Switching to Contracting? 613
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?"
Equally instable (Score:5, Interesting)
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)
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!
Just Do It doesn't have to be blind= go visit site (Score:5, Informative)
'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.
Re:Just Do It doesn't have to be blind= go visit s (Score:3, Funny)
Career? (Score:3, Insightful)
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)
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!
Re:Career? (Score:3, Informative)
Your car, your insurance, your retirement, your healthcare ( I strongly recomend Blue Cross/Blue Shield ), can all be written off. A good accountant will be able to help with this.
Since you are the only one owning the company, you want to keep your "salary" as low as possible (to cover what the company can't legally provide you with) that way you will pay lower taxes.
Again make friends with the local accountant. Pay
Contracting has a lot of cons - beware. (Score:5, Informative)
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.
Re:Contracting has a lot of cons - beware. (Score:3, Interesting)
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.
Re:Contracting has a lot of cons - beware. (Score:5, Insightful)
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
Re:Contracting has a lot of cons - beware. (Score:3, Informative)
Not to mention most contractors are paid on schedule 1099 which is taxed at a rate of your income tax level + 14%. BRUTAL
Re:taxes aren't one of them, really (Score:4, Informative)
About an accountant- It is highly recommended but not entirely necessary to go through an accountant for these things. Accountants are people just like you, and you can read the same books and tax codes that they do. Accountants make mistakes and get too aggressive too and YOU are the one signing the tax return- having an accountant doesn't reduce your liablity one iota. If you have the techie spirt figuring out what you can and cannot deduct should not be too difficult, and won't leave you a whimpering uneducated mess if the IRS comes a knocking for an audit.
Be Careful with Corporations! (Score:3, Informative)
1099 work is not corp-corp, and most companies will not pay a corporation with one shareholder/employee, since that
Re:Contracting has a lot of cons - beware. (Score:3, Insightful)
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)
Re:Just do it... (Score:5, Informative)
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
Wise old contract employee (Score:5, Insightful)
"Bill, we're all temporary employees here, it's just that only some of us know it."
Re:Equally instable (Score:3, Interesting)
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)
Re:Equally instable (Score:3, Insightful)
Re:Equally instable (Score:5, Interesting)
Salaried employees are free! (Score:5, Interesting)
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.
He's right, sorta... (Score:5, Insightful)
Re:He's right, sorta... (Score:3, Interesting)
Yes, he is right in that sense, but I was commenting more on how salaried employees are treated. Just because he is right doesn't mean it isn't bullshit. Cause guess who WASN'T working OT when the team was?
When the quality isn't what they want, guess what? Work overtime to compensate. Note that they don't really believe in this matrix. They want to optimize everything. It just *does* *not* work like that
Re:Salaried employees are free! (Score:3, Funny)
Tax withholding and the IRS (Form SS-8) (Score:5, Informative)
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]
Re:Tax withholding and the IRS (Form SS-8) (Score:3, Informative)
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
Re:Equally instable - But Fees pays your bills (Score:3, Informative)
If your contracting, keep track of your mileage. Check with your tax preparer, but you might be able to deduct it from your business income - no sense in paying self employment taxes on deductible items.
$100K/year == $100/hour (Score:2, Interesting)
Re:$100K/year == $100/hour (Score:3, Informative)
don't do it! (Score:5, Interesting)
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)
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)
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)
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)
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)
Look, there is no such thing as a permanent job any more. So, "full
If getting approval is such a hassle (Score:4, Insightful)
Re:If getting approval is such a hassle (Score:4, Informative)
I did a short-term (6 month) contracting gig when I first got married, as a means to bring in $$$ while looking for permanent work in my new home city (Indianapolis). Just because you land a contract position doesn't mean you have to stop the job hunt...
Re:If getting approval is such a hassle (Score:3, Interesting)
Tax liability... (Score:3, Informative)
same boat (Score:2)
Re:same boat (Score:3, Informative)
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).
My company has started hiring people as contractor (Score:2)
Retirement saving is better (Score:5, Interesting)
The Google keywords are: independent contractor retirement savings [google.com].
Taxes (Score:4, Informative)
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)
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:
- Talk to a trustworthy accountant
- Find a decent lawyer as well
- A financial advisor is a good idea as well but will overlap functionality with the accountant
- ask for guaranteed minimum terms on your contracts (six months or a year)
- 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.Re:Taxes (Score:3, Interesting)
A corporation with one employee will shelter that employee from personal liability when working for the company. (Though I'd guess gross negligence where there was bodily harm, could be tough still.) That liability would go somewhere though, and that is to the corporation.
The problem with incorporating is you can't get money out as easily. The corporation then takes payment for your work, and has to pay you (the employee) accounting for taxes, etc. At the end of th
Not much more (in taxes) (Score:3, Interesting)
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)
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,
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.
Yep. And keep track of it in 1- , 5-, or 6-minute increments, whatever makes the most sense to yo
Stable Company and high salary (Score:5, Insightful)
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)
All in all I would do it again and I recommend it.
It's probably not what you think (Score:5, Insightful)
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)
Re:Run... (Score:5, Interesting)
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)
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)
check out health savings accounts (Score:2, Interesting)
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
makes no difference except bennies (Score:3, Informative)
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.
Lack of stability? (Score:2)
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
Can you get something else? (Score:4, Informative)
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)
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)
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.
Contracting was good to me (Score:3, Informative)
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)
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)
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.
Contract to Perm normal (Score:3, Informative)
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.
Been a contactor for 10 years. No big deal... (Score:5, Insightful)
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)
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
Reasons to hire contractors (Score:3, Insightful)
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)
my experience (Score:5, Interesting)
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:
Some of the stuff I learned about contracting (Score:5, Informative)
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.
No unemployment insurance (Score:3, Insightful)
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.
Contracting is like coke the white powery kind (Score:3, Interesting)
Oh yeah, cause full-time is any better? (Score:5, Interesting)
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
.
Contracting is a mixed bag (Score:4, Informative)
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.
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)
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!
To Contract or Not to Contract... (Score:3, Informative)
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.
lots of things to consider (Score:3, Insightful)
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!
Depends on a number of things (Score:3, Informative)
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
Stability, training, overtime and holidays (Score:3, Informative)
I own a consulting/contracting company... (Score:4, Insightful)
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.
Form own Company, start own 401k plan (Score:3, Insightful)
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)
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.
Retirement? You've gotta be kidding, right? (Score:5, Insightful)
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)
Re:Retirement? You've gotta be kidding, right? (Score:3, Informative)
How to do it as a contractor (Score:3, Insightful)
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
I think it's great, Roth, Motley Fool (Score:5, Informative)
You should calculate your income as your income
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.
Just make sure you protect yourself... (Score:5, Informative)
A Contractor Speaks Out! (Score:3, Interesting)
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)
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
Where to start? Health Insurance (Score:3, Informative)
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
Benefits of contracting (Score:5, Insightful)
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)
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
Re:figure it out (Score:3, Insightful)
While I burn my karma here and take massive metamod hits for good measure, think about the front page "question" and then think about the OP response.
Seriously. Maybe the delivery was poor but the point is still valid.
*Instead of modding my response down as flaimbait/troll why don't you educate both myself and the OP response was anything but factual with an equally factual reply.
Re:figure it out (Score:3)
It definately helps to be more independent when you're a contractor, but not a guarantee of success OR failure.
If we give the guy the benefit of the doubt (he has at least superficially looked into retirement, healthcare costs, etc) we could assume he's asking for additional information. Any "independent" contractor that's stupid enough to think that he's done all the research and he can't be wrong deserves a smackdown.
Even if he is
Incorporate in Delaware (Score:3, Interesting)
http://ask.slashdot.org/comments.pl?sid=130655&ci d =10905562 [slashdot.org]
Incorporate in Delaware.
However, that user did not explain a point that many people do not know: you can incorporate anywhere. Your business does not have to be located there. Delaware has lots of nice provisions for the startup corporation. If not there, do some investigation first, and don't necessarily incorporate
Re:life insurance - BULLSHIT (Score:4, Insightful)
Childbirth was fine. It was the brain tumour that did her in.
Well, even without the insurance we did ok but life would have been a lot easier if I could have afforded a nurse because for 10 years I had to provide 100% supervision, support my family and raise my kids.
I did this through contracting. I was paid 2x what employees were paid - but I did absolutely excellent work (from home). My time was my own, my clients wanted me to clone myself, I had some of the most interesting project one could ask for, and I did have the support of my clients who really did do their best to help me out from time to time.
That being said I was so burned out from the stress after 10 years that I could no longer work. It took 3 years to recover - probably Post Tramatic Stress Disorder! Other than clients lifting work deadlines - I got no help from anyone. Insurance would have made a difference because if I were assured of a policy payout then I would have been willing to take on debt to hire help during the tough years.
Now if any people think that making 2x salary is enough in a situation like this.. forget it. Had I a normal day job I would have needed about 12 hours per day coverage and nursing staff are not cheap. Even with 2x salary I could not have ben able to afford 1.5 nurses salaries along with maintaining my own household.
My ONLY option was doing it all myself - or a premature nursing home - and that 2nd option was not in the cards.
So all in all - You do need insurance if you are married because if either gets sick its on the other's shoulders. Contracting is a good way to go - just make sure you do a really good job because your tenure is a 5 minute phone call.
As for steady employment? Well - I had to interview and hire my supervisor - but made 2x his salary. I didn't think that was a bad idea and I was able to STAY COMPLETELY AWAY from all office politics... everyone knew I was not after anyone's job!!!
The life of a contractor can be bliss.