As someone who has been working as a contractor for the past two years, the big thing I see missing from that list is 'the ability to say no'. That is my primary motivator for staying independent, I get to pick the problems I work on. That is the deciding factor when switching clients or picking up a new task with an existing client, which one of them has the most interesting problem.
The big negative that the article doesn't talk about is all the time you have to spend maintaing a social and professional network. The interesting problems aren't going to come knocking on your door.
Also, the comments about getting paid for 'all your time' are BS. Submitting invoices for 60 hours a week is a great way to find yourself out of a contract real quick. That extra billing is reserved for things like crunch in the last few weeks of the project or when someone explicitly asks you to take on extra work. Invoices over 40 hours maybe cool with the manager, but they send up red flags in accounting and suddenly everyone is wondering why they are paying you for 60 hours a week when they could hire 2 or 3 full time employees.
Or just do 40 hours of work every week. If you cut out some of the time-wasting employees have to endure you might be able to get the work done in that amount of time anyway.
surely you have your own additional "timewasting" when it comes to looking for opportunities, convincing employers you actually have the skills to do the job, dealing with corporate departments who think you should be filling in the same paperwork as the regular employees do at the start of their employment for each individual project (the only part you might actually be able to say no to...) and managing your own accounts.
The OP claims that employers don’t value the institutional knowledge that is built up by employeees. I can refute this from my direct experience, which, as I understand, is not atypical for a developer working at a startup.
I worked for five years for MetaCarta, which sold geographic search technology, primarily to government agencies and oil companies. In April we were aquired by Nokia, which runs its own search engine (http://maps.ovi.com/) and wants to improve its local search capabilities. Nokia hired all of the MetaCarta engineers, offering us retention bonuses. In July, Nokia sold the government-and-oil end of MetaCarta’s business to Qbase, a company in Ohio that I had never heard of before, licensing the technology to Qbase and keeping the engineers.
If Nokia had considered the institutional knowledge of MetaCarta’s engineering staff to be worthless, they would have just bought the IP and not given the engineers any particular incentive to stay on.
My company would be lost without institutional knowledge because it (unfortunately) doesn't document things very well and the problem solving methods rely on "tell x to fix it". Somehow we manage to survive when developers start to leave, though, but only after a lot of setbacks and arguing about who the new maintainer is.
I used to work in a situation that couldn't maintain much institutional knowledge: a college IT department with student employees. The students wouldn't work for more than 4 years and buggy or inadequate applications were more often redone entirely in different languages rather than given new maintainers.
Some companies do, some don't. Glad you were in a camp that does. I've known people who were at companies which didn't value that knowledge and would just cut cut cut.
I worked for one, but rather than constantly cutting, they have high turnover and rely on golden handcuffs to keep people -- that they treat like slaves. Their average turnover was 18 months, though in the seniors it was more like a year (long enough to not have to pay back the signing bonus and relocation if applicable).
And the management didn't seem to care; they would just hire more interns... who they treated better than the seniors anyway.
And honestly, the work sucked. It was almost entirely a crapware maintenance job, no engineering, and a staunch resistance to changing anything at all, even the clumsy, buggy, and inefficient Perl-based "solution" that the company relied on for around 70% of its catalog data.
"The OP claims that employers don’t value the institutional knowledge that is built up by employeees. I can refute this from my direct experience"
And I can confirm from my direct experience that institutions don't respect institutional knowledge, but I am coming from the angle of a major corporation, not a startup.
But as I've found, its not the interest of the corporation you have to worry about, its the career aspiration of that corporations representative.
Do not get distracted by the 2X+ times money he makes. Everyone has made the point: no 401k, no health insurance.
What everyone seems to forget is you also have to pay a 15% self-employment tax at the end of the year out of your pocket because you do not have a W-2. The tax liability is higher as well.
So not only do you have to get independent insurance (which is very expensive), you have no 401k or match and probably have to manage your own Roth, you have increased tax liability and pretty much no control to push back.
Now, I'm not saying you should be an employee vs. contractor - there's benefits and downsides to both. But saying that a contractor makes even 90k when an employee makes 45k isn't really saying much.
From my personal observations, I'd say the 2x number is BS anyway. Yeah, there might be a few contractors really raking it in. And I don't exactly sit around comparing tax returns with my friends and acquaintances. But, I certainly get the impression that I'm making more as a FTE than most contractors around here. (To be fair, I'm also making more than most salaried employees as well.) The guys I know who contract never seem to have as much work as they want. They're always juggling a couple gigs to make ends meet. Their wives are constantly bugging them to just get a "real job" so they can pay the bills. So, I think the idea that you could quit your job and just step into contracting and double your pay is misleading.
In the US, you're already paying half that 15% anyway. You pay the additional half being self-employed, but it's also a deductible expense.
The biggest adjustment people need to make is keeping track of the financial aspect in general. It's not that hard, but you need to keep an eye on it. Make estimated tax payments quarterly, don't spend more than you make, keep extra money in reserve, etc.
Also, as I wrote elsewhere, I'm paying $300/month for health insurance for my wife and I. That's close to what was being deducted for my group plan when I was employed (it's a bit more, but not that much more). Yes, we're fortunate as we're both in decent health, but we've also chosen a moderately high deductible plan, which keeps the premiums lower (though they still keep going up insanely every year).
I've not done it yet, but as a self-employed person, you can set up a SEP-IRA (I think that's it) and some people manage to sock away much more in a SEP than is allowed in traditional Roths or 401Ks. If you've got it and can save it, that's decent deal.
I will say $90k as self-employed vs $45k employed is a pretty big difference, even factoring in the tax/benefits diffs. But I don't normally see that much of a difference in skill levels and income. SR devs I know contracting may be making $120-$150k, but as an employee might only be around $90-$100k. That's a difference, but not a 100% diff.
Good points for anyone if they're weighing the fulltime gig vs. contracting vs. consulting. However
1. The "Self Employment Tax" (in other words, FICA and Medicare) is closer to 7.5% extra for the self-employed. When you're an employee you pay 7.5% of this, and your employer matches that. When you're self employed you pay the entire thing.
2. The FICA and medicare tax can be avoided if you're contracting through a third party agency (and being paid W2 via that agency). This has its own set of tradeoffs and rewards, but is another option worth considering.
3. Remember that the 401k match has to vest, meaning that 4% match is closer to 1.6% if you hold the job for only two years. (on the flip side, that 1.6% is pre-tax)
The matching can also be a temporary benefit if your smaller company gets bought out by a larger one.
4. Paying your own health insurance is a burden, but it's a burden with a fixed monthly cost. It's worth investigating self-insurance options and doing a straight up dollars to dollars comparison.
Consulting and contracting aren't for everyone, but if there's parts of full-time employment that frustrate you it's definitely a route worth considering.
About 1 - This is why you pay yourself 40k and take the rest as profit distributions. As long as your salary stays above 25% of total income you're fine.
I think it entirely depends upon the country in which you're operating. In Canada, I can be a 40 year old man with a wife and child and think contracting is reasonable, but I don't have to worry about a 400,000 bill for a stubbed toe on my daughter.
That being said, it still costs me $4000 to get one tooth fixed in my wife's mouth, and I have 3 in mine that have been waiting for over 5 years, so Canada is not perfect by any means.
Reminder to self in next life: If you want to make the most money with the least amount of work, in the field with the slowest slowest advancement of technology, and have your monopoly enforced, for free, by the government...go into dentistry.
Maybe I'm bitter, and I'm certainly uninformed, but I would absolutely love to hear to hear someone in the know defend the dental industry.
$3000 to fix one broken tooth (if you're lucky), it takes 15 minutes, tops. Thats $12,000 / hour. At what point do people start asking questions?
Speaking as someone who is currently a contractor dealing with arcane legacy code without documentation (as is usually the case in my experience), institutional knowledge matters.
Both. First, Your job is harder if you have to turn over every rock in a company looking for an answer, only to find the only people who had the answer left last year.
Second, management's job is harder because no one ever has the answer. They are constantly stuck training every employee on the most basic historical project knowledge. I would wager that most projects are enhancement projects - moving from one version of something to another and not replacement projects. In enhancement projects historical knowledge is vital, in replacement projects it isn't.
There are more than these two reasons - bottom line, it's important all around.
Most developers only tend to stick around in a job for a couple of years. Going the employee route isn't a guarantee that you'll always have the original developers available.
Your point has some merit, but just by being an employee some place vs a contractor doesn't mean you'll automatically have that institutional knowledge. The only benefit I've had in some employment situations is knowing early on that the people with answers had already left, rather than spending time researching who would know the answers to XYZ.
My point was what MJR said. Employees who understand said arcane legacy code are important. Do you disagree with that or did you misunderstand the point of my reply?
I agree, but on the other hand I don't think it is a viable long-term strategy to rely on irreplaceable employees.
Not that contractors don't create arcane code, but at least they should feel professionally obliged to leave understandable code behind. They know they'll be leaving, whereas employees can count on being around.
"They know they'll be leaving, whereas employees can count on being around."
I don't agree with that. A lot of employees don't expect to be around that long, because they know that they can get better raises by leaving than by staying.
Also, as the employee's institutional knowledge rises, that employee has a higher likelihood of getting shunted onto "critical" maintenance projects and support, which tends to make them dissatisfied with their work and therefore prefer to leave.
Practical Definitions:
An Employee is part of the liability on a company's balance-sheet, its a cost to be pruned when the going gets tough. IN any large company worth its name he is just a number on the wrong side of the Balance Sheet, how good/loyal he is almost completely irrelevant.
A Contractor is a resource and his cost comes from the Project's budget. A manager's position is strengthened by managing ever larger(read costlier) projects , it is in the manager's interest to have more resources(read contractors).
End Definitions.
Contractors by their very nature have no say in the corporate political power game thereby not threatening a manager's position. If something doesn't work out and its time for a scape-goat , contractors can very easily be dismissed , letting go of an employee is a much more onerous task.Given a choice a Manager will almost always opt for a contractor and to top it all of Contractors earn more cash.
Why would one want to be an employee in any large corporate entity ?
"Given a choice a Manager will almost always opt for a contractor and to top it all of Contractors earn more cash."
This hasn't been my experience at real-world medium-size companies around here. I have friends in several, but almost everyone's IT department has a VP or director that has a policy of "absolutely no contractors", so I can't get a foot in the door at any of these places. If they want something done, they _only_ do it internally. They will buy outside products, but they will not outsource development work.
The other medium-big companies in the area have contracts with big groups like RHT or EDS, which is really frustrating and annoying.
Well, the reasoning behind this is obvious. What is the value of a high tech company? It's not "the brand", it's not that it owns a pile of servers in a datacentre somewhere, it's not even in the code in its version control. It's that it is a group of people able to identify and solve new and commercially relevant problems, and that that group possesses a great deal of institutional knowledge. A contractor has self-consciously decided to discount that kind of knowledge; therefore what they can contribute in such an environment is only what could be automated anyway.
My experience has been mainly with large/very large Financial institutions and this is almost always the case.
Manager gets money for Project , hires contractors , if project deemed successful , more money, more contractors , if project deemed failure , fire contractors move on.
Cycle repeats.
> If management builds a network of contractors, who are the best in the business, you bring on these true professionals who have one purpose – to get the job done. They will do it well because they want more work and a good reference.
Not necessarily true. A contractor's incentive is to work as much as possible, and often she can find ways to increase the amount of work necessary.
An extreme example is that of Oracle consultants; I know several tales of the one Oracle consultant being the foot in the door to a whole team of Oracle consultants who get management's ear and tell them what they need.
I'm not saying all consultants do this; clearly not. However, the article makes it seem as if contractors' incentives are more closely aligned to the company's than they are.
Speaking as Oracle consultant, very often you have no clue how much work is going to be there until you are there.
We are very lucky if management actually listens to what you need. Which is often very simple things such as fix reoccuring errors, upgrade components that keep crashing, put decent monitoring in place, make sure the backup strategy makes sense and test the backups.
I've been in situations where I was contracted for 30 hours to "just help us deploy X", discovered what the database looks like and have been able to upgrade my contract to 300 hours of upgrades, monitors, automation, backup verifications, etc.
I can see how this looks like a contractor trying to create lots of work, but all this work did have good reasons behind it.
I have to sell my rationale for extra work to the customer and it is not always trivial. Often it is easier to say "well, its your data, its not like its my problem that your backups are untested", but I wouldn't be in this business if I didn't care about data being safe.
I completely agree that contractors are more focused than employees on getting the job done well.
Once I've overheard two developers talk about me: "Well, of course Gwen is always cheerful and always happily does what we ask, she's a contractor - thats how they do their marketing.".
I'm proud of cheerfully and competently doing my job. I'm always wondering why many full-time DBAs act like they are doing you a favor when they create indexes, clone production to development and generally do what they were hired to do.
This is much more of a problem. You can't switch jobs every few months and expect people to continue hiring you.
Contractor can and usually does take on new projects all the time. So as a contractor when I hear 'Can you do X for us', the answer is usually yes, if it comes within our expertise area, but as an employee, especially freshly hired, you can't respond to every job interview request unless you really really intend to leave.
It really depends on the job you're leaving and the job you're going to. I often respond to interview requests, though I basically start the conversation with "I'm not really looking, but I don't mind talking to you." I'm not really an entry level employee, though.
He got paid more and he has more expenses. No health coverage - he'll be lucky to find a group policy with an organization or professional association. No matching 401K, no tuition reimbursement, and on and on. It's not a valid comparison. Line up the employee's benefits and income against the contractor's expenses and income and then see where you come out.
Then realize you've only looked at one piece of the equation and you can start weighing the pros and cons of continued employment, opportunities for career advancement, etc.
He said he was getting paid more than twice the amount his fried was. Are you saying that your benefits equal your salary? Highly doubtful unless your salary is artificially low (I assume you're a developer-type). Benefits aren't that high for contractors, usually it's just the healthcare that gets you. But even if you pay a non-group, family rate, it's only 15-20K a year which is chump change if you're charging $100+ an hour. Then you get into tax deductions that you just don't get as a full time employee.
20k per year? Wow. Even the most expensive family plans I've seen for family with pre-existing conditions was around $1100/month - $13k. I feel like I'm getting ripped off and we only pay around $300/month!
What I hated about contracting was not working with other people. I wasn't afforded opportunities to learnbfrom senior people like some of my peers were. When I did decide to get a "9-5" I was a bit behind everyone else,
With stack overflow, blogs, irc, message boards, etc I think the idea of a live expert is face to face is overrated. Rather than going to the guru and eating his words as gospel, I can go on the internet and get 10 different opinions on a problem I am having. Then I can critically evaluate those different viewpoints and pick the one that is right for the way I work.
Finding the best way of solving problem X isn't what you learn by being under/around good senior developers, what you learn is a set of mental tools and approaches for solving problems & your ethos as a developer. You can't learn that stuff on Stack Overflow.
Anything that can be learned via talking to people can be learned via Stack Overflow assuming you can communicate well using text (although it may get tagged with the feared Subjective tag).
Technical skills are only one small part of the skill set of a modern technical worker. You can learn a hell of a lot about people-management from the right mentor, and that's going to make a whole lot more difference to your career than learning to solve technical problems.
For concrete problem solving, sure. Esp. If the problems are small or common enough. But there's more that you get out of working closely together with someone who can teach you something.
The thing to remember about contractors is they're not fellow employees, they're another company providing services to your company. There's a strong case IMHO that contractors shouldn't even be paid during the period they're "getting up to speed" - what is the service that they're providing during that period? Certainly many I've worked with should have been paying us for teaching them basic IT skills!
Fictional conversations in which one person picks apart another's argument are a farcical way to present a point. It's a way for a writer to avoid having to let an argument stand on its merits - we as humans are not particularly good at divorcing an argument from the arguer.
Time after time, this author presents one character as surprised and incredulous, and the other as collected and confident. While it's a great way to convince people of something, it's underhanded and rude.
I'm surprised no one has said this: this is illegal in most of the US (definitely in CA). Contractors cannot do the same job as employees. It is skirting the labor by doing this, and circumventing employment taxes.
In the economic hard times, many states (WA, CA, MA) are going after companies that do this. Yes, auditing and fines.
You might think they won't find you. Well, here's how they will: contractor Joe has been working for you for 3 years. You decide you don't want him anymore (for a variety of reasons). He files for unemployment, even though he's not supposed to. He figures, hey, I'm an employee so I deserve it. In CA, the EDD will use this red flag to audit, likely find that Joe was an employee, fine the company and give Joe his unemployment insurance.
I'm not passing judgement here, just stating the facts.
It's obviously not illegal to hire contractors to work on a specific projects.
The scheme you're suggesting where an employer hires people and calls them "independent contractors" to dodge taxes is not at all what's being discussed in the article.
From what I heard (I could be wrong), here in Belgium it is only illegal to be a contractor with only one customer; for the exact same reason as you state here: because such a contractor is actually a disguised employee and thus unfair competition to real employees.
Let me turn that around: What is a better course for an employer, say an internet startup or a small software / webdesign company? To hire contractors or employees?
My first thought would since software/web is the core activity, employ them (bind them closer).
Binding a 120k software developer to a desk is expensive when you only need them for a few months out of the year. The rest of the time a 50k developer would do just fine.
There have been times where my longer term contractings jobs were normal jobs, except I had to pay for my own benefits. I think the government now frowns upon this practice though.
Indeed. I was a contractor for the last year or so. Now I am an associate at the same company. I sit at the same desk and do the same work. Except now my salary is higher, I get a month of vacation, I get 401(k) matching, I get vision/medical/dental insurance, and so on. And I still don't wake up for the "rah rah" meetings :)
I worked with people exactly like the contractor in the article. This kind of person cares only about one thing; money. The project? Secondary. Coming to work regularly? Secondary. Finding every last tax deduction? Critical.
(I take it as a compliment that someone I work with told me, "wow, you're a contractor? I had no idea".)
Sounds like you weren't ever actually a contractor.
There are two types of position that employers describe as "Contractor". The first is the type described in the article, where you bring in a guy for a short term and pay him roughly double what you'd pay a regular dev. The second type is where you bring in a guy, pay him the equivilent of a regular dev salary, but as an hourly rate, and don't give him any benefits.
This second type has a more common name: "Being taken advangage of."
Sounds like that's the type of "contracting" you were doing. Congrats on getting out of it.
One of the issues I had as a contractor was amount of energy I spent chasing invoices. Not being paid on time (or at all) was a big headache for me.
I know this is less of a concern for gov't contracts but some of the mid-size corps would place me last on the totem pole when prioritizing their vendors, knowing I was a 1 man shop.
The big negative that the article doesn't talk about is all the time you have to spend maintaing a social and professional network. The interesting problems aren't going to come knocking on your door.
Also, the comments about getting paid for 'all your time' are BS. Submitting invoices for 60 hours a week is a great way to find yourself out of a contract real quick. That extra billing is reserved for things like crunch in the last few weeks of the project or when someone explicitly asks you to take on extra work. Invoices over 40 hours maybe cool with the manager, but they send up red flags in accounting and suddenly everyone is wondering why they are paying you for 60 hours a week when they could hire 2 or 3 full time employees.