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Contract --> Full time: BIG pay cut

I've been on contract to a financial services company for the past year making a very good wage.  They have now decided that a year is getting a little long in the tooth, so the full-time offer came down today, with a 30% cut in pay.  At the same time, I'm getting interest in other contract work, with perhaps a 5% cut compared to my current rate (which seems reasonable given the market, etc).

Hell, getting a 30% pay cut from my current rate still leaves me with a stupidly-high salary in a *really* cushy IT job.  The real problems are (a) cushy doesn't lend itself to being at the top of one's game over the long haul -- I foresee myself getting lazy and stagnating if I stay where I am for an even more extended period of times, and (b) I have this visceral reaction to a company paying me $xx per hour for a year, and then deciding that it's "in everyone's interests" to see that cut to $(xx*.66).  If I was worth $xx then, I should be worth something around the same magnitude now, or so my gut tells me.

How about you?  When you got this kind of offer, did you take it, and thank your lucky stars that you still have a job, or did you brave it in the contract world some more?  And yes, feel free to make snide remarks about how I shouldn't be bitching at all about getting a job offer.

*monad
Monday, October 27, 2003

Salaried employment generally includes a fairly decent list of benefits, including but not limited to:
- Health insurance
- Disability insurance (it's not just for car accidents - go rollerblading and break your wrists? You're covered. Slam your fingers in a car door? You're covered)
- Vacation time (2 weeks in a year is worth 4% of your pay)
- Bench time/ research time
- Providing software tools
If you're in the US, it will also pay half your FICA - 7.5% of your pay.

Now I'll grant that the lines are often blurred (good clients may pay for tools, salaried jobs don't always pay for full benefits)

You need to find out what benefits you'll gather in the salaried job and do a full cost/benefit comparison.

Philo

Philo
Monday, October 27, 2003

Remember, they'd also be paying for benefits including paid vacation time (you are getting benefits, right?), so you can't really expect to get the same cash as you did as a contractor.

Not only that, but the reason you were paid more is because you were worth it at that rate for a short time frame, but not for an extended time.  Just like the same person who would rent a car for $300/week wouldn't be willing to buy or lease one for more than $400/month.

Actually, you're lucky it's only a 30% decrease.  Most people see a much bigger difference when it comes to contracting vs. full time.

T. Norman
Monday, October 27, 2003

take the FT and telecommute from your cube to other projects.

Tom Vu
Monday, October 27, 2003

"take the FT and telecommute from your cube to other projects. "

... and fired shortly after!!!

sgf
Monday, October 27, 2003

You need to look at the economic value to -you- of the full package you are being offered -- benefits, stock options, profit sharing, and so forth, as well as the economic detriment of whta you are being asked to give up -- work your own hours from home, keep your own copyright on code, free to moonlight for others.

The full package, when you add it all up, should be a raise for you. If not, tell them you'd like to keep working on contract because the full time numbers they are offering don't work out for you. If they don't like it, take the other contract.

Dennis Atkins
Monday, October 27, 2003

Dennis is right. But don't necessarily think the company's trying to screw you just because they want to pay you a salary less than the rate at which they 'rented' you. As a contractor, you were simply a business expense they could keep/drop at any time. Your "burdened rate" to them as an employee may well be about the same as they were paying you in cash under contract.

But evaluate options as Dennis mentioned above.

On another point, if the job is cushy, and provides you ample compensation, then it's your fault if you get lazy / rusty. What a gift a position like that would be -- to be able to actually work only 40 hrs/week, without having to take it home with you at night, after you get home at a decent hour. My god, what a gift that would be. Then to get paid well on top of it, hell, man -- you've been handed a large amount of freedom!

You should use your comparative leisure to work aggressively on your own professional development (you never made the mistake of expecting a company to actually care about and take care of your professional development, did you?), now that you have the time and resources to do so -- you can join useful professional organizations and be able to actually attend the damned meetings instead of having to miss them month after month because of the "deadline-du-jour" you're understaffed to meet; publish some articles or do other writing to help make a name for yourself professionally; do private research projects; take on outside contracts of interest in your own time.

The kind of situation you describe could be a priceless opportunity to prepare yourself for bigger and better career jumps later -- if you take advantage of it now.

Good luck to you,

anonQAguy
Tuesday, October 28, 2003

Here's a question.

Are you costing the company considerably less as an employee than as a contractor? Or are the cuts simply going to normal employee expenses that you were assumed to be taking on yourself?

www.MarkTAW.com
Tuesday, October 28, 2003

> Are you costing the company considerably less as an employee than as a contractor?

Most definitely YES.  We're talking about a $35,000 differential.  Now, even if I were to take advantage of every benefit they offered, there's no way in hell that I would get anything like that kind of value out of them.  I've always carried my own health insurance [and theirs is pretty poor these days], I would squirm if their stock was in my portfolio, and I wouldn't know who to leave a life insurance policy to if I did kick it this early in life.  I was hoping I could trade in benefits with a commensurate hike in the salary, but went over pretty hard.

Their big selling point is job security for me (har har, good one, right?) and the fact that I would be starting at some glorified level in their organization that is one level below "executive" status.  I would hope that in the year I've worked there, they would have caught on that I don't care a whit about things like 'status' and dubious job security.

As for getting lazy, you're right that it would be my fault if I got that way.  I've been taking on some outside projects to work on at night which have kept things interesting, and doing some tech volunteer work for a few causes I've donated to in the past.  But then I look at a full-time engineer I've come to be friends with at this company, and he's just been beaten down into a level of apathy that stuns me.  His skills are stuck at pre-1999 levels (I had to tutor him on the basics of XML and XSLT a few months ago), and I shudder to think that I might turn into him.

-------------
Heh, looking at what I've been writing, it sounds like I've made up my mind, doesn't it?  I guess I'll try to grab some other contract, and only taking the FT if nothing else avails itself.  Nothing keeping me from leaving in 3 months if something better comes along (good ol' "at will" employment, eh?).

Thanks all for providing a space for me to figure myself out!

*monad
Tuesday, October 28, 2003

Monad, if you're single without dependents then absolutely a salary is a pay cut.

BTW, don't forget that in general an independent contractor should be incorporated and carry liability and errors & omissions insurance.

I'm married with children. My health insurance is $12k/year. Dental is another $1200. Disability - $1200. Life insurance - $1k. Liability/E&O - $3k.

Two weeks vacation - $4k
FICA - $7k

So that's already $29k.

Start to see where it comes from?

Philo

Philo
Tuesday, October 28, 2003

Philo, do you really need E&O? I am also incorporated (only employee) but never really saw the need for it.

Interaction Architect
Tuesday, October 28, 2003

I've always understood E&O to be really necessary only for development work that is considered "mission critical", where problems with the application in question results in direct and immediate loss of revenue/income/customers.  Otherwise, it would be exceedingly rare for a client to become litigious instead of simply complaining about the problem (of course, that probably varies from client to client).

*monad
Tuesday, October 28, 2003

> do you really need E&O?

Same here -- I've never needed it.

My liability insurance runs $500/yr. I wouldn't even carry *that* unless the clients insisted.

Portabella
Tuesday, October 28, 2003

Architect -- you will see the need for E & O right about the time of your first lawsuit. You don't have to be in the wrong to end up in a lawsuit, whether the court finds for you or not, but if it's civil, if you lose, and if loser pays, for example, then you're toast.

Also, one contract I worked on for a large US-based company required providing certificates of insurance proving we had at least 1 Million USD E&O coverage before they'd sign the contract for us to start and get paid. This is on a case-by case basis from one client to another. Some clients, especially large ones, may screen contractors on the basis of whether they have this or not. If you do get E & O, it would be appropriate to so state on any online contractor listings (e.g. computerjobs.com), or on your website if you have one. Some big client may have already looked at you and skipped over you because you didn't have this.

It's nothing more, really, than what you would do if you were hiring a general contractor for work on your house -- you'd never get one who didn't have full insurance coverage against his screwups to your house as well as his injuries -- you don't want to get stuck with a million-dollar medical bill against your homeowner's insurance because you hired him when he wasn't covered and he fell off your roof and broke his back. If he ruined your house, you'd need to get money to fix his work from someplace, and that would be his liability coverage. Many big companies feel the same way hiring IT contractors.

FWIW, this number's several years old, and your mileage will likely vary, but back in 99, I'd gotten a quote of about $3500/year for a pretty full insurance package for IT contractors (major metro area, SE USA). It included 1 Million USD E&O as well as worker's comp. One of the things they mentioned is that even if you're self-employed, you are likely to need to take out worker's comp, because the health insurance plan you're buying, eventhough you're paying for it yourself, may have certain precedence issues with which policy pays first/most. In the US, this may vary by state, but to protect yourself and family, you should check with a competent insurance specialist in the state you're incorporated in and where you work(if that's different) to see what the prudent requirements would be with respect to having both health insurance and worker's comp. See, eventhough it's just you, "you" are two people -- the incorporated employer, the "company", and the "employee".  So at the time I got the quote, I was warned that many IT contractors forget to check into this and leave themsevles exposed. Normally, they skate by, but under some circumstances it's possible for something to happen to you, say, on the way to a worksite, and your health insurance doesn't want to pay because it was work related -- they want the workers comp to pay as primary.

I'm only a layman at the insurance stuff, and it certainly makes sense to weigh your risks reasonably without getting too wrapped up about it, but I recommend you locate a competent insurance person who can help you make sure you're aware of your risks and get whatever insurance you judge you want to have. Getting surprised by a hole in your coverage when you really need it is not a good thing.

anonQAguy
Tuesday, October 28, 2003

I'd certainly recommend getting as much insurance as you feel comfortable with.

But I'm dubious about the wisdom of asking *insurance salesmen* how much insurance you need.

As for requiring E&O to get contracts: wouldn't it just be reasonable to state that you'll get E&O when it's necessary? I'd have no qualms whatsoever about getting an E&O quote from my insurance broker, and then telling the client that we'll supply proof of E&O as soon as they need it. If they never ask for it, then so much the better.

Portabella
Tuesday, October 28, 2003

portabella -

valid points about going to the salesman. I know -- that's a problem. One needs useful and accurate technical advice about what can be a stupidly complex bunch of bureaucratic crap, and unless you want to educate yourself to that level, you have to ask somebody else, but who? This isn't quite the same thing as needing to goto a lawyer. I don't know of anybody who sells themselves as specificially an 'insurance specialist' (as I labeled it above, I don't think I actually said 'salesman'), who is not in fact a salesman, so there's a self-serving aspect one has to watch out for. Perhaps some lawyers specializing in incorporating have the expertise without the self-serving insurance sales aspect of it and could advise honestly. .... wait. did I just suggest a lawyer could be honest?  argh!! < just kidding >

and what you suggested about getting insurance as asked for is certainly a way to go too. anyone who screens you out of a search if you don't have it, you won't know about, and as long as you're busy enough to pay your bills, no harm done.

what you suggest is kind of like I heard some Germans used to do with car insurance, back when I was stationed over there in the 80's. Some folks would try to save a few marks by carrying liability all the time, but only carrying collision coverage during the winter/bad weather months.

anonQAguy
Tuesday, October 28, 2003

"> do you really need E&O?

Same here -- I've never needed it. "

<=>

"Do you really need seatbelts?"

"Same here - I've never needed them."

Like all insurance, you don't need it, until you do. Then it's too late.

An example of a need for E&O - code that you write hits a boundary condition and drops a production database, forcing a company to lose eight hours of orders and be down for two days.

So they sue you for losses. You now get to try to convince a judge or jury why it's not completely your fault, or you get to lose your company, or maybe your house. And consider it from the "poor management" aspect - tell the CEO it happened because his QA department screwed up, or blame it on "that damn contractor"?

As the IT economy continues to mature and grow, be prepared to see companies starting to hold contract developers accountable for mistakes.

Philo

Philo
Tuesday, October 28, 2003

> So they sue you for losses.

Most likely they look at you and decide you're not big enough to be worth suing. (If you *are* big enough, then by all means, get the insurance!)

Realistically, here's what would happen to most one-person companies: They sue (and fire you, of course), you close the company and start a new one. They know this; that's why they're not going to sue.

> be prepared to see companies starting to hold contract developers accountable for mistakes.

Maybe.

You sound like someone who's saying, "I've done all my homework, now give me an A". In such a situation, nothing is more irritating than seeing other people, who haven't done the same homework, succeed. But nevertheless they do.

Portabella
Tuesday, October 28, 2003

No, I'm saying "if you want an A, you're best served doing your homework." Obviously you can get an A without doing your homework, but advising others to do it is risky business. :-)

And the "just close your business and open another" is asking for trouble on the "piercing the corporate veil" front.

Philo

Philo
Tuesday, October 28, 2003

For E&O, it's virtually unanimous that if the client requires it, you should get it :)

I think it's most common for contractors *not* to carry it because of the expense.

You seem to be asserting that it's both significantly less risky to you (*) and advantageous to the client if you carry it, and I just don't see proof of either one. Especially the latter, since clients would ask for it if they thought it was important (and apparently do in some limited circumstances).

* ie, worth the premium. You obviously have slightly less risk if you're insured than not.

> "if you want an A, you're best served doing your homework."

Sure, but to continue the analogy, we're interested in getting As, not doing homework. And that means especially not doing homework that is irrelevant. This is the Real World, after all :)

Portabella
Tuesday, October 28, 2003

"You seem to be asserting that it's both significantly less risky to you (*) and advantageous to the client if you carry it, and I just don't see proof of either one. Especially the latter, since clients would ask for it if they thought it was important (and apparently do in some limited circumstances)."

I'm assuming you also feel that you should only test your code if it fails in production? Because a large number of IT shops don't really have a rigorous QA program in place, and obviously if it was important they'd have it there.

Just because some companies have poor judgement doesn't mean you should rely on that poor judgement. In fact, I'm tempted to think that the companies that don't have the foresight to require E&O up front are the ones that are most likely to sue you in the event of a code-inspired loss.

Anyway, you have your opinion (don't need a helmet unless it's required), I have mine. ;-)

Have a day,
Philo

Philo
Tuesday, October 28, 2003

"Hell, getting a 30% pay cut from my current rate still leaves me with a stupidly-high salary in a *really* cushy IT job"

You didn't give any numbers dude. If a 30% pay cut still results in you making six figures, then I'm coming to work with you!

Contracting nowadays usually results in a bit over the six figure mark from what I see.

P.S. I still wouldn't take the job.

x
Tuesday, October 28, 2003

> I'm assuming you also feel that you should only test your code if it fails in production? Because a large number of IT shops don't really have a rigorous QA program in place, and obviously if it was important they'd have it there.

No, I believe in testing because it has real, measurable benefits: the code has less bugs, I look better to the client, and I go home earlier.

If I thought E&O had benefits beyond the warm fuzzies, then I'd get it.

You like to portray yourself as a hard-headed guy, so chew on this: in the Real World, the fact is that if no one else is testing their code, you will not be blamed if you do not test yours. I prefer to do quality work, but I don't fool myself about what is required, and what is not.

As a developer, I'd love to believe that developing high-quality code, testing and QA are absolutely crucial to success -- but what I see in the Real World convinces me otherwise.

> don't need a helmet unless it's required

I think your helmet is made of tinfoil, but if it makes you feel better, then more power to ya.

Portabella
Tuesday, October 28, 2003

I prefer contractor status.  No stupid annual reviews, no stupid employee retreats, etc.  Do my work, get paid.  Skip the buyllshit fluff, and make friends along the way.  All I ever wanted in a job.


All those stupid little expenses people love to harp on mean PISS when you're making $1500/day.   
Contractor  = $$$$$ and  FT = $$$

But you may also get treated different at a FT vs. 1099.  (For better or worse)  Lip service of Stability may mean something to you or not.  Get bettter projects, long term mentaility, etc. Though nothings  a guarantee.  I;ve seen hourlys get the new sexy work, and FT'er get stuck with shit maint.  I honestly have never figured out why in fucks sake a firm would pay someone $100/hr when they can hire the same guy for $80k. 

BUT, FT vs 1099 is a mental thing.  (LISTEN CAREFULLLY)  eg:  You may be more likely to take your 4 weeks vacation as a W2, since its  not "your money".  I never took a vacation as a contractor, b/c I couldn't justify taking 2 weeks off, and losing $10,000.  As a result, I eventually burnt out, and lost all conern for money (hit the other extreme) .  But am ultimately glad, b/c I saved enough to bail out of IT totally, which I feel is a horrendous long-term career choice.

Bella
Tuesday, October 28, 2003

Bella, you never let us know what you are actually doing now that you aren't in IT. I'm soon to be hitting the 30 yr old point of diminishing returns and need some ideas.

rz
Tuesday, October 28, 2003

"But am ultimately glad, b/c I saved enough to bail out of IT totally, which I feel is a horrendous long-term career choice. "

What did you write and in what languages? I am just curious to know because you talk the talk.

Tom Vu
Tuesday, October 28, 2003

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