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Submitted by Consultant2001 on


Greetings- If there is a cast for this, please let me know.

I recently was contacted by a recruiter about an opportunity for a contract job that is double my current salary for a fortune 500 company. (I am currently an internal consultant for a fortune 500)

My questions:
What are the advantages of contract work vs. being an employee?
Is being an employee always better?
Is there a website that will help me do the math as to whether or not this is an opportunity worth pursuing?
What questions should I be asking when we get into contract negotiations?

Regardless I will be interviewing cause - "Until I have an offer, I got nothing!" :)

I appreciate any insight- since contract work scares me a bit- but without risk there is no reward.
I saw a ton of cast on "How to be a good contractor etc"- but not IF it is a good choice.


mrreliable's picture

Assuming U.S., there are lower taxes and more protection as an employee. You need to earn more as a contractor to come out even, but at twice the compensation, that's more than covered.

- As an employee your employer pays half of FICA (Social Security and Medicare tax). As a contractor you'll owe 7.65% more with self-employment tax compared to an employee.

- A contractor is not eligible for unemployment benefits, workers comp coverage, and there are protections for employees that are not available to contractors. You're a vendor, just like any other business. You can obtain your own insurance coverage and save for a rainy day.

- You have to track your earnings and make quarterly estimated tax payments. The company will not withhold taxes for you. Tax planning and returns will be more complicated (and expensive if you hire someone to do it - recommended especially for contractors).

- You may have an easier time deducting business expenses as a contractor. Being a contractor does not make any expense deductible that would not be deductible for an employee, but there are dollar limits on how much an employee can deduct on their tax return.

- It can cause frustration to be a contractor in terms of bringing in and holding on to your earnings, then having to send big chunks of money in to the taxing authorities. Contractors feel the pain of seeing how much they're paying in taxes. Employees seldom have any clue what they're paying in taxes. They just know what their take-home pay is after withholding and whether they got a refund or owed additional tax on their return.

motopascyyy's picture

My fiancee did just the same analysis and given her priorities, full time work just made more sense. The biggest factor came with the vacations. In our industry (finance), most contractors are obligated to take extra time off around the holidays, long weekends. This means she'd lose about 10-12 days of salary, but that's split up in non contiguous chunks, so forget travelling. SO if she wanted to maintain her current 3-4 weeks of vacation for travelling per year, that would equate to 5-7 weeks of the year where she wouldn't be earning a dime, or 10-13% of the year. Add on health insurance, employee benefits, lack of year end bonus, reduced scheduling flexibility and increased stress of being forced to change jobs more frequently (when the contracts are done), the math didn't add up. For her, the choice was clear that anything less than 50% increase in salary wouldn't be enough to break even, let alone offset the added stress and turmoil.

Keep in mind that these factors are very much tailored to her, but it might give you some ideas of what to consider.