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Advice for a first-time contractor?

I have over 15 years of professional experience, but it looks like I'm about to land my first contracting (staff augmentation) position. I have plenty of experience working with contractors, but not being one of them. Luckily, I've picked their brains before about the basics, but now it's time to sink or swim.

I'm contracting as a W-2 employee and I'm actually getting a decent rate (especially considering the job market in Chicago). I'm a little nervous, it being my first time.

Does anyone have any advice that might make this transition easier? Anything I should watch out for?

Thanks!

RocketJeff
Monday, February 17, 2003

Here are some contractor oriented message boards:

http://pub21.ezboard.com/bopenitforum - The "Open IT Forum". Bluntly honest and experienced contractors and other IT folks hang out here.

http://pub102.ezboard.com/bcomputerconsultants - The message board sponsored by Janet Ruhl, the computer contracting writer, and her 'Realrates' web site.

Advanced client management questions and discussions on industry direction are best posted in the Open IT Forum. The Realrates BBS is mainly frequented by newbies who ask Contracting 101 questions such as the difference between 1099 and corp to corp contracts, etc. Open IT has more of a community feel, while Realrates is closely aligned with entry level contractor interests.

http://www.realrates.com  - Contains a survey of going rates for IT industry contractors, categorized and searchable by discipline and location, and some useful white papers.

Also check out http://rmpcp.com, which is an 'umbrella' service for contractors - a kind of payrolling service and commitment free corporate identity. This person has many links for other web sites of interest to contractors at this site.

Do you have specific questions?

Bored Bystander
Monday, February 17, 2003

As a contractor your job will be more vulnerable to office politics.  Pick your battles *very* carefully.

Joe Paradise
Monday, February 17, 2003

I have been contracting for the past 6 yrs and find it to be just like a job but hourly. Of course, this does depend on where you do the contract. Some places might treat contractors as second class citizens, others might treat you as god. Also, recruitors are sales people; they are not tryinf to help you. You should definitely not go W2; incorporate as soon as possible.

PRC 
Monday, February 17, 2003

First step: Start your own corporation - guess you have already done that.

Always keep your resume updated.

As far as possible bill directly to the client, not through someother company.

Some clients might want you to switch from a consultant to an employee; this would be a good time to start sending out resumes again.

You will hear a lot of rumors, about new management, etc - don't let that get to you.

Don't work more than 40 hours.

See if it possible to work from home.

Make sure you have enough cash to sustain the same kind of lifestyle you have for 6 months, even if you do not have a job.

that's all for now:-)

Prakash S
Monday, February 17, 2003

guess you have already done that.

should read as:

guess you have not done that already.

Prakash S
Monday, February 17, 2003

>> Do you have specific questions?

I wish I did... While I'm excited/happy about contracting, I am a little nervous about the change.  The links you provided have been very helpful (been reading them for the past hour or so).

>> guess you have not done that already

No, I haven't incorporated. As recommended many years ago by an experienced contractor, I'm starting out as a W-2. When it looks like starting a subchapter S is profitable, I'll do that. Since I'm not incorporated, most companies won't take me directly (due to IRS regulations). From what I've seen as an employee, most companies don;t like dealing with a bunch of 1099 contractors, they'd prefer to deal with just writing one or two checks to consulting companies.

RocketJeff
Monday, February 17, 2003

If this is a long-term contract, spend the money to have an attorney with experience in software contracting review the contract with you, explaining to you what the various terms mean.

Be advised, as I've just discovered - while some companies may view Net 30 as "we have thirty days to pay you" apparently some bastards see it as "we don't have to pay you until the 30th day"

If you don't get paid overtime, only work 40 hours.

Learn about the IRS rules regarding employee vs. contractor - in general they favor the worker, and they're a good thing to have in your back pocket.

Do NOT get emotionally involved with your work. This is the best part about being a contractor - you don't have to care. You recommend SQL or Oracle, and when they say "no, we think Access can handle it" you smile, salute, and go about your business. (if you're paid hourly then "more work" just means "more money")

Philo

Philip Janus
Monday, February 17, 2003

<<
Be advised, as I've just discovered - while some companies may view Net 30 as "we have thirty days to pay you" apparently some bastards see it as "we don't have to pay you until the 30th day"
>>

Eh, not to frighten you, but sometimes they don't like to buck up the cash till even after the 'Net 30' days.  Which is why eventually you'll probably want to add some type of penalty/interest-rate clause in your contract(s).  FYI: I am not an independant contractor, I work for a consulting company, but the boss's wife's job is to "nag" the clients who don't pay after the Net 30 days and I guess she's pretty busy ;-)

Pondering the one man show...
Monday, February 17, 2003

It's amazing how many people either did not read the original post, or do not know what a W2 is. 

RocketJeff, you are being W2'ed by a staffing firm, correct?  You are an employee, not a true consultant.  There is nothing you need to know, except that there is a middleman who is getting paid, taking his cut, and then paying you.  You do not need a s-corp or any of that jazz. 

Here are some tips

1) Log the hours worked, and what tasks the time was allocated to.  Both the client, and your employer may require this.

2) You will probably not deal with your agency on a day to day basis.  You will deal with the client all day.  Know who you need to keep happy, and who is really feeding you.  If the client is not happy with you, then you are gone.  And if there is no client, your staffing firm will dump your ass the next day. 

3) Focus on your work.  Make contacts in as many places in the firm as you can.  Make a good impression.  This may be a way to land a FT job either in your dept, or another one. 

4) It takes little skill to go into a client and disparage all the existing code (unless this is your job description).  You do not know the constraints that the original coders were under.  Most code could have been written moreefficiently, in hindsight.  The FT'ers there don't need some smartass newbie consultant to tell them that.

Good luck

Bella
Monday, February 17, 2003

Bella, you would do yourself (and others around you) wonders by not always assuming you are the most enlightened human being on this forum.

Here, I'm going to give you an example:

Bella wrote:
<<
It's amazing how many people either did not read the original post, or do not know what a W2 is. 
>>

You could have written:

<<
Hey folks, I believe that being W-2'ed means that you are an employee, not a consultant/contractor.
>>

It essentially says the same thing without inferring that the rest of us have no idea what reading comprehension is.

In any event, RocketJeff was asking about contracting.  Yes, he's technically an employee of the staffing firm.  He's still a contractor by my definition - he is providing services to a company he does not work for.

He also mentioned the fact that this was his 'first time', which to me implies he will probably want to continue contracting if he can find the work.  So all of the suggestions about incorporating, misc. links are still valid to his question.

-Note: Bella, you sound like an intelligent individual; and could certainly contribute positively to the discussions here.  It's a shame that you find joy in putting people here down. 

GiorgioG
Monday, February 17, 2003

He clearly stated he is going to be a W2 employee, and was asking for advice. 

Setting up an s-corp, hiring attorneys, reviewing contracts do not concern him b/c he is an employee, NOT an independent consultant.  He was being given extraneous, irrelevant (and therefore BAD) advice.  Therefore, I spoke up, and offered to share relevent advice that applies to his actual situation.

Bella
Monday, February 17, 2003

Thanks for the advice from everyone so far. As Bella pointed out, this is a W-2 arrangement with a staffing firm so I won't have to worry about collecting from the client, incorporating, etc. These *will* be factors later on if I decide I like contracting and want to continue. Although I already knew a lot of the advice, it's nice to get reinforcement and has also given me a couple of things to make sure I keep in mind (like "don't dis the code").

Actually, one of the things I've never liked about staff augmentation is that it's also called 'consulting' when it's usually just regular work. I guess some people don't like to be called a temp.

RocketJeff
Tuesday, February 18, 2003

Watch your back. Don't believe anything the agency says. Don't believe anything your client's staff say. Watch your back. Trust nobody. Did I mention watch your back?


Tuesday, February 18, 2003

Going into contracting is easy. Coming out of it may be a bit tricky especially if you don't have a bit of money saved for this purpose (tax and tax related expenses mainly)

My advice is save about 1/3 to 1/2 of your income.

Good luck
Dino

Dino
Tuesday, February 18, 2003

Not to derail the thread, but I couldn't pass this up:

<<
Be advised, as I've just discovered - while some companies may view Net 30 as "we have thirty days to pay you" apparently some bastards see it as "we don't have to pay you until the 30th day"
>>

Actually, in many companies (particularly smaller ones struggling with cash flow) it is standard practice to stretch out a receivable as long as possible.  A company that pays within net 30 is a good client. 

One of the worst culprits (here in Canada) is actually "the government", which often takes 90+ days to cough up the cash, but the stretching out of terms is very common both in the States and here in Canada.

Having interest charges on the outstanding balance can work, but if it's a repeat customer, it's not exactly great customer relations (and some will simply ignore the interest charges). The approach that I've seen that is most effective is to offer a discount for payment within a certain period.  Often comes out to the same thing as assessing interest after the fact, but the psychological impact is different.

Just a thought
Tuesday, February 18, 2003

On the net terms issue: if you're paid within the net terms stated in a contract or even several days after the net term "ended", consider the client creditworthy. There's insolvency, there's unwillingness to pay, and then there's paying late but eventually paying. What you don't want to do is alienate a client that intends to pay by treating them accusationally when they stretch payment out for as long as contractually allowed. Don't be abused but don't be anal, either.


On W-2 employment for contract assignments: when your contract ends, expect that the agency will do *everything*conceivable to keep you from drawing unemployment, even though common sense indicates that you may be eligible.  One ruse commonly used is to offer you a low rate contract that is in an area that the agency doesn't expect you to relocate to... and some state unemployment agencies treat *any* refusal of a pending job offer as grounds to cut off unemployment.


In general, be extremely skeptical of *everything* the agency does, including but not limited to things such as non-competition agreements and other contract paperwork. Agencies in this business are generally scum o' the earth and are only as ethical as they need to be to avoid getting closed down by the authorities.

Bored Bystander
Tuesday, February 18, 2003

The only reason he is W2'ed is b/c the agency has a client to place him at.  It is only sensible to EXPECT that once the contract is over, either they'll place him somewhere else, if they can.  Or he will be terminated, (rightfully so.) 

This situation is nothing more than a *temporary* contract that happens to pay via a W2.

Bella
Wednesday, February 19, 2003

"apparently some bastards see it as "we don't have to pay you until the 30th day"

It is standard business practice to strech out payment for as long as you can get away with. For small consultancies servicing vertical markets (read - small number of potential clients), it is not uncommon to have to wait a whole year before payment.

Just me (Sir to you)
Wednesday, February 19, 2003

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