since at half their rate I would get enough to live on comfortably for a few months and still give me time to work on other projects.
They were slow to respond and never got me feedback on the proposal and eventually got an email telling me that they would like to continue the development internally. It was a bad economic blow for me and was living on the small projects that I expected to have fillers around that big project. I was making a fraction of the salary that I made at that company for many months, but I stuck with it. I ate less went out less. I cut down my bank statements from having hundreds of a transactions per month to a few dozen. The decision to leave was made in the beginning of this summer and used up a lot from savings to sustain, but I learned that a lot of the seeds that I planted a few months ago are just now becoming fruitful. I am in the process of signing 3 major contracts with people who I talked to months ago and I expect to be able to live on this easily for at least a year.
If I were to do it all over again, I would. It was the best decision I ever made. Freedom is great. I work more than I ever did at my old company. I am doing more advanced things and I am learning more. Because I don't have to be at the "office" I work whenever I want. I read more about other topics I am interested in.
BUT! discipline is everything. I make sure that I worked a minimum of 8 hours a day. I tried to do 10 though. If I wake up late, I work late. My housemates always comment about how disciplined I am and how I am always working, and it's true. Every moment you have, work. You also have to set boundaries. I never work on Saturday and Sunday. I turn of my cell phone and computer and don't touch my computer. I have another friend who does this and I suspect he's going to burn out pretty soon (i.e going to grad school).
Re:Job security does not exist anymore (Score:3, Informative)
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.
Health insurance (Score:5, Informative)
If your life goes perfectly and you don't have any problems then great - you gambled and you got lucky. But what if you get into a car accident/ get appendicitis, or something worse? - Do you really want to pay out of pocket for medical expenses? What about eyeglasses or dental?
People get into accidents through no fault of their own. It's nice to be an adult and PLAN ahead for the unexpected, instead of just gambling on everything being perfect.
Full Time Employee vs. Non-Payroll Worker (Score:2, Informative)
But your mileage may vary.....
Be prepared, don't do it on a whim (Score:2, Informative)
Re:I went the other way (Score:4, Informative)
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...
Re:Clarification (Score:1, Informative)
From the sounds of it, you're not a contractor at all; just a temporary employee, who isn't paying the proper taxes.
The problem here is that you're exposing your so-called client to legal risk. The I.R.S. can recategorize you as an employee, and force your employer/client to pay all the back taxes that they should have been paying, along with penalties.
In general, it's not a good idea to expose your clients to unnecessary legal risks. A real contractor WOULD know the the legal side of things, and not do this.
Important lesson I learned: SAVE! (Score:2, Informative)
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 and solid investments (low risk bonds and the like) juuuust in case
B.) to always save at least 10% of my gross income monthly even after I'd achieved A.
I personally watched four good-sized to lucrative contracts all at once drag on FAR longer than any reasonable person would have expected. Then there's the normal invoicing and payment delays, particularly so when working with very large companies, government, or educational institutions.
As for the mechanics of savings, IMHO ingdirect.com is a great way to do just that as they offer superior rates.
benefits (Score:5, Informative)
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.
Contracting != Freelance != Consulting (Score:5, Informative)
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.
My Advice... (Score:2, Informative)
General Advice
Pros
Cons
A recent experience (Score:1, Informative)
Can't say how it will go - so far I have been able to fill the pipeline with prior contacts and projects, and a few new projects that come by.
Good: I could take 3 month (planned) vacation this year.
Bad: It's a lot of work to manage the pipeline. It's bit unnerving when the pipeline gets pretty short.
Don't know how it will develop - may get back into being an employee, who knows. But you definitely learn a lot. I realized how insulated I was when working in a development outfit in a company as an employee. If you are practical/professional programmer/engineer (as opposed to researcher types), I think it's definitely worth it take the turn to see how it is.
Good luck,
Anonymous coward programmer
PS: You may want to set up with a sales/rainmaker type of outfit eventually, unless you like doing the adminstrative/sales work.
I switched recently. (Score:2, Informative)
Things I love? No more idiotic bank rules to follow, which only seek to prevent me from actually doing any productive work. Being able to work in an agile environment. Being able to actually focus on software development versus idiotic worksplace politics. Not having to sit in meetings half my life coming up with specs that will never be followed.
Things I don't like? You pay more taxes because you are self-employed and you have to deal with it (quarterly payments, etc...). That's my only complaint.
Use agencies instead of being self employed (Score:5, Informative)
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.
Re:Financial side of contracting (Score:3, Informative)
Retirement: There's the SEP-IRA. Very easy to set up. I use Vanguard. My company pays 10% of my salary into the fund, and I can do my own $3000 yearly IRA contribution as well. The limit on a SEP-IRA is 25% of salary. Note that if you have employees, as I do, the SEP-IRA contribution level must be the same for all. You can't pay yourself 25% and your employee(s) 5%.
Also, you should always incorporate. It makes sense legally, you can pay dividends and avoid payroll taxes (so long as you draw a "reasonable" salary), and it is generally easy to do on your own. Here in Illinois it takes a one page form plus filing fee. The annual filing fee is $100 then.
Larry
Contracting as a form of business management (Score:3, Informative)
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.
Re:Financial side of contracting (Score:3, Informative)
Larry
Re:Clarification (Score:2, Informative)
You're employer is allowed to stipulate whatever they like in the contract. You should read the proposed contract quite carefully before signing it. Usually you will be signing a standard contract from an agency that specifies that you will work the standard core hours of the client, unless agreed otherwise with your manager.
Re:Funny you should ask (Score:2, Informative)
The former contractor I made reference to has been in court for a couple of years, has lost his house and his wife over this, and imho, the pimp doesn't have a leg to stand on
I think the company (at this point) is just fighting 'cause it knows he's broke... :(
Re:It was worth it (Score:3, Informative)
Re:It was worth it (Score:2, Informative)
If you were reading my comment history, that particular comment (10353234 [slashdot.org]) was posted September 26, 2004. I decided that because I could not find normal employment in my field (and realizing grease really wasn't my thing) that I would open up my own shop.
In the interim I've put two competitors out of business, and acquired most of the local government contracts.
(Just for curiosity's sake, why do you feel the need to attack my comment in such a feeble manner... really, aren't there more productive ways to squander your time?)