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Difference between FTE and contracting

There's been a lot of discussion about how much better contracting is compared to being a FTE.

I've always taken full time employment. Originally it was because my parents kept hassling me about the importance of having a regular income, and it's kind of rubbed off on me.

I don't think I could cope with having to continually find new contracts, the possibility of not getting paid or suddenly kicked out, and going for large amounts of time without getting any income to pay the mortgage.

Yet there seems to be an impression from quite a few people on here that contractors get a better deal when they're in work.

Am I missing out, or have I made the right decision?

Better Than Being Unemployed...
Tuesday, July 1, 2003

It depends.  I contracted for the same company for 5 years.

Tuesday, July 1, 2003

Given your stipulations about instability, it sounds like FTE is right for you.  Finding what's right for you is the goal. Here is my experience:

I have been a contractor for a year, after always being a full time employee at 3 different employers (over a span of 14 years). Some of the nice things about being a contractor:
  setting my billable rate,
  less moral "dilemma" about putting in extra hours (ie. hours = $$),
  can take multiple contracts at the same time (less conflict of interest issues, if your contract is written that way),
  sense of freedom and independence (a big one for me)
  down time between contracts

Some of the down sides to contracting:
  uncertainty: down time between contracts,
  possibly being excluded from the "team," 
  possibly being treated as less than an employee,
  not being able to use the company facilities as an FTE would,
  have to pay for benefits and insurance,
  have to pay for training or conferences,
  if you work as a 1099 contractor, having to do quarterly taxes,
  creating invoices / accounting
How much these things bother you are variable. Personally, I am beginning to enjoy the uncertainty (=adventure, in a small way) and I like networking / negotiating to find work. Slowly, I'm building a reputation and I will get known. Kinda cool.

So far I've been successful, and one year is hardly long enough to judge! Plus, I have a spouse with a full time, well-paying job. That helps.

Lauren B.
Tuesday, July 1, 2003

I owned a third of a consulting company for a year and a half. Thankfully, I also maintained FTE during the time. The consulting work was miserable, not because of the work, but having to fight to get paid. The crap companies will pull to not pay is unbeleivable, and we had to get lawyers in a couple cases.

The money could have been much better in the consulting, but it wasn't worth the stress to me. I also do not like the "business" side of business. I suspect if you're the same way, stick with FTE.

Troy King
Tuesday, July 1, 2003

"The crap companies will pull to not pay is unbeleivable"

Me Too.

i got into contracting after being fired from my last job (rough entry). Now when there is a fine day, and  i have my bills payed i think 'yeah, freedom rulez'.

When my bills are not payed i think 'capitalism sux, lets hail the proletarian revolution'.

Michael Moser
Tuesday, July 1, 2003

Another way to look at it is once you get going good, there's more stability in having a large number of clients instead of relying on one single employer. 

The trick is getting going good.  It helps if you have another source of income, especially if that source is in the form of another person that will enable you to go w/o pay for a while.

What I like about working for companies though is that IME the projects are more interesting.  Consulting work was fairly mundane, usually fairly simple stuff with importance placed being on-time & within budget.  The FTE work I've done has seemed much more relaxed.  There's more room to play around with technologies.  I recently spent 2 weeks learning about remoting, something I never would've had the luxury to do as a contractor.

Tuesday, July 1, 2003

Just depends on the person and the aversion to risk....

One of the biggest advantages I have of being a contractor is the relative immunity from office politics. I'm not here to get promoted; I'm here to make the guy that hired me look like a superstar.

That makes my job a little bit easier than the person that might be hesitant to make their boss look good because they are afraid of losing out in the long run.

Not a perfect system and it depends on the client, but I've been fortunate that I get to focus on technical problem solving without having to worry about accruing political chips and favors along the way.

Mark Hoffman
Tuesday, July 1, 2003

I contracted for the past 7 years (avg. 1 contract per year) and never saw instability as an issue. I suppose working for a smart firm that writes software would be great but there aren't too many of those, and most of those firms outsource to contractors or overseas. Probably the greatest benefit for a FTE is that if you work for a large multinational you can just come in and do the same thing day after day (until you become downsized or automated).
For me it was a bigger risk to be a FTE than a contractor.

Tom Vu
Tuesday, July 1, 2003

ANY work you do for someone else is "unstable". Full time employment in most parts of the US is at-will on both sides so is virtually equivalent to contracting, except that no anti-discrimination or unemployment compensation issues enter into contracting.  Basically, all you lose with contracting is the ability to draw a pittance for unemployment, and you can't claim illegal discrimination. THAT'S IT. I'll gladly forego these two "benefits" in order to have the dignity of not having some jerk act like he owns me.

I've contracted for the last 10 years. At *every* permanent technical job for which I have been contacted in this period, the  employer wanted someone ready to go balls-to-the-wall, steeped in the exact specific technology that they wanted, and no learning curve was tolerated.  In other words, exactly the same preconditions as contracting. And one current client uses me after canning a long term technical employee. All that matters is performance and the employer's perception of your worth and contribution.

As far as client non-payment and poor working conditions in contracting, I'll pull a Bella now (punitive, scornful and accusational of fellow technology people) and say that these "problems" are *always* the fault of the principals of the consulting firm.

As far as working conditions or the quality of work goes, one reason you're a contractor is that you seek to equalize the disparity in economic power between you and the person(s) you work for. If the client really starts to suck, well, you have other clients, because you're a small business and you market on the side, right?

And there is NO excuse for letting a client get $10's of thousands of dollars into you except exceptionally gross stupidity about human nature and management of accounts receivable. I've known or heard of several local guys who basically had enough contacts to sustain excellent consultancies, who acted like complete childish dumbasses and wouldn't invoice regularly, set aside monies for taxes, or other minimal activities of managing the mechanics of a business. They had to quit not because they didn't have enough business but because they were adult children techies refusing to take care of business.

Bored Bystander
Tuesday, July 1, 2003

My experience has been similar to Mark Hoffman's. 

  - No office politics.  You are there to make the person who hired you look great. 
  - Hours equals income, in most cases. YMMV depending on the agreement.
  - Valued more than FTE.  I see someone said they found themselves less valued, but I find just the opposite.
  - High level of exposure to all levels of customer organization.
  - I am as successful as I make myself.  I am not held back because my manager wants to keep me taking care of the dinosaur.  [OTOH: I make more money supporting old systems while employees learn new tech.]

  - You must sell yourself and skills.  If you cannot sell, you will fail.
  -  It is a business: Training, healthcare, retirement, etc. at your expense. [** this often oversold by companies.  FTEs are paying nearly as much as me for health insurance and getting FAR less in retirement]
  - With few exceptions, you can be let go on a moment's notice.  You must be prepared to be out of work for 12 months.  I have yet to be out for more than one month, but it is not uncommon to go six or more during bad times. 
  - Because of the MS permatemps loss, many companies force you to go through Vendor managers, which are basically rip-offs.  They get the company to pay an "admin fee", then force the contractors to take a 5% cut and then the contractors have to pay the vendor manager 5-10% to stay on their list of available vendors.  [Yes, I am a little bitter or envious. Check the day. ] 

If you have a unique skill set and can sell yourself, contracting is much better IMHO.  It was at one time felt less secure.  The last three years I have seen employees laid off while contractors were kept.  I believe it is an illusion to think FTE is secure.

Mike Gamerland
Tuesday, July 1, 2003

Wow...I have to agree with Bored too.  Well put!

Mike Gamerland
Tuesday, July 1, 2003

Better Than Being Unemployed...

The vast majority of computer contractors working in the U.S. (this includes many H-1B visa workers) are simply W-2 hourly employees. In other words, these people are short-term employees who work for a staffing firm/broker. These firms will keep a contractor employed for as they can sell their skills or for as long as a particular client of the staffing firm/broker is interested in using their services. In many instances these contractors are eligible for unemployment compensation.

Bored Bystander sounds to me as if he chases after his own contracts. That is, he doesn't find most of his gigs via a broker, staffing firm, or consulting firm. I bet if you asked him he would tell you he is an independent contractor or independent consultant. These type of people truly are independent businessman. Note: sometimes ICs aren't able to find their own clients and are forced to use a middleman (a broker, a staffing firm, etc.) to get work.

Many W-2 hourly contractors either have bleeding edge technical skills or some type of niche technical skill/knowledge (i.e. ERP experience, SAS, etc.) that keeps them employed.

Someone who has excellent VB, Java, or VC++ programming skills probably isn't going to be able to get a good hourly rate from a broker simply because everyone and his brother claim to have these technical skills nowadays.

One Programmer Opinion
Tuesday, July 1, 2003

How many years of experience should someone have before they become a contractor?  I only have a couple years of experience and have assumed that >= 5 years would be best in order to to land a steady stream of contracting gigs.

Tuesday, July 1, 2003

It was at one time felt less secure.  The last three years I have seen employees laid off while contractors were kept. 

I have seen FTE laid off and then hired back as contractors because contractor pay was accounted for differently.

Bored Bystander seems to have summed it up quite clearly. There are no guarantees be it contracting or FTE, but at least in contracting you take responsibilty for yourself and manage your own career.

As for how many years you need to become a contractor. 0 years, start right away. Look at the threads on this board about FTE that have no skills or drive. In any industry or profession if you are good or at least think you are good and are confident in your abilities then show some b*lls and do it.
But if your skills are in ass kissing and politics then a FTE environment may actually be a good place

Tom Vu
Tuesday, July 1, 2003

Indeed the "job security" aspect of being a FTE has been largely whittled away, with the way companies have become addicted to layoffs.

Before my current job at a Fortune 500 company, I was an employee of a tech consulting firm which is now breathing its last breaths.  In the past 4 years I survived 6 rounds of layoffs at the consulting firm and 2 rounds at my current company.

Even though I was a contractor to the clients, I was an FTE to the consulting firm.  So I had both the problems of not being paid for overtime while facing the clear and present danger of being unemployed if a client couldn't be found.  Luckily the clients weren't strong pushers of overtime as they would be billed for it, and I had a client 95%+ of the time.

I am looking into getting into *independent* contracting myself; the problem is figuring out how to get started.  Companies seem to be resistant to contract any one-man-shops, instead sticking to people from their "preferred vendor" list.  Which means I would have to come through one of those vendors, who tend to take too much of a cut out of the billing rate, either forcing me to price too high or drop my rates to the point where I am worse off than I am now.

T. Norman
Tuesday, July 1, 2003

Anyone wanting to develop a real contracting or consulting business should avoid going through recruiters at all costs. Working through recruiters means you have very little say in arrangements, and this becomes critical if problems arise, which is normal in software development.

Most people considering becoming contractors have specialised expertise in some area or other, and this is useful to companies. You need to get in touch with companies directly and offer your services.

Companies are sucked in by recruiters just as much as developers are. If companies tell you they only hire through recruiters, firmly tell them the only way they can hire you is directly. You are a business. You don't work through middlemen.

A second important skill, alluded to by others, is being firm on getting paid. Staffers are not accustomed to making demands for pay, but consultants learn to do it. If you don't, some companies delay paying as long as possible, considering this financial prudence. So you have to learn to contact accounts payable and chase them for money.

Tuesday, July 1, 2003

To answer the speculation - yeah, I find my own work. Recruiters and brokers have done absolutely nothing for me except waste my time with their bullsh*t mind games and lies and noodling around to get lists of references. I've had one brokered contract in 10 years.

In my case, it's not so much networking and sales skills as it's been just lucking into singular situations.

T. Norman - "consulting" firms are the dregs with all the disadvantages of both full time employment and contracting. The worst of both. I sympathize.

In general - I think technical work has become such a commodity at a certain level of client (Fortune 1000 and up) that the *only* way that you can name your terms (IE, by refusing to work through agencies) are with much smaller businesses. The large companies procure contract technical help through preferred vendors and they seem to approach the selection game like a glamour talent agency model anymore. Whereas the smaller businesses are not large enough "accounts" to be of interest to large body shops so they can be approached directly with much more credibility.

Of course, smaller businesses tend to have a LOT less money available than large businesses. It is not proportionate to their size, either.

Bored Bystander
Tuesday, July 1, 2003

There's still plenty of money in large companies. That's why it's important to avoid recruiters.

If you can do something useful for a big company, you can negotiate a good fee for it directly wtih the people who want it.

But if you just answer ads from recruiters, they will pocket the money, and just pay you the standard rate for "C++ programmers" or whatever. And lie through their teeth about it.

If you work directly, you negotiate whether you work off-site, you retain IP, you are an equal partner. If you respond to an ad from a recruiter, you are tied up in unequal and useless contracts, and legally prevented from doing any negotiation with the real employer.

Wednesday, July 2, 2003

The problem with large companies is finding and building relationships with influential contacts within those companies. I don't dispute that anyone would be better off contracting for a large company rather than a small one, just that it's damned near impossible to market to executives within large companies.

The money's there - but it's there mainly for preferred vendors.

Bored Bystander
Wednesday, July 2, 2003

" You must be prepared to be out of work for 12 months.  I have yet to be out for more than one month, but it is not uncommon to go six or more during bad times. "

Can any independent contractors comment on how they set rates based on these assumptions?  For us FTEs, we really haven't had the experience of figuring out what health insurance, etc. costs.  Or how to set rates or figure out how much we need in the bank to get started.  (Enough to pay the mortgage and eat for 6 months? 1 year?).


Even if you want to be a FTE, you still must find a way around the recruiters.  They are truly a scourge on our economy.

Jim Rankin
Thursday, July 3, 2003

I contracted for 8 years and only went W-2 last Sept. when the company offered me equity in the company.

When that finally pays off I'll go back to contract work.

I like the freedom.

~~~~~ ~~~~~~
Monday, July 14, 2003

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