Tuesday, July 14, 2015

Being a Full Time Employee vs. a Contractor

Ever weighed the pros/cons between being a contractor or an FTE for similar work? If the choice comes up, crunch the total compensation numbers and consider lifestyle factors. Which one works best will vary by situation- both yours and the details of the offers. Look at the specifics, ask questions, and consider the whole picture before deciding.

Pros of being an employee include easier taxes, fringe benefits such as healthcare and retirement, and often, more job security. There might be a bonus structure and better support systems (IT, for example).  Social support with office mates might be a plus. Cons can include lower base rate, lots of internal time spent on administration and company meetings, and the like.

Pros of being a contractor can include a higher hourly rate, less organizational hassles, perhaps a more flexible schedule and location. Cons could include being lonely, if you don't work on site; being concerned for good reason about work drying up with little warning, lack of support systems, and lack of benefits. Some companies are using intermediary companies to manage their contractors, though, which provide healthcare, tax support and other helpful benefits- so that hybrid model may be appealing. Some sectors have ample work, so workflow may not be a con depending on what you do.

A friend of mine just decided to take a contractor position to a small company with a good reputation for lifestyle and growth, leaving an FTE position at a big company. The money may be less on the whole, although the salary is 25% higher, because instead of a stock bonus the compensation is cash, which is taxed at a higher rate. But he's doing it anyway for lifestyle tradeoffs and long-term opportunity. He will be managed by a third party company that will handle benefits and taxes, so that removes several cons. They promised to try to hire him on full time next year. Big company jobs are not always the best deal- it has been interesting to see one person's analysis. What have you seen or experienced?

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