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Permanent employee to contractor transition

 
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I'm thinking about making a transition from being a permanent employment to being a contractor. What attracts me to contracting is getting paid for every hour I work. What are the ins and outs of going the contractor route besides no paid holidays, vacation, or health insurance?

If you went from permanent to contract, what major changes did you notice and do you actually charge for every hour you work (is billing for more than 8hrs/day frowned upon and make it likely for you to be replaced?).
 
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well, if you're a paid employee you get paid for every hour you work as well, plus for the hours you're on vacation, sick leave, or having lunch...

While it all sounds highly attractive to be self employed, your own boss, not working for The Man, in reality you'll be working for that Man a lot more than now because you're far more easily replaced than the people on the company payroll and a lot more expensive too.

Insurance cost skyrockets, no more company health plans, need for your own liability insurance, etc. etc.
No more rights to unemployment benefits and no job security at all (most contractor jobs these days are for a period of one month, contract to terminate at the end of each month unless specifically extended) so you'd better set aside most of your income for the inevitable months you'll be out of work.
And set something aside for disability insurance, pension fund, lawyers, tax consultants (your taxreturns will get a lot more complex as well), marketing, etc. etc. etc.

I'd personally not take the step in the current economic climate. I've seen too many small contractor firms and independents go belly up in recent times (including the one I worked for).
In slow times like this the best thing to have is job security. You may not have that brand new Mustang or CLK every year that the contractors had a few years ago, but you have an income while they're out of a job and still trying to pay back the loans on those cars, laptops, and Versace suits they showed off with during the boom.
 
doug parker
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Jeroen, this is w2 hourly contracting instead of 1099. I don't think I need tax consultants, liability insurance, ...

As exempt employee, I don't get paid for every hour I work and management knows that and abuses that. I've done 60 hour weeks and been paid for only 40 because I am on salary. My overtime is free for them.
 
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I moved from contracting to a permanent position late last year. Why? Because with contracting you have no job security. You get paid well (and get taxed more for it in my country) but you must go through all the find-a-job-apply-interview AGAIN and AGAIN whne you contract is finished! I hated it and the worse part is when you are told at the last minute whether your contract will be renewed (maybe is was a company thing in my experience).

I certainly have no regrets, although I miss the reimbursements for food and travel that I got when I was a contractor.

The good thing with contracting though is that you work on a real project and contribute from day one - it looks great on a CV/resume. In fact, I did more work in 3 months whilst contracting (2 projects for big big companies) compared to an Accenture employee that I know (same level of qualifications) in 6-12 months in the UK.
 
Jeroen Wenting
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I've done 60 hour weeks and been paid for only 40 because I am on salary. My overtime is free for them.

Most contract work these days is fixed price, not hourly rate... You'll get abused even more.
I'm on a salary now too, but my contract states clearly how overtime is paid (100% for the first x hours, 125 for the next x, 200% on sundays, etc.).

I hated it and the worse part is when you are told at the last minute whether your contract will be renewed (maybe is was a company thing in my experience).

More often than not we had to push the customer to get them to renew contracts before they ended. Usually dropping a hint that another customer is interested in our services a few weeks before the deadline would cause action.
I've seen others though who were told on a friday afternoon that their contracts that were up for renewal by monday would not get extended several times...

The good thing with contracting though is that you work on a real project and contribute from day one

In my experience contractors are often brought in when a project threatens to blow up in the face of the customer. Either they underestimate the manpower need, overestimate their technical capabilities to pull it off, or it's just bad luck (I've in several cases been called in to replace key project members who became seriously ill and were out of the running for several months, in one case to fill in for someone on maternity leave, etc.).
I've only been involved in a single project from its conception while doing contract work, and that project I could not complete because the company I worked for went bust about a month before it would be completed.
 
blacksmith
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doug parker:
If you went from permanent to contract, what major changes did you notice and do you actually charge for every hour you work (is billing for more than 8hrs/day frowned upon and make it likely for you to be replaced?).

Normally you will be given a maximum amount you can work each week; normally it will be 40 hours/week. Generally the contract is written so you can't contractually work more than that amount without prior written permission.

What you can do is, when requested to work more than the agreed hours per week, say that you need written permission (which would allow you to bill it). Usually the answer is, "oh, it's not that important." This can help you keep the number of hours within reason.
 
Greenhorn
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I've been an FTE, 1099, CTC and W2 contractor. First I disagree with the comments saying that most contract work is fixed-price, or that most contracts limit your hours. If you're talking W2, the former is not true, and the latter depends on the client. I also disagree with the blanket statement that making the transition is not advisable in this economy. Your skillset, experience level, family situation and geographic are are big factors.

That all being said, if you're into the whole job security, company-provided benefits thing, then contracting certainly doesn't provide that. It will require more effort on your part to obtain things like health insurance. It can be a pain to constantly deal with clueless recruiters. If the job market in your area dries up, you may need to be willing to travel to find work.

Some of the upsides are, you get paid for each hour, it's easier to avoid getting entangled in office politics, you get to experience lots of new things and meet new people. It can really add to your resume.

If your personality is adventureous and risk tolerant, then contracting can be very enjoyable and profitable. If not, then maybe you should think twice about it.
 
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