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what is being an independent contractor like
Old 02-23-2011, 10:36 AM   #1
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what is being an independent contractor like

So my dept is looking to reduce headcount later this year and I'll be one of the people affected. I've been doing some casual job searching(software development), one of the positions I applied to is a contractor position. From what I read online, being a contractor, I'd have to pay the entire 15.5% of FICA, no bennies. Is it true that most contractors are treated like outsiders/intruders? Can anyone chime in on this? I've never been a contractor before, so just want to learn as much as possible. And what is con_w2 for 1 year? BTW, the position is with a large CA university.
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Old 02-23-2011, 10:48 AM   #2
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I've been a subcontractor several times in my career and always had a good experience (wasn't treated any different than a regular employee).

In today's market it is unusual to sub directly to a company (IRS tests for who qualifies as a sub are strict). More likely you would sub through an 'approved vendor'. If you sub through an approved vendor the vendor usually is responsible for paying half of your FICA, just like your employer does today. Many vendors also have benefits.

I would find out if the position is a direct sub or if you would be required to sub through an approved vendor. Once you have that answer, then you'll know what next steps to take.
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Old 02-23-2011, 11:10 AM   #3
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So you want to be contract as apposed to a leased employee. Do you know the difference?
A contractor, in effect is running a company, with himself as an employee:
Does his own marketing
Provides his own tools & skills.
Does his own book keeping & billing.
Does his own finances.
Does his own bill collecting.
Does his own skill improvement training.
Is responsible for computing, filing, and paying taxes, every 3 months, and yearly.
Is responsible for computing, filing & paying employment insurance, every year.
Does his own legal employment contract negotiation, writing and dispute resolution.
Does his own public relations.
Provides his own liability insurance, health insurance, disability insurance, life insurance, etc.
Provides his own documentation and record keeping, to satisfy IRS independent contractor status test.
Provides his own work record keeping to satisfy client, federal, state and city standards.
Provides his own licenses when necessary.
Is ready to stop work and be unemployed at literally a moments notice.
Etc.

As Lisa99 indicates, a leased employee doesn’t do a lot of these things, his job shop does them for him, for a fee. But he is still employed minute to minute and can be laid off and escorted off the job site at a moments notice.

So can you stand, both mentally and financially, being unemployed for many months at a time? Still want to try it?


Being a contractor is great and can be very rewarding, both mentally and financially. But you have to be able, both mentally and financially, to take risk.
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Old 02-23-2011, 11:41 AM   #4
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Was a contractor for 7 months and I found out about the opportunity through a friend who is an approved vendor. He would get 100% and I would get a certain cut but was considered a 1099. Money was still better than a regular job even considering for no benefits and extra taxes. Was a contractor for 3 months when my last company laid me off and I took my salary, included benefits, taxes and came up with a number and did a comparable study of what other contractors are being paid and averaged it.
From my experience, contractors were taking on pretty boring assignments. If we needed to clean up our books, contractors would get account reconciliation assignements. If we need to issue multiple financials, they would do all the word editing changes. We have intercompany balance variances, they would need to clean it up. I'm not sure what they would do as a high level consultant but, if somebody gave me assignments at mid or lower leve, I wouldn't take it b/c I'll be extremely bored.
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Old 02-23-2011, 10:07 PM   #5
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Get on dice.com and look around. What is your skill set? There are other ways besides 1099. Check out Teksystems, Robert Half, Brooksource for work as a contractor. I can forward you others depending on your location and skill set. I prefer contractor (21 yr) over employee (7 yr). Usually they will pay you with a w2. I assume by con-w2 it may be a 1 year contract and paid like w2. University job is the front seat on the gravy train. Good stuff.

Like Lisa said, you are usually taken into the fold like every one else and treated the same, only no office politics. If you have the latest skill set you will be in the development area vs production support. Find a couple of applications, learn the process and code, become the expert and you will be around for a while. A lot of contract to hire. The 3 month gig I started in December is already been extended to 6 months and they want to hire me. Good luck.

How am I treated: They only beat me until my morale improves.
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Old 02-24-2011, 08:59 AM   #6
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I can forward you others depending on your location and skill set.
10 yrs in dynamic web development, mostly in J2EE(Spring MVC, iBatis, JSP) with backends in Oracle and Sql Server. Just started doing some hibernate/JQuery recently. I'm in SoCal. Thanks.
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Old 02-24-2011, 10:02 AM   #7
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10 yrs in dynamic web development, mostly in J2EE(Spring MVC, iBatis, JSP) with backends in Oracle and Sql Server. Just started doing some hibernate/JQuery recently. I'm in SoCal. Thanks.
Good skill set. You can do some of that 'fancy' clicking. 38-110 job postings on Dice in LA area using J2EE,Oracle. Probably more with microsoft SQL. You don't have to always be on the leading edge. Other IT jobs are quality testing, ad-hoc reporting, junior DBA . Relax, sign up for unemployment and have your pick. Another reason to LBYM and achive FI. I can work 3 months a year and cover all basic expenses for the year. Gotta do a little fancy clicking myself now(ssis/2008). See ya.
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Old 02-24-2011, 10:10 AM   #8
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So can you stand, both mentally and financially, being unemployed for many months at a time? Still want to try it?
My personal goal is 9 months being unemployed, but it looks likes another 'bad' year of only 6.

I gotta learn to say no.
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Old 02-24-2011, 05:34 PM   #9
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Relax, sign up for unemployment and have your pick. .
I thought I'd be able to shrug it off and finally enjoy some time off while living on unemployment, but the very thought being unemployed scares me(to the point of waking up in the middle of the night). maybe I'm just over-anxious about the situation. anyone have any idea on how to cure this? (Yes, I've an emergency fund that could last me at least 1 yr or so after unemployment ends.)
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Old 02-24-2011, 05:37 PM   #10
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Here's a book I recommend:

Amazon.com: You, Inc.: The Art of Selling Yourself (9780446578219): Harry Beckwith, Christine Clifford Beckwith: Books

It's really about taking charge of your life and feeling in control of where you are going with your career.
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Old 02-24-2011, 07:49 PM   #11
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It is very common in Nursing to be independent contractors . I was one for a few years . Great pay & flexibility ! The only negative was the additional form for the taxes .
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Old 02-24-2011, 08:13 PM   #12
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I have been a contractor for more than 10 years (lost count). I looked into having my own company, but decided against it. Many employers will not deal with a single individual, company or not. I always work through an agency. I usually find my own jobs so they don't take as big a cut as they would if they found the job for me. They do the paperwork and make sure I get paid. It is worth the small cut they take.

Don't obsess on the 15.5% FICA. The employer will pay the same billing rate to whoever has the contract, the shop or you. Either the shop pays half and you pay half or you pay all of it. You wind up 15.5% poorer no matter what. The shop will probably be able to negotiate a better billing rate than you can any way. The shop will take a cut. They have expenses and have to make a profit, too. Research agencies if at all possible. Talk to other contractors about them. Some are worse than any employer you ever had.

Generally, you are treated the same or maybe better (less stress) than staff employees. No office politics.

Be aware that you must have skills that you can sell, that are in demand. Document these. Keep your resume up-to-date at all times. Expect to reword it to focus on specific opportunities as they come up.

Save your money. I have been out of work twice for about 5 months at a time. If your local market goes to hell, you will have to pack your suitcase. Pay close attention to costs before accepting an away-from-home assignment. You can lose your shirt. If you don't understand, don't go. Motels and/or rental deposits and leases can destroy you. Going home too often will also eat your lunch. Get SkypeOut.

Once a contractor, you will find it hard to be considered for a staff position again. If you stay with one agency, put them down on your resume as your employer, not the end-customer. (Otherwise you will eventually get flack: "You have had too may jobs." I made this mistake.)

Oh, yeah--network like crazy. Do not make enemies, make friends. Help other people find work. You will be closer to the market than anybody else. Keep track of good people you have worked with. Tell them where you are and what you are doing.

On the other hand, I have acquired enormous experience and have my own reputation. I can find work when nobody else can (but not 100% of the time). I also have to move around. I am now working in Baku, Azerbaijan. For the previous 10 years I was working all over Canada as a NAFTA engineer (not something everybody can do).

I am also a lot happier, with much less job stress.

On the other hand, I have not been home every night. My son went through high school with me only visiting odd weekends. Beware of family stress. This was only possible because my family understood what I was doing and why I had to do it. They didn't get ripped out of school and have to move every time I got a new assignment. People who live this way have a high divorce rate.

Now, do you still want to be a contractor?
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Old 02-25-2011, 07:33 AM   #13
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Hmm - I'm a consultant and have 'sub contract' arrangements as well as separate single engagements. Yes, you have to be willing to take a risk, but if you've got the knowledge or skills, it can be quite lucrative and flexible. I personally love it, but don't think I would have been as in demand or able to do what I do before I did it. I.e., I spent 20 + years working for employers building my knowledge and experience base - as I look back, it was a progression, even thought I didn't plan it that way exactly. One thing I did do while employed, was network at professional conferences, do presentations at those conferences and write articles for my professional magazines. That early marketing has paid off - and still does. Yes, it's 'free' work, but I don't cold call, my customers have come to me. I've been very fortunate.

My main issue is having a broad enough base of customers such that I don't rely too much on one customer or another for my income flow. That fine art of balance is important.

As for the overhead - yes, I do all my own bookeeping, etc. It is actually quite educational as I see what our governments are up to with their tax codes and set-asides and other such nonsense - amazing the number of games one can play.
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Old 02-26-2011, 01:56 PM   #14
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I am now working in Baku, Azerbaijan.
Now, do you still want to be a contractor?
Well, thank goodness you didn't get tricked into going to Pakistan?!?
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Old 02-26-2011, 02:05 PM   #15
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Being a contractor you have zero job security. However, if its working for an academic or Government organization it's probably beter that with a private company. I was a contractor at NASA and was as much a part of the team as the civil servants, so if you have a good feeling about who you'd be working with and for it can work out well.

However whether it's a good deal is another thing. I was recently offered a contractor position at Government lab as a contractor earning $102 an hour. No benefits although payroll
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Old 02-27-2011, 08:51 AM   #16
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Whether you're treated as an outsider depends on the client. Some put you in a cube in a busy hallway. Others treat you like a regular employee and give you a regular cube.

The best part about being an IC are the vacations. Between gigs, you can take as short or as long as you want. Of course, some of these are forced on you when you can't find work.

The 2nd best part about being an IC is the solo 401k.

You'll need a lot of cash to handle the unemployment. If you can get comfortable with the uncertainty, you'll be able to enjoy the 6 weeks off between finishing a project and starting another.
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Old 02-27-2011, 10:40 AM   #17
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I worked as a software developer for about 30 years. The last 15 years of that time, I worked as a contract worker. In my experiences, most companies hiring a software developer as a contractor preferred that the contract worker work through a contracting company on a W-2 basis. The contracting company must handle the payroll, paying FiCA, and buying liability insurance, etc. which I think the end employer likes. I worked as a W-2 employee the entire time I was a contractor. As a result what I got paid ended up having much to do with how well I could negotiate my rate with the contracting company. Much of the time, the contracting company would attempt to keep the end billing rate a secret from me. I always hated that part of it because I felt somewhat blind in my negotiations with them. Most contract companies will attempt to keep as much of the billing rate as they can. In general, I felt like I was doing well to get them to only keep only 20-25% of the billing rate. Keep in mind, they have to pay half of the FICA out of that amount. A few times the end employer dictated to the contracting company, what percentage they could keep. Most of the companies I worked for offered group health insurance (I paid the full amount) and several offered access to a 401K (no matching). I felt the advantages of working for a contracting company on a W-2 basis (as opposed to 1099 on my own) were that I didn't have to set up my own corporation, bill the employer, pay FiCA to the government, etc....it was just easier to do it that way. The downside I guess is that I didn't get the full billing rate and probably didn't do as well financially. One way to look at being a W-2 contract worker is that you're a regular employee of a contract company without many of the benefits.

As far as a contract worker being treated as an outsider, there were times I felt that way, but in general, I felt like I was treated like any other employee. The longer I was on a particular contract, the more I felt like a "regular employee". I liked not having to do all the regular employee bullcrap like doing reviews and setting yearly goals, etc. Also, I got to avoid much of the politics of the work place. Another advantage was that as a computer programmer several of the companies I worked for wanted to put me "on call" to support the production systems (i.e. nights and weekends work). As a contractor, you need to get paid for every hour you work, so I asked my end employer how they planned to pay me for my on-call work and they usually removed me from the on-call rotation because they didn't want to pay the overtime. If you let them, they'll try to take advantage of you by having you work on-call for free. Don't fall for that unless you're desperate to hold on to the job. In my case, I gave them an ultimatum....either pay me for the hours I work, or I won't work those hours.

Being a contract worker is definitely less secure. I've had periods of time where I was out of work for extended periods of time. So it's important that you save as much as you can while you're working. In my case, that wasn't a problem because when I first started contracting back in 1994 I was able to make about twice as much as a contract worker as compared to a regular employee and saved all of the pay increase. I think that today the pay gap isn't as big though....at least in the type of computer programming I did. Another thing to ask yourself. Are my particular skills in medium to high demand? If yes, you'll probably do quite well as a contract worker. If not, you might want to consider working as a regular employee for the better security.
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Old 02-27-2011, 04:01 PM   #18
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thanks for all the replies!

be sure to watch for the sequel.
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