Contracting vs. being a full time employee - WWYD?

[Firebird]

So I've been at my new job for about six months now.  It's the first time I've ever been a contractor instead of a full time employee (unless you count the six week stint at the job before this, which I decided wasn't a good fit and left for this position). 

Pros and cons as I've experienced them so far:

1)  Being hourly instead of salaried - I'm not sure to count this as a pro or con.  On the one hand, I despise having to track every hour and make up hours when I have a doctor's appointment or something.  I also don't get paid when the company is shut down for holidays.  On the other hand, when overtime is required we either get paid for it or we can "flex" the hours to leave early or take a day off.  As a salaried employee, I wouldn't be compensated for overtime and this job doesn't always fit neatly into a 40 hour week.  

2)  Flexibility - a definite pro.  I have WAY more freedom as a contractor than I did as a FTE.  I can work from home when necessary and set my own schedule to some extent.  That is NICE (part of it is the culture and would still be true even if I became an FTE, but part of it is the nature of contracting).  But it goes along with...

3)  Decreased security - I don't like the feeling that my contract could end at any moment.  Although my assignment is relatively stable and my contract currently goes through July, there's definitely a sense of "don't get too comfy" which makes me nervous.  Especially since I'm the most junior person on my team by a wide margin.

4)  Lack of benefits - the company that employs me and owns my contract actually does offer limited benefits (medical, 401k - no match - and sick leave) but not much beyond that.  I didn't realize how spoiled I'd gotten with respect to benefits  

There are five people on my team right now.  As of today, only one of us is a FTE and the other four (including me) are contractors.  The eventual goal as I understand it is for everyone on the team to be FTEs.  So I'm trying to decide if I want to remain a contractor or become a FTE (assuming I'm even given a choice).

DH and I are planning to move within a couple of years, as most of you know from my other thread, but it's far enough off that this alone wouldn't preclude me from becoming a FTE, especially since I don't even know where we'll be and it's not impossible that I could do this job remotely. 

Much bigger considerations for me:

1)  Do I want to give up the flexibility and freedom of contracting, especially since I'm not sure this is the right career path for me?  I like it for now and I'm learning a lot, but I'm only six months into it which isn't really enough time to know if it's right for me long-term.  Becoming a FTE in this role would make it tougher for me to transition out if I wanted.

2)  Salary negotiations would be tricky - I'd need to factor in the noncompensated overtime and frankly, at this point I'm probably better off being paid for overtime and renegotiating my bill rate every six months as I increase my skills than agreeing to a salary which may not increase for awhile.  I'm not underpaid by any means (technically I make more than I did at my previous job) but the rest of my team outearns me by quite a bit due to my inexperience.  They'd be in a much more favorable position to negotiate a salary wage than I would be at this time.

3)  Getting benefits back and feeling some sense of job security would be nice.  Getting paid when the company is closed would be nice.  Having a 401k match for the first time would be awesome.

I don't need to make a decision right this minute but it's been on my mind lately and I decided I could use some good old impartial YM feedback  

As before, I will only be responding sporadically.  I read the boards occasionally during the day, but don't have time to comment in depth.

[HoneyBBQ]

As a parent in a dual-income household - flexibility is extremely important to me. Unfortunately I have to take care of most of the routine household items - dog vet visits, Dr visits with DD, etc. And having the flexibility to come and go sounds fantastic. I sometimes run to the grocery store at lunch and I'm even thinking of hitting the gym. That is one of the reasons I moved to this job; less demands on my time, and for me time >>>> money.

[Firebird]

Me too- and like I said, some of that is part of the culture here. Pretty loose and relaxed, we're all adults and get our work done without micromanaging each other. So I'd probably retain some of that flexibility even as an FTE.

[justme]

1) Being hourly instead of salaried - I'm not sure to count this as a pro or con. On the one hand, I despise having to track every hour and make up hours when I have a doctor's appointment or something. I also don't get paid when the company is shut down for holidays. On the other hand, when overtime is required we either get paid for it or we can "flex" the hours to leave early or take a day off. As a salaried employee, I wouldn't be compensated for overtime and this job doesn't always fit neatly into a 40 hour week.

2) Flexibility - a definite pro. I have WAY more freedom as a contractor than I did as a FTE. I can work from home when necessary and set my own schedule to some extent. That is NICE (part of it is the culture and would still be true even if I became an FTE, but part of it is the nature of contracting). But it goes along with...

3) Decreased security - I don't like the feeling that my contract could end at any moment. Although my assignment is relatively stable and my contract currently goes through July, there's definitely a sense of "don't get too comfy" which makes me nervous. Especially since I'm the most junior person on my team by a wide margin.

I actually have all of that and I'm a FTE. We contract with the government so I have to track my hours, and if I work over time I either can take time off another day in the pay period or I can get "over time" pay if approved (which is just my straight hourly rate x # of hours worked over 40/week). I can work from home (the contract I'm on allows it, though not all do) and right now my contract was only extended to Feb so I'm definitely not totally secure. Though I do get FTE benefits.

Are you so sure that moving to FTE with the company would get rid of 1 & 2?

[giramomma]

How are your H's benefits? Does he have a stable job? Are you planning to have more kids?

I'm lucky in that I have a flexible job while working for the man. Some weeks, I'm out of the office 3 times for my kids' activities, gone for up to two hours at at time. I also have the freedom to work wherever I can get a wifi signal and plug in my computer. I've also negotiated only being in the office M-Thursday. (It's also not uncommon for me to be working at 6 am if I can squeeze some work in..) So, what I'm trying to say is that is IS possible to find a family friendly/flexible job as a FTE.

As the primary breadwinner (DH earns 13K/year at a contract job), mom, and woman, my benefits are priceless. I was able to take 4.5 months off for maternity leave with my last kid and have it be completely be covered with PTO (at my job, there are no maternity leave benefits). I have enough vacation time to go on vacation AND spend extra time with my kids over the summer.

Job security is also a must for me.  So far, it's worked out OK. I've been employed by the same entity now, for 12 years. As long as I don't break any major laws, I will have a job until I retire. That's unheard of these days.

I think not getting compensated for overtime and jobs not fitting neatly int 40 hours are pretty much the way of the world these days.



 

[shanendoah]

My very good (and very successful) friend says "the only difference between a contract job and a regular job is that with the contract job, you know the end date from the beginning and can prepare". I will say she happens to work in the games industry, which is notorious for it's annual lay offs. But I do think that if you understand the trade-offs and can negotiate your contract to take those into account, being a contractor probably wins out due to the freedom and flexibility it offers.

[Deleted]

One issue is that as a "contractor" you are not covered by workman's compensation, not entitled to UI, and you will pay both halves of your SS contribution, so 15% off the top of your pay goes to the IRS.

I prefer contracting for companies where I can work when I want to. This is a GREAT perk in my life. It allows me to work when I feel well and not work when I don't.  I also enjoy working at night from home because that is when I tend to be the most productive.

[Phoenix84]

Why do you think becoming a FTE would make leaving harder?  You just put in your resignation letter and that's that.  So I'm not sure if that should be a consideration.

Anyway, I'm not sure how much additional job security would be gained from being a FTE.  Employers have demonstrated that they'll cut FTE's as easily as contractors when things get tight. 

I think the main deciding factor would be the benefits vs. the flexibility.  But you gave me the impression the flexibility had more to do with the culture than being a contractor.  So I would probably go for the FTE if asked, for the benefits.  It sounds like things wouldn't change much, if at all, if you were to become a FTE.  Only this time you'd be getting benefits.

[Firebird]

I actually have all of that and I'm a FTE. We contract with the government so I have to track my hours, and if I work over time I either can take time off another day in the pay period or I can get "over time" pay if approved (which is just my straight hourly rate x # of hours worked over 40/week). I can work from home (the contract I'm on allows it, though not all do) and right now my contract was only extended to Feb so I'm definitely not totally secure. Though I do get FTE benefits.

Interesting, justzombies (name link isn't working for me right now).  I'm pretty sure that all FTEs at this company are on salary, although they are still required to submit their hours weekly. 

But other than that, good point on the flexibility retention.

How are your H's benefits? Does he have a stable job? Are you planning to have more kids?

Good, yes, and probably someday (not this year).  

His company was just bought out but I see that as a positive for him.  Assuming he's retained (never can tell but I think the odds are in his favor and I'm not just saying that because he's cute), the company that bought his used to be their biggest competitor and they have many more locations, so he'll have a lot more options for transfer at a later date.

I was able to take 4.5 months off for maternity leave with my last kid and have it be completely be covered with PTO (at my job, there are no maternity leave benefits)

*Firebird's eyes turn green as she reminds herself that no one is entitled to paid maternity leave*

I think not getting compensated for overtime and jobs not fitting neatly int 40 hours are pretty much the way of the world these days.

True, and it's not that I have any problem working overtime (at my last job, the "normal" work week started at 50 hours, not 40 - and I worked much less than anyone else in my department - so ironically, generally sticking to a 40 hour week means I'm home more with this job even with a longer commute).  But as I said, I'm not sure I'm in a good position to negotiate my salary here.

To put this in perspective, I currently make $40/hr, which is pretty great (at least I think so - bear in mind I was making $70k base + bonus at my last job), but the other two contractors doing the same job as me earn approximately twice that ($80-$85/hr) because they have years more experience. 

So if it come down to hard salary negotiations right now, those two are in a position to negotiate a pretty hefty yearly salary - probably north of $170k or so.  Factoring in overtime and adjusting for benefits, I *might* be able to negotiate $90k or so.  And as most of us know, huge raises once you accept a salary aren't likely to happen all that frequently.  On the other hand, if I remain a contractor then I have an opportunity to renegotiate my bill rate every six months.  And meanwhile, I get paid when I work overtime.

That's my take on the money angle.  But I'm totally open to feedback.     

More responses shortly. 

[Firebird]

shanendoah, good point regarding knowing the end date. Oh, another potential downside to contracting with this company I forgot to mention is that there is a two-year tenure limit. Once I've been here for two years, I have to take a 90 day break before I can start working for them again. Obviously I could try to get a short term assignment or temp somewhere (and if we *do* have another baby that will be a convenient opportunity to take maternity leave) but it will be unpaid, and that'll be a slim three months. We could live on DH's salary if we didn't have daycare, but only just.

One issue is that as a "contractor" you are not covered by workman's compensation, not entitled to UI, and you will pay both halves of your SS contribution, so 15% off the top of your pay goes to the IRS.

I think you're referring to independent contractors - something I doubt I will ever be. I am employed by an outside company, which means I'm a W-2 employee.

Why do you think becoming a FTE would make leaving harder? You just put in your resignation letter and that's that. So I'm not sure if that should be a consideration.

I just reread my OP and don't see where I said that leaving this company would be harder as an FTE. If you point me to the specific quote you're talking about, I'll try to clarify. I don't have a problem leaving any job if it's no longer working for me, regardless of what kind of employee I am.

Anyway, I'm not sure how much additional job security would be gained from being a FTE. Employers have demonstrated that they'll cut FTE's as easily as contractors when things get tight. 

Obviously no position is ever 100% secure, but it's much easier to offboard a contractor than an FTE - trust me. 

You're all correct, the flexibility of the culture is something that wouldn't change if I were an FTE.  So it mainly comes down to money and security considerations for me (which is a good thing to have identified, so thanks everyone!). 

[shanendoah]

You are going to run into that 90 day break every two years at just about every company you ever work with if you remain a contractor. That's the result of a contractors vs microsoft lawsuit heard round the country. It is how the companies prove you are a contractor and not an employee without benefits.

[Firebird]

I know   Tenure is a huge issue for us right now so I'm very familiar with the legality of it and why it's required.  Different companies have different tenure periods, though.  Some are as short as six months, some (not many) are longer than two years.

Closer to the time when it becomes an issue for me, I'll speak with my company to see if they have any short term assignments available. 

[Works4me]

Dec 18, 2013 13:57:52 GMT -5 @atsahsreborn said:

One issue is that as a "contractor" you are not covered by workman's compensation, not entitled to UI, and you will pay both halves of your SS contribution, so 15% off the top of your pay goes to the IRS.

I prefer contracting for companies where I can work when I want to. This is a GREAT perk in my life. It allows me to work when I feel well and not work when I don't.  I also enjoy working at night from home because that is when I tend to be the most productive.

This is not true for all contractors - depends on type of contract - 1099 yes but W-2 contracts no - you get workman's comp, UI, social security is paid same as employee - main difference is no holidays, no paid vacation and no health care/other benefits although even those are available with some companies. Let me know if you need more information on the differences between 1099 and W-2 contracts.

Something to be careful of is in the state of California, legally you are supposed to be paid hourly, not salaried unless you are management (ie actively managing people.) This means that according to state law flex time is not allowed. According to state employment laws you are supposed to be paid OT for anything over 8 hours in a shift and/or 40 in a week. Many businesses choose to work in a more free environment allowing comp time and such but if they are ever audited by the department of labor it all hits the fan and the place changes practices immediately, sometimes even retroactively. I have seen people get burned badly and lose huge amounts of comp time just because some employee got pissed off at the company and reports them to state the labor board. Not a fun place to be working - lol

Something else to look into if you contract long term is purchasing your own benefits. As you well know the ideal way to contract is for your hourly rate to be high enough that you are able to pay for the benefits you are lacking while still coming out ahead on the money part.

   &

I'm pretty sure that all FTEs at this company are on salary, although they are still required to submit their hours weekly. "

This means that they are officially hourly not salaried - the reason for submission of weekly hours is not only to track/bill projects but also is done to keep the labor board happy. It also allows them to warn/terminate those who work too few hours as well as those who work too many hours to get their job done.

Usual terms are exempt for management or what we think of as salaried and non-exempt for hourly.

[Deleted]

I've done both, being a contract worker was better for me when I needed the flexibility.
Being an employee was good when I needed benefits and a steady income.

[spartan7886]

Dec 19, 2013 15:45:24 GMT -5 Works4me said:

This means that they are officially hourly not salaried - the reason for submission of weekly hours is not only to track/bill projects but also is done to keep the labor board happy. It also allows them to warn/terminate those who work too few hours as well as those who work too many hours to get their job done.

Usual terms are exempt for management or what we think of as salaried and non-exempt for hourly.

Couldn't they be salaried non-exempt? My husband was, at an old job. We don't live in California, though.

[Works4me]

Non-exempt employees are entitled to overtime pay and therefore are not salaried. Many employers still choose to play fast and loose with labor laws but when they are caught it hits the fan. This is not just in the state of California. Also if it was some time ago it could have been before the laws were so strictly enforced. The purpose of these laws is to prevent employers from taking advantage of people.

Employees in exempt positions do not receive overtime pay no matter how many hours they work in a workweek. Since they don't receive overtime pay, there is no need for them to keep records of the specific hours they work.

Employees who work in non-exempt positions are not exempt from the overtime pay requirements of the FLSA. They keep records of the specific times they work so that they are paid overtime when they work more than 40 hours in a workweek. Overtime is paid at 1.5 times the employee's hourly rate.

Source:

www.purdue.edu/hr/LeadingEdition/LEdi_704_exempt_nonexempt.html

[spartan7886]

No, there is a specific designation called salaried non-exempt. See here for all the reasons one lawyer doesn't like it. Best link I could find. It looks like in most instances, it is substantially equivalent to hourly, just with more catches.

First of all, when properly done, there is nothing illegal about non-exempt salaried arrangements. A non-exempt salaried arrangement is simply when an employer pays a non-exempt employee a fixed salary for the week instead of paying the employee by the hour (by the way, we often use the term “hourly employee” and “non-exempt employee” interchangeably—although these terms are not entirely synonymous as this article demonstrates). (source above)

The biggest advantage, and the reason I suspect DH's work was set up that way, is that it allows fluctuating work weeks to be paid at straight time. DH worked a 9/80, like most jobs in our industry. That means, though, that he worked 44 hours one week and 36 the next, back and forth on a regular schedule. If he was hourly, they'd have to pay time and a half for those extra four hours, so bye bye 9/80.

[Sum Dum Gai]

What's 9/80?

[Timberwolf]

I think it means working roughly equivalent to a 9 hour work day, 5 days one week and 4 days the second week so a person can have every other Friday off (or whatever day).